CYPRESS SEMICONDUCTOR CORP /DE/ (Form: 10-Q, Received: 08/09/2016 16:09:44)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 3, 2016

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-10079

CYPRESS SEMICONDUCTOR CORPORATION

(Exact name of registrant as specified in its charter)

Delaware

94-2885898

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

198 Champion Court, San Jose, California 95134

(Address of principal executive offices and zip code)

(408) 943-2600

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	x	Accelerated filer	¨

Non-accelerated filer	o (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The total number of outstanding shares of the registrant’s common stock as of August 2, 2016 was 321,180,733.

INDEX

		Page
PART I—FINANCIAL INFORMATION
Forward-Looking Statements		3

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	45
Item 4.	Controls and Procedures	46

PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 3.	Defaults Upon Senior Securities	51
Item 4.	Mine Safety Disclosures	51
Item 5.	Other Information	51
Item 6.	Exhibits	52
	Signatures	53
	Exhibit Index	54

PART I—FINANCI AL INFORMATION

Forward-Looking Statements

The discussion in this Quarterly Report on Form 10-Q contains statements that are not historical in nature, but are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated by the forward-looking statements. Forward-looking statements include, but are not limited to, statements relating to: the expected timing and costs related to the integration of Cypress Semiconductor Corporation (“Cypress” or the “Company”) with Spansion Inc. (“Spansion”) as a result of our merger; our ability to execute on planned synergies related to the merger with Spansion and our related restructuring activities; the anticipated timing of the payout of the remaining Spansion restructuring reserve balance; the anticipated technological feasibility of our in-process research and development; estimated further amortization expense related to intangible assets; our expectations regarding our active litigation matters and our intent to defend ourselves in those matters; events that could cause a material change in unrecognized tax benefits and our ability to recognize those benefits; the specific strategies we are pursuing to achieve our goals on revenue growth and profitability; our ability to position the Company in high-growth markets; the value of non-GAAP financial measures to investors; the estimates we make in preparing our financial statements, including but not limited to those relating to our critical accounting policies; the expected impact on our operating results of changes in market interest rates applicable to our investment portfolio; our expectations regarding dividends and the tax treatment of dividends for recipients; our expectations regarding stock repurchases;; our foreign currency exposure and the impact exchange rates could have on our operating results; and the adequacy of our cash and working capital positions; the value and liquidity of our investments. We use words such as “may,” “will,” “should,” “expect,” “plan,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” and similar expressions to identify forward-looking statements. Such forward-looking statements are made as of the date hereof and are based on our current expectations, beliefs and intentions regarding future events or our financial performance and the information available to management as of the date hereof. We assume no responsibility to update any such forward-looking statements. Our actual results could differ materially from those expected, discussed or projected in the forward-looking statements contained in this Quarterly Report on Form 10-Q for any number of reasons, including, but not limited to: global economic and market conditions; business conditions and growth trends in the semiconductor market; our ability to compete effectively; the volatility in supply and demand conditions for our products, including but limited to the impact of seasonality on supply and demand; our ability to develop, introduce and sell new products and technologies; potential problems relating to our manufacturing activities; the impact of acquisitions, including but limited to the continuing integration of Spansion and the recent acquisition of Broadcom’s wireless IoT business; our ability to attract and retain key personnel, including a new President and Chief Executive Officer; and/or the materialization of one or more of the risks set forth in Item 1A (Risk Factors) in this Quarterly Report on Form 10-Q and in Part I, Item 1A (Risk Factors) in our Annual Report on Form 10-K for the fiscal year ended January 3, 2016.

ITEM 1. FINANCI AL STATEMENTS

CYPRESS SEMICONDUCTOR CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	July 3, 2016			January 3, 2016
	(In thousands, except per-share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	188,333		$	226,690
Short-term investments		970			871
Accounts receivable, net		325,142			292,736
Inventories		220,890			243,595
Other current assets		127,670			86,880
Total current assets		863,005			850,772
Property, plant and equipment, net		402,369			425,003
Goodwill		1,250,378			1,738,882
Intangible assets, net		686,885			789,195
Other long-term assets		201,117			200,409
Total assets	$	3,403,754		$	4,004,261
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	174,389		$	143,383
Accrued compensation and employee benefits		57,390			54,850
Deferred margin on sales to distributors		19,052			73,370
Dividends payable		35,240			36,520
Income taxes payable		3,581			3,262
Current portion of debt		13,436			14,606
Price adjustment reserve for sales to distributors		102,826			52,712
Other current liabilities		127,313			149,693
Total current liabilities		533,227			528,396
Deferred income taxes and other tax liabilities		45,950			51,737
Revolving credit facility and long-term debt		820,364			673,659
Other long-term liabilities		41,163			37,784
Total liabilities		1,440,704			1,291,576
Commitments and contingencies (Note 10)		—			—
Equity:
Preferred stock, $.01 par value, 5,000 shares authorized; none issued and outstanding		—			—
Common stock, $.01 par value, 650,000 and 650,000 shares authorized; 494,273 and 481,912 shares issued;320,809 and 332,276 shares outstanding at July 3, 2016 and January 3, 2016 respectively		4,721			4,637
Additional paid-in-capital		5,679,928			5,623,411
Accumulated other comprehensive gain / (loss)		1,552			(227	)
Accumulated deficit		(1,382,077	)		(758,780	)
Stockholders’ equity before treasury stock		4,304,124			4,869,041
Less: Shares of common stock held in treasury, at cost; 173,464 and 149,636 shares at July 3, 2016 and January 3, 2016 respectively		(2,335,289	)		(2,148,193	)
Total Cypress stockholders’ equity		1,968,835			2,720,848
Non-controlling interests		(5,785	)		(8,163	)
Total equity		1,963,050			2,712,685
Total liabilities and equity	$	3,403,754		$	4,004,261

The accompanying notes are an integral part of these condensed consolidated financial statements.

CYPRESS SEMICONDUCTOR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended						Six Months Ended
	July 3, 2016			June 28, 2015			July 3, 2016			June 28, 2015
	(In thousands, except per-share amounts)
Revenues	$	450,127		$	484,778		$	869,091		$	693,915
Costs and expenses:
Cost of revenues		291,349			346,705			584,528			597,535
Research and development		70,171			81,227			144,138			131,749
Selling, general and administrative		81,836			91,840			156,336			162,300
Amortization of intangible assets		32,605			35,928			67,792			43,274
Impairment of acquisition-related intangible assets		—			—			33,944			—
Goodwill impairment charge		488,504			—			488,504			—
Restructuring costs		654			10,039			924			85,754
Total costs and expenses		965,119			565,739			1,476,166			1,020,612
Operating loss		(514,992	)		(80,961	)		(607,075	)		(326,697	)
Interest expense		(7,540	)		(5,041	)		(13,872	)		(7,124	)
Other income (expense), net		224			(295	)		305			(2,361	)
Loss before income taxes and non-controlling interest		(522,308	)		(86,297	)		(620,642	)		(336,182	)
Income tax benefit (provision)		5,221			(2,935	)		1,479			1,068
Share in net loss of equity method investee		(2,568	)		(1,459	)		(4,646	)		(3,018	)
Net loss		(519,655	)		(90,691	)		(623,809	)		(338,132	)
Net loss attributable to non-controlling interests		381			640			513			1,283
Net loss attributable to Cypress	$	(519,274	)	$	(90,051	)	$	(623,296	)	$	(336,849	)
Net loss per share attributable to Cypress:
Basic	$	(1.65	)	$	(0.27	)	$	(1.96	)	$	(1.27	)
Diluted	$	(1.65	)	$	(0.27	)	$	(1.96	)	$	(1.27	)
Cash dividend declared per share	$	0.11		$	0.11		$	0.22		$	0.22
Shares used in net loss per share calculation:
Basic		314,305			333,334			317,330			264,547
Diluted		314,305			333,334			317,330			264,547

The accompanying notes are an integral part of these condensed consolidated financial statements.

CYPRESS SEMICONDUCTOR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three Months Ended						Six Months Ended
	July 3, 2016			June 28, 2015			July 3, 2016			June 28, 2015
	(In thousands)
Net loss	$	(519,655	)	$	(90,691	)	$	(623,809	)	$	(338,132	)
Other comprehensive loss, net of taxes:
Net change in unrealized (losses) gains on available for sale securities		—			(1	)		—			26
Net unrealized gain (loss) on cash flow hedges:
Net unrealized loss arising during the period		(7,951	)		(1,549	)		(10,629	)		(1,741	)
Net loss reclassified into earnings for revenue hedges (effective portion)		4,102			193			5,127			390
Net loss reclassified into earnings for revenue hedges (ineffective portion)		(184	)		—			(173	)
Net loss (gain) reclassified into earnings for expense hedges (effective portion)		4,665			233			7,454			162
Net unrealized gain (loss) on cash flow hedges		632			(1,123	)		1,779			(1,189	)
Other comprehensive gain (loss)		632			(1,124	)		1,779			(1,163	)
Comprehensive loss		(519,023	)		(91,815	)		(622,030	)		(339,295	)
Comprehensive loss attributable to non-controlling interest		381			640			513			1,283
Comprehensive loss attributable to Cypress	$	(518,642	)	$	(91,175	)	$	(621,517	)	$	(338,012	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

CYPRESS SEMICONDUCTOR CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended
	July 3, 2016			June 28, 2015
	(In thousands)
Cash flows from operating activities:
Net loss	$	(623,809	)	$	(338,132	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Stock-based compensation expense		42,387			46,464
Depreciation and amortization		122,737			96,641
Impairment of acquisition-related intangible assets		33,944			—
Impairment of goodwill		488,504			—
Loss on disposal of property and equipment		6,116			9,346
Share in net loss of equity method investee		4,646			3,018
Accretion of interest expense on Senior Exchangeable Notes		2,039			—
Loss (gain) on assets held under deferred compensation plan		793			(1,204	)
Unrealized loss on trading securities		598			191
Restructuring and other costs		2,464			13,768
Changes in operating assets and liabilities, net of acquisition and divestiture
Accounts receivable		(32,406	)		(85,418	)
Inventories		22,383			238,884
Other current and long-term assets		(36,656	)		(15,519	)
Price adjustment reserve for sales to distributors		50,114			13,951
Accounts payable and other liabilities		(6,815	)		(67,095	)
Deferred margin on sales to distributors		(54,536	)		32,089
Net cash provided by (used in) operating activities		22,503			(53,016	)
Cash flows from investing activities:
Purchases of marketable securities		(80,053	)		(1,530	)
Proceeds from maturities of available-for-sale investments		40,000			7,187
Proceeds from sales of available-for-sale investments		44,317			—
Business acquisition, net of cash acquired		—			(105,130	)
Contribution, net of distributions to deferred compensation plan		1,743			1,270
Acquisition of property, plant and equipment		(25,814	)		(25,231	)
Cash paid for equity and cost method investments, and other		(14,376	)		(11,877	)
Net cash used in investing activities		(34,183	)		(135,311	)
Cash flows from financing activities:
Borrowings under revolving credit facility		120,000			299,000
Repayment of revolving credit facility		(202,000	)		(77,000	)
Repayment of Term Loan A		(2,500	)		—
Repurchase of treasury stock		(175,694	)		(10,382	)
Payment of dividends		(70,820	)		(54,334	)
Proceeds from employee equity awards		40,111			33,199
Repayment of equipment leases, loans, net and other		(6,606	)		(4,486	)
Net proceeds from issuance of 4.50% Senior Exchangeable Notes		279,594			—
Purchase of capped calls		(8,165	)		—
Proceeds from settlement of capped calls		—			25,293
Financing costs related to revolving credit facility		(597	)		(2,559	)
Net cash (used in) provided byfinancing activities		(26,677	)		208,731
Net (decrease) increase in cash and cash equivalents		(38,357	)		20,404
Cash and cash equivalents, beginning of period		226,690			103,736
Cash and cash equivalents, end of period	$	188,333		$	124,140
Supplemental Cash Flows Disclosures:
Dividends payable	$	35,240		$	36,718
Unpaid purchase of property, plant and equipment	$	3,804		$	10,578
Cash paid for interest	$	10,398		$	4,268
Cash paid for income taxes	$	4,742		$	4,220

The accompanying notes are an integral part of these condensed consolidated financial statements.

CYPRESS SEMICONDUCTOR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Fiscal Years

Cypress Semiconductor Corporation (“Cypress” or the “Company”) reports on a fiscal-year basis. The Company ends its quarters on the Sunday closest to the end of the applicable calendar quarter, except in a 53-week fiscal year, in which case the additional week falls into the fourth quarter of that fiscal year. Fiscal 2016 has 52 weeks and Fiscal 2015 had 53 weeks. The second quarter of fiscal 2016 ended on July 3, 2016 and the second quarter of fiscal 2015 ended on June 28, 2015.

Basis of Presentation

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments of a normal, recurring nature, which are necessary to state fairly the financial information included therein. These financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto included in Cypress's Annual Report on Form 10-K for the fiscal year ended January 3, 2016. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

On March 12, 2015, the Company completed the merger (“Merger”) with Spansion Inc. ("Spansion") pursuant to the Agreement and Plan of Merger and Reorganization, as of December 1, 2014 (the "Merger Agreement"), for a total consideration of approximately $2.8 billion. Consequently, the financial condition and results of operations includes the financial results of legacy Spansion beginning March 12, 2015. The comparability of our results for the six months ended July 3, 2016 to the same periods in fiscal 2015 is significantly impacted by the Merger.

Certain balances included in the Condensed Consolidated Balance Sheet and Condensed Consolidated Statement of Cash Flows for prior periods have been reclassified to conform to the current period presentation.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

The condensed consolidated results of operations for the three and six months ended July 3, 2016 are not necessarily indicative of the results to be expected for the full fiscal year.

Summary of Significant Accounting Policies

Revenue Recognition

The Company has historically recognized a significant portion of revenue through distributors at the time the distributor resold the product to its end customer (also referred to as the sell-through basis of revenue recognition) given the difficulty in estimating the ultimate price of these product shipments and amount of potential returns. The Company continuously reassesses its ability to reliably estimate the ultimate price of these products and, over the past several years, has made investments in its systems and processes around its distribution channel to improve the quality of the information it receives from its distributors. Given these ongoing investments, and based on the financial framework we use for estimating potential price adjustments, in the fourth quarter of 2014 the Company began recognizing revenue on certain product families and with certain distributors (less its estimate of future price adjustments and returns) upon shipment to the distributors (also referred to as the sell-in basis of revenue recognition). During the three months ended July 3, 2016, the Company recognized an incremental $24.2 million of revenue on additional product families for which revenue was previously recognized on a sell-through basis as it determined that it could reasonably estimate returns and pricing concessions at the time of shipment to distributors. This change resulted in a reduction of the Company’s net loss of $6.8 million or $0.02 per basic and diluted share for the three months ended July 3, 2016. During the three months ended June 28, 2015, there were no new product families or distributors for which the Company recognized revenue on a sell-in basis.

CYPRESS SEMICONDUCTOR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

During the six months ended July 3, 2016, the Company recognized approximately $40.6 million of incremental revenue from this change in revenue recognition, which resulted in a reduction of the Company’s net loss of approximately $14.2 million for the six months ended July 3, 2016, or approximately $0.05 per basic and diluted share. Durin g the six months ended June 28, 2015, the Company recognized approximately $22.7 million of incremental revenue from this change, which resulted in a benefit to net income of approximately $13.7 million for the six months ended June 28, 2015, or approximat ely $0.05 per basic and diluted share. During the three months ended July 3, 2016, we recognized approximately $306.5 million or 92.8% of distribution revenue on a sell-in basis. During the three months ended June 28, 2015, we recognized approximately $22 0.7million or 62.5% of distribution revenue on a sell-in basis. During the six months ended July 3, 2016, the Company recognized approximately $540.0 million or 86.9% of distribution revenue on a sell-in basis. During the six months ended June 28, 2015, we recognized approximately $329.1 million or 51.1% of distribution revenue on a sell-in basis.

Net Loss per Share

Basic net loss per share is calculated by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential of shares of common stock outstanding during the period including stock options or warrants, using the treasury stock method (by using the average stock price for the period to determine the number of shares assumed to be purchased from the exercise of stock options or warrants), and convertible debt, using the treasury stock method. Diluted EPS excludes all dilutive potential of shares of common stock if their effect is anti-dilutive.

Convertible debt

In accounting for the Senior Exchangeable Notes at issuance, the Company separated the Notes into debt and equity components according to accounting standards codification ("ASC") 470-20 for convertible debt instruments that may be fully or partially settled in cash upon conversion. The carrying amount of the debt component, which approximates its fair value, was estimated by using an interest rate for nonconvertible debt, with terms similar to the Notes. The excess of the principal amount of the Notes over the fair value of the debt component was recorded as a debt discount and a corresponding increase in additional paid-in capital. The debt discount is accreted to the carrying value of the Notes over their term as interest expense using the effective interest method. In accounting for the transaction costs incurred relating to issuance of the Notes, the Company allocated the costs of the offering in proportion to the fair value of the debt and equity recognized in accordance with the accounting standards. The transaction costs allocated to the debt are being amortized as interest expense over the term of the Notes.

In accounting for the cost of the capped call transaction entered in connection with issuance of the Senior Exchangeable Notes, the Company included the cost as a net reduction to additional paid-in capital in the stockholders’ equity section of the consolidated balance sheet, in accordance with the guidance in ASC 815-40 Derivatives and Hedging-Contracts in Entity’s Own Equity. See Note 8 for further details.

NOTE 2. GOODWILL

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. The Company has four reporting units of which two, Memory Products Division (MPD) and Programmable Systems Division (PSD), carried goodwill in the amounts of $770.0 million and $968.8 million respectively, as of January 3, 2016.

During the quarter ended July 3, 2016, the Company concluded that a combination of factors, including (a) decreases in our forecasted operating results when compared with the expectations of the PSD reporting unit at the time of the Merger, primarily in consumer markets as the Company has subsequently increased its focus on the automotive and industrial end markets, (b) evaluation of business priorities due to recent changes in management, and (c) certain market conditions necessitated a quantitative impairment analysis for the carrying value of the Goodwill related to PSD which resulted in an impairment charge of $488.5 million.

As the first step of the quantitative test (“Step 1”), the Company estimated the fair value of the net assets, including goodwill related to PSD. In estimating these fair values, a combination of a market approach and an income approach was utilized. This combination was deemed to be the most indicative of the reporting unit’s estimated fair value in an orderly transaction between market participants and is consistent with the methodology of the Company used for the goodwill impairment tests in prior years. In performing the step 1 analysis in the second quarter of fiscal 2016, the Company applied a weighting of 75% to the income approach and 25% to the market approach. Under the market approach, the Company utilizes publicly-traded comparable company information

CYPRESS SEMICONDUCTOR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

to determine revenue and earnings multiples that are used to value the reporting units. Under the income approach, the Co mpany determines fair value based on estimated future cash flows of the reporting unit discounted by an estimated weighted-average cost of capital, reflecting the overall level of inherent risk of the reporting unit and the rate of return an outside invest or would expect to earn. The Company based cash flow projections for PSD using a forecast of cash flows and a terminal value based on the industry’s perpetuity growth model. The forecast and related assumptions were derived from a recently completed five-y ear outlook which included adjustments arising from the changes in strategic decisions as discussed above.

Based on the Step 1 analysis, the Company concluded that the carrying value of PSD’s net assets exceeded their estimated fair value as of June 1, 2016, the date of the analysis.

The Company performed an analysis as required by ASC 350 and did not note an impairment in the carrying value of the long-lived assets related to PSD.

The deficiency between the carrying and estimated fair value of the net assets as noted in Step 1, required the second step of the quantitative test (“Step 2”) to be performed by comparing the carrying value of the goodwill related to PSD to its implied fair value. The implied fair value is calculated by allocating all of the assets and liabilities of the reporting unit, including any unrecognized intangible assets, in a hypothetical analysis that calculates the implied fair value of goodwill in the same manner as if the reporting unit was being acquired in a business combination. An impairment charge is recognized for the excess of the carrying value of goodwill over its implied fair value.

The Company has completed a preliminary assessment of the implied fair value of the PSD reporting unit, which resulted in a partial impairment of goodwill of $488.5 million. Due to the complexity and effort required to estimate the fair value of the reporting unit in the second step of the analysis, the fair value estimates were based on preliminary analysis and assumptions that are subject to change. The measurement of impairment will be completed in the third quarter of fiscal 2016 and further adjustments to the preliminary goodwill impairment charge, if any, may be recognized when the Company finalizes the second step of the goodwill impairment test.

Given the partial impairment recorded in the PSD reporting unit, it is reasonably possible that even small future changes in judgments, assumptions and estimates the Company made in assessing the implied fair value of goodwill could cause the Company to determine that some or all of the remaining goodwill of the PSD reporting unit has become impaired. In addition, a future decline in market conditions and/or changes in the Company’s market share could negatively impact the market comparables, estimated future cash flows and discount rates used in the market and income approaches to determine the fair value of the reporting unit and could result in another material impairment charge in the future.

During the six months ended July 3, 2016, the Company did not note any triggers that necessitated an impairment analysis for the MPD reporting unit.

The changes in the carrying amount of goodwill by reportable segment for the six months ended July 3, 2016 were as follows:

	MPD		PSD			Total
	(in thousands)
Goodwill as of January 3, 2016 ⁽¹⁾	$	770,046	$	968,836		$	1,738,882
Impairment		-		(488,504	)		(488,504	)
Goodwill as of July 3, 2016	$	770,046	$	480,332		$	1,250,378

(1)

The Company previously recorded an impairment charge of $351.3 million in the fourth quarter of fiscal 2008.

CYPRESS SEMICONDUCTOR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

NOTE 3. INTANGIBLE ASSETS

The following table presents details of the Company's intangible assets:

	As of July 3, 2016							As of January 3, 2016
	Gross		Accumulated Amortization			Net (a)		Gross		Accumulated Amortization			Net (a)
	(In thousands)
Developed technology and other intangible assets
Acquisition-related intangible assets	$	879,709	$	(294,210	)	$	585,499	$	836,256	$	(226,417	)	$	609,839
Non-acquisition related intangible assets		12,714		(10,367	)		2,347		13,368		(10,228	)		3,140
Total developed technology and other intangible assets		892,423		(304,577	)		587,846		849,624		(236,645	)		612,979
In-process research and development		99,039		—			99,039		176,216		—			176,216
Total intangible assets	$	991,462	$	(304,577	)	$	686,885	$	1,025,840	$	(236,645	)	$	789,195

(a)

Included in the intangible assets are in-process research and development projects acquired as part of the Merger (“IPR&D”) that had not attained technological feasibility and commercial production:

	(in thousands)
As of January 3, 2016	$	176,216
Technological feasibility achieved		(43,233	)
Projects impaired		(33,944	)
As of July 3, 2016	$	99,039

In the first half of fiscal 2016, the Company recognized a $33.9 million impairment charge related to two IPR&D projects that were cancelled due to changes in the Company’s product portfolio strategy. The impairment charges are included in the “Impairment of acquisition-related intangible assets” line in the Condensed Consolidated Statements of Operations.

The Company expects the remaining IPR&D projects as of July 3, 2016 to attain technological feasibility by the first half of fiscal 2017.

The estimated future amortization expense related to developed technology and other intangible assets as of July 3, 2016 is as follows:

	(In thousands)
2016 (remaining six months)	$	65,820
2017		130,986
2018		128,440
2019		121,212
2020		85,886
2021 and future		55,502
Total future amortization expense	$	587,846

NOTE 4. BALANCE SHEET COMPONENTS

Accounts Receivable, Net

	As of
	July 3, 2016			January 3, 2016
	(In thousands)
Accounts receivable, gross	$	328,635		$	295,803
Allowance for doubtful accounts receivable and sales returns		(3,493	)		(3,067	)
Total accounts receivable, net	$	325,142		$	292,736

CYPRESS SEMICONDUCTOR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Inventories

	As of
	July 3, 2016		January 3, 2016
	(In thousands)
Raw materials	$	15,430	$	13,516
Work-in-process		161,494		192,245
Finished goods		43,966		37,834
Total inventories	$	220,890	$	243,595

Other Current Assets

	As of
	July 3, 2016		January 3, 2016
	(In thousands)
Prepaid tooling assets	$	20,771	$	19,379
Restricted cash relating to defined benefit pension plan, current		4,181		3,730
Foundry service prepayments - current portion		5,903		5,753
Advances to suppliers		10,844		10,683
Prepaid royalty and licenses		19,975		14,281
Derivative Asset		11,317		966
Value added tax receivable		16,867		12,493
Receivable from sale of TrueTouch Mobile ^® business		10,000		—
Other current assets		27,812		19,595
Total other current assets	$	127,670	$	86,880

Other Long-term Assets

	As of
	July 3, 2016		January 3, 2016
	(In thousands)
Employee deferred compensation plan	$	40,030	$	41,249
Investments in equity securities		61,121		57,030
Deferred tax assets		4,199		4,080
Long-term license		25,793		24,079
Restricted cash relating to defined benefit pension plan, non current		4,377		3,462
Long-term receivable from sale of TrueTouch Mobile ^® business		—		10,000
Foundry service prepayments - non-current portion		30,976		26,237
Other assets		34,621		34,272
Total other long-term assets	$	201,117	$	200,409

CYPRESS SEMICONDUCTOR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Other Current Liabilities

	As of
	July 3, 2016		January 3, 2016
	(In thousands)
Employee deferred compensation plan	$	40,941	$	41,457
Restructuring accrual - current portion (See Note 5)		4,642		7,270
Deferred revenue on sale of True Touch mobile ^® business		5,789		15,295
Rebate reserve		10,236		7,944
Derivative liability		10,358		1,283
Other current liabilities		55,347		76,444
Total other current liabilities	$	127,313	$	149,693

Other Long-term Liabilities

	As of
	July 3, 2016		January 3, 2016
	(In thousands)
Long-term defined benefit pension plan liabilities	$	4,935	$	8,712
Restructuring accrual - non-current portion (See Note 5)		12,654		14,217
Asset retirement obligation		5,024		2,783
Other long-term liabilities		18,550		12,072
Total other long-term liabilities	$	41,163	$	37,784

NOTE 5. RESTRUCTURING

Spansion Integration-Related Restructuring Plan

In March 2015, the Company began the implementation of planned cost reduction and restructuring activities in connection with the Merger.

The following table summarizes the restructuring charges recorded in the Company’s Condensed Consolidated Statements of Operations for the periods presented pursuant to the Spansion Integration-Related Restructuring Plan:

	Three Months Ended					Six Months Ended
	July 3, 2016		June 28, 2015			July 3, 2016		June 28, 2015
	(In thousands)
Personnel costs	$	369	$	11,120		$	615	$	55,326
Lease termination costs and other related charges		285		(845	)		309		17,897
Impairment of property, plant and equipment		—		(236	)		—		12,531
Total restructuring costs	$	654	$	10,039		$	924	$	85,754

All restructuring costs are included in Costs and expenses under "Restructuring costs" in the Condensed Consolidated Statements of Operations.

CYPRESS SEMICONDUCTOR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Restructuring act ivity under the Spansion Integration – Related Restructuring Plan during the six months ended July 3, 2016 was as follows:

	Six Months Ended
	July 3, 2016
	(In thousands)
Accrued restructuring balance as of January 3, 2016	$	21,487
Provision		270
Cash payments and other adjustments		(3,028	)
Accrued restructuring balance as of April 3, 2016	$	18,729
Provision	$	654
Cash payments and other		(2,087	)
Accrued restructuring balance as of July 3, 2016	$	17,296
Current portion of the restructuring accrual	$	4,642
Non-current portion of the restructuring accrual	$	12,654

The Company anticipates that the remaining restructuring accrual balance will be paid out in cash through the remainder of 2016 for employee terminations and over the remaining lease term through 2026 for the excess lease obligation related to the buildings Spansion had leased prior to the Merger, which the Company decided not to occupy in the post-Merger period.

CYPRESS SEMICONDUCTOR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

NOTE 6. FAIR VALUE MEASUREMENTS

Assets/Liabilities Measured at Fair Value on a Recurring Basis

The following tables present the fair value hierarchy for the Company's financial assets and liabilities measured at fair value on a recurring basis and its non-financial liabilities measured at fair value on a non-recurring basis as of July 3, 2016 and January 3, 2016:

	As of July 3, 2016						As of January 3, 2016
	Level 1		Level 2		Total		Level 1		Level 2		Total
	(In thousands)
Financial Assets
Cash equivalents:
Money market funds (1)	$	116	$	—	$	116	$	119	$	—	$	119
Total cash equivalents		116		—		116		119		—		119
Short-term investments:
Certificates of deposit (1)				970		970		—		871		871
Total short-term investments		—		970		970		—		871		871
Long-term investments:
Marketable equity securities		1,587		—		1,587		6,516		—		6,516
Total long-term investments		1,587		—		1,587		6,516		—		6,516
Employee deferred compensation plan assets:
Cash equivalents		3,755		—		3,755		3,333		—		3,333
Mutual funds		21,927		—		21,927		22,023		—		22,023
Equity securities		8,179		—		8,179		8,624		—		8,624
Fixed income		—		3,243		3,243		—		3,227		3,227
Money market funds		2,926		—		2,926		4,042		—		4,042
Total employee deferred compensation plan assets		36,787		3,243		40,030		38,022		3,227		41,249
Foreign exchange forward contracts		—		11,317		11,317		—		966		966
Total financial assets	$	38,490	$	15,530	$	54,020	$	44,657	$	5,064	$	49,721
Financial Liabilities
Foreign exchange forward contracts	$	—	$	10,358	$	10,358	$	—	$	1,283	$	1,283
Employee deferred compensation plan liability		—		40,941		40,941		—		41,457		41,457
Total financial liabilities	$	—	$	51,299	$	51,299	$	—	$	42,740	$	42,740

(1)

Available for sale securities, maturing within one year. There were no unrealized gains or losses recorded during the three and six months ended July 3, 2016 and June 28, 2015 related to these securities.

The Company did not have any assets or liabilities measured at fair value using level 3 inputs as of July 3, 2016 and January 3, 2016. There were no transfers between Level 1, Level 2 and Level 3 fair value hierarchies during the six months ended July 3, 2016.

Valuation Techniques:

There have been no changes to the valuation techniques used to measure the fair value of the Company's assets and liabilities. For a description of the valuation techniques, refer to Note 5 of the Notes to the Consolidated Financial Statements included in the Company's Annual report on Form 10-K for the year ended January 3, 2016.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain of the Company’s assets, including Intangible Assets and Goodwill are carried at historical cost but are remeasured on a non-recurring basis and are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). For the six months ended July 3, 2016, the Company recorded a $33.9 million impairment charge related to two IPR&D projects acquired in the Merger. During the same period the Company recorded a $488.5 million goodwill impairment charge related to PSD reporting unit based on a fair value measurement that included level 3 inputs. There were no impairment charges recorded for the three and six months ended June 28, 2015.

CYPRESS SEMICONDUCTOR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

As of July 3, 2016, the carrying value of the Company's Revolving Credit Facility was $367.0 million (See Note 8). The carrying value of the Company's Credit Facility approximates its fair value since it bears an interest rate that is comparable to rates on similar credit facilities and is determined using level 2 inputs.

The Company's 2.00% Senior Exchangeable Notes assumed as part of the Merger are traded in the market and are categorized as a Level 2 liability. The carrying value and the estimated fair value of the said Notes as of July 3, 2016 were $133.6 million and $303.4 million, respectively. See Note 8 for further details.

The Company’s 4.50% Senior Convertible Notes are traded in the secondary market and the fair value is determined using Level 2 inputs. The carrying value and the estimated fair value of the debt portion of the said Notes as of July 3, 2016 were $231.5 million and $320.4 million, respectively. See Note 8 for further details.

Investments in Equity Securities

The Company's investments in equity securities include long-term investments in non-marketable equity securities of privately-held companies valued at approximately $59.5 million and $50.5 million as of July 3, 2016 and January 3, 2016, respectively.

Included in the Company's non-marketable equity securities recorded within “Other long-term assets” line item of the Condensed Consolidated Balance Sheet is an investment in a company that designs, develops and manufactures certain battery storage products for mobile consumer devices. This investment is being accounted for using the equity method. During the three and six months ended July 3, 2016, the Company invested an additional $7.0 million and $12.0 million, respectively, in this battery products company, which increased the Company’s cumulative total investment to $68.5 million. This represented 42.5% of the investee's outstanding voting shares as of July 3, 2016. The Company held 38.7% of this investee’s voting shares as of January 3, 2016.

In the second quarter of fiscal 2016, the Company partially sold shares of its investments in Hua Hong Semiconductor Limited (HHSL), a publicly traded company, which is the parent company of Grace Semiconductor Manufacturing Corporation, one of the Company's strategic foundry partners, resulting in cash proceeds of approximately $4.3 million. The loss on the sale of said investment was not material.

The remaining privately-held equity investments are accounted for under the cost method and are periodically reviewed for other-than-temporary declines in fair value.

NOTE 7. EMPLOYEE STOCK PLANS AND STOCK-BASED COMPENSATION

The Company's equity incentive plans are broad-based, long-term programs intended to attract and retain talented employees and align stockholder and employee interests.

The following table summarizes the stock-based compensation expense by line item recorded in the Condensed Consolidated Statements of Operations:

	Three Months Ended				Six months ended
	July 3, 2016		June 28, 2015		July 3, 2016		June 28, 2015
	(In thousands)
Cost of revenues	$	4,278	$	3,910	$	9,925	$	8,631
Research and development		5,329		6,908		12,259		12,661
Selling, general and administrative		9,242		16,849		20,203		25,172
Total stock-based compensation expense	$	18,849	$	27,667	$	42,387	$	46,464

As of July 3, 2016 and January 3, 2016, stock-based compensation capitalized in inventories totaled $4.0 million and $4.3 million, respectively.

CYPRESS SEMICONDUCTOR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The following table summarizes the stock-based compensation expense by type of awards:

	Three Months Ended				Six months ended
	July 3, 2016		June 28, 2015		July 3, 2016		June 28, 2015
	(In thousands)
Stock options	$	206	$	572	$	504	$	1,268
Restricted stock units ("RSUs"), including Performance-Based Restricted Stock Units ("PSUs")		13,204		23,882		30,597		38,770
Employee Stock Purchase Plan (“ESPP”)		5,439		3,213		11,286		6,426
Total stock-based compensation expense	$	18,849	$	27,667	$	42,387	$	46,464

The following table summarizes the unrecognized stock-based compensation expense, net of estimated forfeitures, by type of awards:

	As of
	July 3, 2016		Weighted- Average Amortization Period
	(In thousands)		(In years)
Stock options	$	1,481		1.02
RSUs including PSUs		59,244		1.38
ESPP		7,475		0.54
Total unrecognized stock-based compensation expense	$	68,200		1.28

During the three months ended July 3, 2016, the Company, as part of the severance agreement executed with Dr. T.J. Rodgers, accelerated the vesting of the PSU’s previously granted and modified the vesting conditions such that 100% of such awards vested on the effective date of his termination which was April 28, 2016. Included in the stock-based compensation expense for the three and six months ended July 3, 2016, is an amount of $3.1 million related to the impact of the said modification.

Equity Incentive Program

As of July 3, 2016, approximately 31.9 million stock options, or 21.8 million RSUs/PSUs were available for grant as share based awards under the 2013 Stock Plan, the 2010 Equity Incentive Award Plan (formerly the Spansion 2010 Equity Incentive Award Plan) and the 2012 Incentive Award Plan (formerly the Ramtron Plan). As of July 3, 2016, there were 2.6 million shares of stock available for issuance under the ESPP plan.

Stock Options

The following table summarizes the Company's stock option activities:

	Shares			Weighted- Average Exercise Price Per Share		Weighted Average Remaining Contractual term		Aggregate Intrinsic Value
	(In thousands, except per-share amounts)					(In years)		($ in millions)
Options outstanding as of January 3, 2016		16,840		$	7.99
Exercised		(191	)	$	4.19
Forfeited or expired		(163	)	$	11.35
Options outstanding as of April 3, 2016		16,486		$	8.00
Exercised		(7,069	)	$	4.85
Forfeited or expired		(97	)	$	12.88
Options outstanding as of July 3, 2016		9,320		$	10.35		3.39	$	14.60
Options exercisable as of July 3, 2016		7,483		$	10.11		3.05	$	14.27

CYPRESS SEMICONDUCTOR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

There were no options granted for the three and six months ended July 3, 2016.

Restricted Stock Units (“RSUs”) and Performance-Based Restricted Stock Units (“PSUs”)

The following table summarizes the Company's RSU/PSU activities:

	Shares			Weighted- Average Grant Date Fair Value Per Share
	(In thousands, except per-share amounts)
Balance as of January 3, 2016		11,053		$	13.43
Granted		1,957		$	10.97
Vested		(2,903	)	$	14.53
Forfeited		(1,304	)	$	12.66
Balance as of April 3, 2016		8,803		$	12.63
Granted		1,316		$	9.31
Released		(1,073	)	$	12.56
Forfeited		(199	)	$	12.17
Balance as of July 3, 2016		8,847		$	12.16

On April 1, 2016, the Compensation Committee of the Company approved the grant of 0.9 million awards of restricted stock units to certain of the Company’s executive officers (the “2016 Grants”). Approximately 57% of the 2016 Grants are in the form of PSUs which vest based on achievement of two performance milestones: product development and production milestones and Gross Margin goals—over the next two years. Such PSU grants will be capped at target levels if Cypress’s total shareholder return (TSR) is negative, even if the Product Development/Production or Gross Margin performance milestones are achieved at above-target or maximum levels. The remaining 43% of the 2016 Grants are in the form of RSUs which cliff vest based on continued service over two years.

In addition to PSUs subject to the milestones specified above, a portion of the grants under the 2015 performance based restricted stock (“PARS”) Program are RSUs which have service-based vesting terms under which employees are eligible to earn 100% of their RSUs if they remain an employee of the Company through specified dates between fiscal 2016 and 2018.

CYPRESS SEMICONDUCTOR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

NOTE 8. DEBT

Total debt is comprised of the following:

	As of
	July 3, 2016		January 3, 2016
	(In thousands)
Current portion of long-term debt
Capital lease obligations	$	5,675	$	6,603
Equipment loans		1,511		3,003
Term Loan A		6,250		5,000
Current portion of long-term debt		13,436		14,606
Revolving credit facility and long-term debt
Senior Secured Credit facility		367,000		449,000
Term Loan A		88,301		92,228
2.00% Senior Exchangeable Notes		133,607		131,845
4.50% Senior Exchangeable Notes		231,456		—
Capital lease obligations		—		586
Revolving credit facility and long-term debt		820,364		673,659
Total debt	$	833,800	$	688,265

4.50% Senior Exchangeable Notes

On June 23, 2016, the Company , issued at face value, $287.5 million of Senior Exchangeable Notes due 2022 (the “Notes”) in a private placement to qualified institutional buyers under Rule 144A of the Securities Act of 1933, as amended. The Notes are governed by an Indenture (“Indenture”), dated June 23, 2016, between the Company and U.S. Bank National Association , as Trustee. The Notes will mature on January 15, 2022, unless earlier repurchased or converted, and bear interest of 4.50% per year payable semi-annually in arrears on January 15 and July 15, commencing on January 15, 2017. The Notes may be due and payable immediately in certain events of default.

The Notes are exchangeable for an initial exchange rate of 74.1372 shares of common stock per $1,000 principal amount of the Notes (equivalent to an initial exchange price of approximately $13.49 per share) subject to adjustments for anti-dilutive issuances and make-whole adjustments upon a fundamental change. A fundamental change includes a change in control, delisting of the Company’s stock and liquidation, consolidation or merger of the Company. Prior to October 15, 2021, the Notes will be exchangeable under certain specified circumstances as described in the Indenture. On or after October 15, 2021, until the close of business on the second scheduled trading day immediately preceding the maturity date, the Notes will be convertible in multiples of $1,000 principal amount regardless of the foregoing circumstances.

Upon conversion, the Company may pay or deliver, as the case may be, cash, shares of its common stock or a combination of cash and shares of its common stock, at its election. If the Company satisfies its conversion obligation solely in cash or through payment and delivery, as the case may be, of a combination of cash and shares of its common stock, the amount of cash and shares of common stock, if any, due upon conversion will be based on a pre-defined conversion value.

It is the Company’s intent that upon conversion, the Company would pay the holders of the Notes cash for an amount up to the aggregate principal the Notes. If the conversion value exceeds the principal amount, the Company intends to deliver shares of its common stock in respect to the remainder of its conversion obligation in excess of the aggregate principal amount (“conversion spread”). Accordingly, for the purposes of calculating diluted earnings per share, there would be no adjustment to the numerator in the net income per common share computation for the cash settled portion of the Notes, as that portion of the debt liability is expected to be settled in cash. The conversion spread, will be included in the denominator for the computation of diluted net income per common share, using the treasury stock method.

In accordance with ASC 470-20, Debt with Conversion and Other Options, the Company separated the Convertible Notes into liability and equity components. The carrying amount of the liability component was calculated by measuring the estimated fair value of a similar liability that does not have an associated convertible feature. Such amount was based on the contractual cash flows discounted at an appropriate market rate for non-convertible debt at the date of issuance, which was determined to be 82.9% of the par

CYPRESS SEMICONDUCTOR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

value of the Notes or $238.3 million. The carrying amount of the equity component of $49.2 million representing the conversion option was determined by deducting the fair value of the liability component from the face value of the Convertible Notes as a whole. The excess of the principal amount of the liability componen t over its carrying amount ("debt discount") is accreted to interest expense over the term of the Notes using the effective interest method. The equity component is not re-measured as long as it continues to meet the conditions for equity classification.

The Company incurred transaction costs of approximately $8.63 million relating to the issuance of the Notes. The transaction costs of $8.63 million include $7.91 million financing fees paid to the initial purchases of The Notes, and other estimated offering expenses payable by the Company. In accounting for these costs, the Company allocated the costs of the offering in proportion to the fair value of the debt and equity recognized in accordance with the accounting standards. The transaction costs allocated to the debt component of approximately $7.2 million and are being amortized as interest expense over the term of the Notes using the effective yield method. The transaction costs allocated to the equity component of approximately $1.5 million were recorded as a reduction of additional paid-in capital.

At the debt issuance date, the Convertible Notes, net of issuance costs, consisted of the following (in thousands):

	June 23, 2016
Liability component
Principal		238,338
Less: Issuance cost		(7,158	)
Net carrying amount		231,180
Equity component
Allocated amount		49,163
Less: Issuance cost		(1,477	)
Net carrying amount		47,686
Convertible Notes, net of issuance costs		278,866

The following table includes total interest expense related to the Notes recognized for during the three and six months ended July 3, 2016 (in thousands):

	Three and Six months ended July 3, 2016
Contractual interest expense	$	354
Amortization of debt issuance costs		34
Accretion of debt discount		242
Total	$	630

The net liability component of Notes as of July 3, 2016 is comprised of the following (in thousands):

	July 3, 2016
Net carrying amount at issuance date	$	231,180
Amortization of debt issuance costs during the year		34
Accretion of debt discount during the year		242
	$	231,456

Capped Calls

In connection with the issuance of the Notes, the Company entered into capped call transactions with certain bank counterparties to reduce the risk of potential dilution of the Company’s common stock upon the exchange of the Notes. The capped call transactions have a strike price of approximately $13.49 and a cap price of approximately $15.27, and are exercisable when and if the Notes are converted. If upon conversion of the Convertible Notes, the price of the Company’s common stock is above the strike price of the capped calls, the counterparties will deliver shares of the Company’s common stock and/or cash with an aggregate value approximately equal to the difference between the price of the Company’s common stock at the conversion date (as defined, with a maximum price for purposes of this calculation equal to the cap price) and the strike price, multiplied by the number of shares of the

CYPRESS SEMICONDUCTOR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Company’s common stock related to the capped call transactions being exercised. The capped calls expire in January 2022. The Company paid $8.2 million for these capped calls which were recorded as a reduction in addi tional paid-in capital.

Senior Secured Revolving Credit Facility

On April 27, 2016, the Company amended and restated its existing senior secured revolving credit facility ("Credit Facility") and of $540 million. The borrowings under the Credit Facility bear interest, at the Company's option, at an adjusted base rate plus a spread of 1.25%, or an adjusted LIBOR rate plus a spread of 2.25%. The borrowings under the Credit Facility are guaranteed by certain present and future wholly-owned material domestic subsidiaries of the Company (the “Guarantors”) and secured by a security interest in substantially all assets of the Company and the Guarantors. The financial covenants include the following conditions: 1) maximum total leverage ratio of 4.50x through October 2016, 4.25x until January 1, 2017, 4.00 x until April 2, 2017 and 3.75x thereafter, 2) minimum fixed charge coverage ratio of 1.00x. The Company incurred financing costs of $2.6 million related to the Credit Facility which has been capitalized and recognized in other long-term assets on the Condensed Consolidated Balance Sheet. These costs will be amortized over the life of the Credit Facility and recorded in “Interest Expense” on the Condensed Consolidated Statement of Operations.

As per the terms of the Credit Facility, the Company entered into a Joinder Agreement on December 22, 2015 under which the Company borrowed an additional $100 million (“Term Loan A”). Term Loan A is subject to, at the Company’s option, either an interest rate equal to (i) 3.25% over LIBOR or (ii) an interest rate equal to 2.25% over the greater of (x) the prime lending rate published by the Wall Street Journal, (y) the federal funds effective rate plus 0.50%, and (z) the LIBOR rate for a one month interest period plus 1%. The Company paid a 1.00% upfront fee in connection with the Term Loan A. Such Term Loan A is payable in quarterly installments equal to 1.25% of the principal per quarter for 2016, 1.875% of the principal per quarter for 2017 and 2018, and 2.50% of the principal per quarter thereafter, with the remaining outstanding principle amount due at final maturity on March 12, 2020. It may be voluntarily prepaid at the Company’s option and is subject to mandatory prepayments equal to (i) 50% of excess cash flow, as defined in the agreement, (stepping down to 25% and 0% based on a decrease in total leverage ratio over time) at the end of each fiscal year, (ii) the net cash proceeds from certain asset sales (subject to certain reinvestment rights) and (iii) the proceeds from any debt issuances not otherwise permitted under the Credit Agreement. The Company incurred financing costs of $2.8 million to the lenders of Term Loan A which has been capitalized and recognized as a deduction of the Term Loan A balance in “Long-term revolving credit facility and long term debt” on the Consolidated Balance Sheet. These costs will be amortized over the life of Term Loan A and recorded in “Interest Expense” on the Condensed Consolidated Statement of Operations.

As of July 3, 2016, $464.5 million aggregate principal amount of loans, including Term Loan A, were outstanding under the Credit Facility.

As of July 3, 2016, the Company was in compliance with all of the financial covenants under the Credit Facility.

2.00% Senior Exchangeable Notes

Pursuant to the Merger, Cypress assumed Spansion's 2.00% Senior Exchangeable Notes (the “Assumed Notes”) on March 12, 2015. They are fully and unconditionally guaranteed on a senior unsecured basis by the Company. The Assumed Notes will mature on September 1, 2020, unless earlier repurchased or converted, and bear interest of 2.00% per year payable semi-annually in arrears on March 1 and September 1. The Assumed Notes may be due and payable immediately in certain events of default.

As of July 3, 2016, the Assumed Notes are exchangeable for 188.5 shares of common stock per $1,000 principal amount of the Notes (equivalent to an exchange price of approximately $5.31) subject to adjustments for dividends, anti-dilutive issuances and make-whole adjustments upon a fundamental change. A fundamental change includes a change in control, delisting of the Company’s stock and liquidation, consolidation or merger of the Company. According to the Indenture, a change in control occurs when a person or group becomes the beneficial owner directly or indirectly, of more than 50% of the Company’s common stock. In the case of a consolidation or merger, if the surviving entity continues to be listed, no change of control will be triggered. Prior to June 1, 2020, the Assumed Notes will be exchangeable under certain specified circumstances as described in the Indenture.

Upon conversion, the Company may pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of its common stock, at its election. If the Company satisfies its conversion obligation solely in cash or through payment and delivery, as the case may be, of a combination of cash and shares of our common stock, the amount of cash and shares of common stock, if any, due upon conversion will be based on a pre-defined conversion value.

CYPRESS SEMICONDUCTOR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

It is Company’s intent that upon conversion, the Company would pay the holders of the Notes cash for an amount up to the aggregate principal the Notes. If the conversion value exceeds the principal am ount, the Company intends to deliver shares of its common stock in respect to the remainder of its conversion obligation in excess of the aggregate principal amount (“conversion spread”). Accordingly, for the purposes of calculation of diluted earnings per share, there would be no adjustment to the numerator in the net income per common share computation for the cash settled portion of the Notes, as that portion of the debt liability is expected to be settled in cash. The conversion spread, will be included in the denominator for the computation of diluted net income per common share, using the treasury stock method.

The net carrying amount of the liability component of the Assumed Notes as of July 3, 2016 consists of the following:

	(in thousands)
Principal amount	$	149,990
Unamortized debt discount		(16,383	)
Net carrying value	$	133,607

The following table presents the interest on the Assumed Notes recognized as an expense during the three and months ended July 3, 2016 and June 28, 2015:

	Three Months Ended				Six Months Ended
	July 3, 2016		June 28, 2015		July 3, 2016		June 28, 2015
	(in thousands)
2.00% Senior Exchangeable Notes
Contractual interest expense at 2% per annum	$	742	$	742	$	1,489	$	889
Accretion of debt discount		890		820		1,762		983
Total	$	1,632	$	1,562	$	3,251	$	1,872

Equipment Loans

In December 2011, the Company obtained equipment loans from a financial institution for an aggregate amount of approximately $14.1 million which are collateralized by certain manufacturing equipment and bear interest of 3.15% to 3.18% per annum payable in 60 equal installments. The balance of $1.5 million outstanding against these loans as of July 3, 2016 is payable within the remaining six months of fiscal 2016.

Capital Leases

In 2011, the Company entered into capital lease agreements which allow it to borrow up to $35.0 million to finance the acquisition of certain manufacturing equipment. Assets purchased under all capital leases are included in “Property, plant and equipment, net” on the Company's Condensed Consolidated Balance Sheet.

As of July 3, 2016, the gross value and net book value of manufacturing equipment purchased under these capital leases were $11.1 million and $5.5 million, respectively. As of January 3, 2016, the gross value and net book value of manufacturing equipment purchased under these capital leases were $20.5 million and $11.9 million, respectively.

CYPRESS SEMICONDUCTOR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Future Debt Payments

For each of the next five years and beyond, the scheduled maturities of the Company's debt including interest as of July 3, 2016, are as follows:

Fiscal Year	Term Loan A		Senior Secured Credit Facility		2.00% Senior Exchangeable Notes		4.50% Senior Exchangeable Notes		Capital lease obligations and Equipment loans		Total
	(In thousands)
2016 (remaining six months)	$	3,988	$	5,046	$	1,500	$	—	$	7,243	$	17,777
2017		13,131		10,093		3,000		13,717		—	$	39,941
2018		12,673		10,093		3,000		12,938		—	$	38,704
2019		14,657		10,093		3,000		12,938		—	$	40,688
2020 and after		71,069		369,523		152,990		319,930		—	$	913,512
Total	$	115,518	$	404,848	$	163,490	$	359,523	$	7,243	$	1,050,622

NOTE 9. EQUITY TRANSACTIONS

$450 Million Stock Buyback Program

On October 20, 2015, the Company entered into a new $450 million stock buyback program (“October 2015 program”). The program allows the Company to purchase its common stock or enter into equity derivative transactions related to our common stock. The timing and actual amount expended with the new authorized funds will depend on a variety of factors including the market price of the Company’s common stock, regulatory, legal, and contractual requirements, alternatives uses of cash, availability of on-shore cash and other market factors. The October 2015 program does not obligate the Company to repurchase any particular amount of common stock and may be modified or suspended at any time at the Company’s discretion. Through the end of second quarter of fiscal 2016, the Company has repurchased a total of 29.5 million shares for a total cost of $239.0 million under the October 2015 program. Of this, 23.8 million shares worth $182.5 million were repurchased in the three and six months ended July 3, 2016, which includes withholdings for tax obligations on vested stock-based awards.

Dividends

On May 11, 2016 the Company's Board of Directors approved a cash dividend of $0.11 per share payable to holders of record of its common stock at the close of business day on June 30, 2016. This cash dividend was paid on July 21, 2016 and totaled approximately $35.2 million which was accrued for and shown as “Dividends payable” on the Condensed Consolidated Balance Sheet as of July 3, 2016.

For US income tax purposes, the Company will make a determination as to whether 2016 distributions are to be treated as a return of capital or a dividend after the Company's 2016 fiscal year end. At this time the Company anticipates that 2016 distributions will be taxable dividends and should be treated accordingly by dividend recipients until a final determination can be made. The Company’s distribution policy and the payment of cash distributions under that policy are subject to the Board's continuing determination that the distribution policy and the declaration of dividends are in the best interests of the Company’s stockholders and are in compliance with all laws and agreements of the Company applicable to the declaration and payment of cash distributions. This policy may be changed or cancelled in the Company’s discretion at any time.

NOTE 10. COMMITMENTS AND CONTINGENCIES

Operating Lease Commitments

The Company leases certain facilities and equipment under non-cancelable operating lease agreements that expire at various dates through fiscal 2020. Some leases include renewal options, which would permit extensions of the expiration dates at rates approximating fair market rental values at the time of the extension.

CYPRESS SEMICONDUCTOR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

As of July 3, 2016, future minimum lease payments under non-cancelable operating leases were as follows:

Fiscal Year	(In thousands)
2016 (remaining six months)	$	9,406
2017		17,412
2018		11,308
2019		7,455
2020		6,699
2021 and thereafter		24,767
Total	$	77,047

Restructuring reserve balances related to operating facility leases were $15.7 million and $17.4 million as of July 3, 2016 and January 3, 2016, respectively.

Product Warranties

The Company generally warrants its products against defects in materials and workmanship for a period of one year and that product warranty is generally limited to a refund of the original purchase price of the product or a replacement part. The Company estimates its warranty costs based upon its historical warranty claim experience. Warranty returns are recorded as an allowance for sales returns. The allowance for sales returns is reviewed quarterly to verify that it properly reflects the remaining obligations based on the anticipated returns over the balance of the obligation period.

The following table presents the Company's warranty reserve activities:

	Three Months Ended						Six Months Ended
	July 3, 2016			June 28, 2015			July 3, 2016			June 28, 2015
	(In thousands)
Beginning balance	$	4,176		$	2,370		$	4,096		$	2,370
Warranties assumed as part of the Merger		—			1,220			—			1,254
Settlements made		(651	)		(427	)		(1,081	)		(552	)
Provisions		2,439			871			2,949			962
Ending balance	$	5,964		$	4,034		$	5,964		$	4,034

Litigation and Asserted Claims

In a matter associated with Ramtron International Corporation (“Ramtron”), a wholly owned subsidiary of Cypress, bankruptcy proceedings are ongoing in Italy where the trustee for four bankrupt entities of Finmek S.pA. is seeking refunds of approximately $2.8 million in payments made by Finmek to Ramtron prior to Finmek’s bankruptcy in 2004. In November 2014, one of the courts presiding over these proceedings found that two payments should be refunded to Finmek, which currently total approximately $0.5 million, including interest and fees. The Company believes this ruling was made in error and has filed an appeal (Court of Appeal of Venice, Docket no. 2706/2015). The Company has prevailed in all other related proceedings, which the trustee may appeal (Court of Appeal of Venice, Docket Nos. 1387/2014 and 2487/2015; Tribunal of Padua Docket No. 5378/2009). Due to the current stage of the proceedings and the appellate process, the Company cannot reasonably estimate the loss or the range of possible loss, if any.

In 2013, a former employee filed a grievance against the Company with the U.S. Department of Labor (“DOL”) seeking back pay and reinstatement or forward pay. That matter was tried before an administrative law judge in July 2014. In December 2014, the administrative law judge issued a ruling in favor of the former employee for amounts totaling approximately $1.3 million. On March 30, 2016, the ruling was affirmed by the DOL Administrative Review Board (ARB). The Company believes both rulings were erroneous and filed an appeal in the United States Court of Appeals for the Tenth Circuit on April 29, 2016 (Case No. 16-9523). The respective positions of the parties and the appellate process prevent a reasonable determination of the outcome at this time. This former employee also filed a complaint for wrongful termination in state court in El Paso County, Colorado on March 4, 2015 (Case No. 2015-cv-030632). The state court litigation is stayed pending resolution of the DOL matter. The Company believes the state court action is meritless and will defend against the allegations.

CYPRESS SEMICONDUCTOR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

After our announcement of the merger between the Company and Span sion Inc. in December 2014, two separate putative class action complaints (Walter Jeter v. Spansion Inc., et. al. (No. 114-cv-274635) and Shiva Y. Stein v. Spansion Inc., el. al. (No. 114-cv-274924)) were filed in Santa Clara County Superior Court in Decem ber 2014, alleging claims of breach of fiduciary duty against Spansion’s board of directors and naming Cypress as a defendant for aiding and abetting the alleged breach of fiduciary duty. While Cypress believes these lawsuits to be meritless, Spansion and Cypress entered into a memorandum of understanding with plaintiffs, the terms of which required additional disclosures by the Company and payment of nominal attorneys’ fees to the class counsel. Final resolution of these litigations will require court appr oval of a final settlement agreement. Due to the current stage of the proceedings, the Company cannot reasonably estimate the loss or the range of possible loss, if any.

The Company is involved in various trademark opposition proceedings with Kingston Technology Corporation (“Kingston”) concerning Kingston’s “HYPERX” trademark and the Company’s “HYPERRAM” trademark, including Trademark Trial and Appeal Board Proceeding Nos. 91218100, 91222728, and 92061796. The Company believes its defenses and counterclaims have merit and will continue to defend its intellectual property. Due to the current stage of the proceedings, the Company cannot reasonably estimate the loss or the range of possible loss, if any.

On May 17, 2016, a patent infringement case was filed by North Star Innovations, Inc. (“North Star”) against the Company and UMC Group USA in the U.S. District Court for the District of Delaware (Case No. 16-cv-00368). North Star alleges that the Company infringes three patents. The matter is still in the very early stages and the Company will defend against the allegations accordingly. Due to the current stage of the proceedings, the Company cannot reasonably estimate the loss or the range of possible loss, if any.

The Company is currently a party to various other legal proceedings, claims, disputes and litigation arising in the ordinary course of business. Based on its own investigations, the Company believes the ultimate outcome of the current legal proceedings, individually and in the aggregate, will not have a material adverse effect on its financial position, results of operation or cash flows. However, because of the nature and inherent uncertainties of the litigation, should the outcome of these actions be unfavorable, the Company's business, financial condition, results of operations or cash flows could be materially and adversely affected.

Indemnification Obligations

The Company is a party to a variety of agreements pursuant to which it may be obligated to indemnify other parties to such agreements with respect to certain matters. Typically, these obligations arise in the context of contracts that the Company has entered into, under which the Company customarily agrees to hold the other party harmless against losses arising from a breach of representations and covenants or terms and conditions related to such matters as the sale and/or delivery of its products, title to assets sold, certain intellectual property claims, defective products, specified environmental matters and certain income taxes. In these circumstances, payment by the Company is customarily conditioned on the other party making a claim pursuant to the procedures specified in the particular contract, which procedures typically allow the Company to challenge the other party’s claims and vigorously defend itself and the third party against such claims. Further, the Company's obligations under these agreements may be limited in terms of time, amount or the scope of its responsibility and in some instances, the Company may have recourse against third parties for certain payments made under these agreements.

It is not possible to predict the maximum potential amount of future payments under these agreements due to the conditional nature of the Company's obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments the Company has made under these agreements have not had a material effect on the Company’s business, financial condition or results of operations. Management believes that if the Company were to incur a loss in any of these matters, such loss would not have a material effect on its business, financial condition, cash flows or results of operations, although there can be no assurance of this. As of July 3, 2016, the Company had no reason to believe a loss exceeding amounts already recognized had been incurred.

CYPRESS SEMICONDUCTOR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

NOTE 11. FOREIGN CURRENCY DERIVATIVES

The Company enters into multiple foreign exchange forward contracts to hedge certain operational exposures resulting from fluctuations in Japanese yen and Euro exchange rates. The Company does not enter into derivative securities for speculative purposes. The Company’s hedging policy is designed to mitigate the impact of foreign currency exchange rate fluctuations on its operating results. Some foreign currency forward contracts were considered to be economic hedges that were not designated as hedging instruments while others were designated as cash flow hedges. Whether designated or undesignated as cash flow hedges or not, these forward contracts protect the Company against the variability of forecasted foreign currency cash flows resulting from revenues, expenses and net asset or liability positions designated in currencies other than the U.S. dollar. The maximum original duration of any contract allowable under the Company’s hedging policy is thirteen months.

Cash Flow Hedges

The Company enters into cash flow hedges to protect non-functional currency inventory purchases and certain other operational expenses, in addition to its on-going program of cash flow hedges to protect its non-functional currency revenues against variability in cash flows due to foreign currency fluctuations. The Company’s foreign currency forward contracts that were designated as cash flow hedges have maturities between three and nine months. All hedging relationships are formally documented, and the hedges are designed to offset changes to future cash flows on hedged transactions at the inception of the hedge. The Company recognizes derivative instruments from hedging activities as either assets or liabilities on the balance sheet and measures them at fair value on a monthly basis. The Company records changes in the intrinsic value of its cash flow hedges in accumulated other comprehensive income on the Condensed Consolidated Balance Sheets, until the forecasted transaction occurs. Interest charges or “forward points” on the forward contracts are excluded from the assessment of hedge effectiveness and are recorded in interest and other income (expense), net in the Condensed Consolidated Statements of Operations. When the forecasted transaction occurs, the Company reclassifies the related gain or loss on the cash flow hedge to revenue or costs, depending on the risk hedged. In the event the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, the Company will reclassify the gain or loss on the related cash flow hedge from accumulated other comprehensive income to interest and other income (expense), net in its Condensed Consolidated Statements of Operations at that time.

The Company evaluates hedge effectiveness at the inception of the hedge prospectively as well as retrospectively and records any ineffective portion of the hedge in interest and other income (expense), net in its Condensed Consolidated Statements of Operations.

At July 3, 2016, the Company had outstanding forward contracts to buy approximately ¥1,522 million for $13.5 million.

Non-designated hedges

Total notional amounts of net outstanding contracts were as summarized below:

Buy / Sell	July 3, 2016		January 3, 2016
	(in millions)
US dollar / Japanese Yen		-	$19.4 / ¥2,333
US dollar / EUR	$19.3/€17.4		$7.3/€6.8
Japanese Yen / US dollar	¥701.7 / $7.4			-

The effect of derivative instruments on the Condensed Consolidated Statements of Operations for the three and six months ended July 3, 2016 was immaterial.

CYPRESS SEMICONDUCTOR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The gross fair values of derivative instruments on the Condensed Consolidated Balance Sheets as of July 3, 2016 and January 3, 2016 were as follows:

	July 3, 2016				January 3, 2016
Balance Sheet location	Derivatives designated as hedging instruments		Derivatives not designated as hedging instruments		Derivatives designated as hedging instruments		Derivatives not designated as hedging instruments
	(in thousands)
Other Current Assets
Derivative Asset	$	11,312	$	5	$	966	$	17

Other Current Liabilities
Derivative Liability	$	9,813	$	545	$	1,283	$	99

NOTE 12. INCOME TAXES

The Company's income tax benefit was $5.2 million and income tax expense was $2.9 million for the three months ended July 3, 2016 and June 28, 2015, respectively. The Company’s income tax benefit was $1.5 million for the six months ended July 3, 2016 and the Company’s income tax benefit was $1.1 million for the six months ended June 28, 2015. The tax benefit for the six months ended July 3, 2016 was primarily attributable to a release of previously accrued taxes related to the lapsing of statutes of limitation, primarily offset by income taxes associated with the Company’s non-US operations. The tax benefit for the six months ended June 28, 2015 was primarily a result of non-U.S. income taxes on income earned in foreign jurisdictions which was partially offset by the tax impact of accounting for certain acquired assets and liabilities as a result of the Merger resulting in $5.3 million of the Company’s valuation allowance being released.

Unrecognized Tax Benefits

As of July 3, 2016 and January 3, 2016 the amount of unrecognized tax benefits that, if recognized, would affect the Company's effective tax rate totaled $26.4 million and $28.4 million, respectively.

Management believes events that could occur in the next 12 months which could cause a material change in unrecognized tax benefits include, but are not limited to, the following:

completion of examinations by the U.S. or foreign taxing authorities; and

expiration of statute of limitations on the Company's tax returns.

The calculation of unrecognized tax benefits involves dealing with uncertainties in the application of complex global tax regulations. Management regularly assesses the Company’s tax positions in light of legislative, bilateral tax treaty, regulatory and judicial developments in the countries in which the Company does business. The Company believes it is reasonably possible that it may recognize up to approximately $4.1 million of its existing unrecognized tax benefits within the next twelve months as a result of the lapse of statutes of limitations and the resolution of agreements with domestic and various foreign tax authorities.

Classification of Interest and Penalties

The Company classifies interest and penalties as components of the income tax provision in the Condensed Consolidated Statements of Operations. As of July 3, 2016 and January 3, 2016, the amounts of accrued interest and penalties totaled $9.5 million and $12.0 million, respectively.

CYPRESS SEMICONDUCTOR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

NOTE 13. NET LOSS PER SHARE

The following table sets forth the computation of basic and diluted net loss per share:

	Three Months Ended						Six Months Ended
	July 3, 2016			June 28, 2015			July 3, 2016			June 28, 2015
	(In thousands, except per-share amounts)
Net loss attributable to Cypress	$	(519,274	)	$	(90,051	)	$	(623,296	)	$	(336,849	)
Weighted-average common shares		314,305			333,334			317,330			264,547
Weighted-average diluted shares		314,305			333,334			317,330			264,547
Net loss per share—basic	$	(1.65	)	$	(0.27	)	$	(1.96	)	$	(1.27	)
Net loss per share—diluted	$	(1.65	)	$	(0.27	)	$	(1.96	)	$	(1.27	)

For the three months ended July 3, 2016 and June 28, 2015, approximately 7.7 million and 16.6 million, weighted average potentially dilutive securities consisting of outstanding stock options, RSUs and PSUs and Convertible debt, respectively, were excluded in the computation of diluted net income per share because their effect would have been anti-dilutive. For the six months ended July 3, 2016 and June 28, 2015, approximately 8.9 million and 30.4 million, weighted average potentially dilutive securities consisting of outstanding stock options, unvested restricted RSUs and PSU’s and Convertible debt, respectively, were excluded in the computation of diluted net income (loss) per share because their effect would have been anti-dilutive.

NOTE 14. SEGMENT, GEOGRAPHICAL AND CUSTOMER INFORMATION

Segment Information

The Company designs, develops, manufactures and markets a broad range of high-performance solutions for embedded systems, from automotive, industrial and networking platforms to highly interactive consumer and mobile devices. In connection with Cypress’s merger with Spansion, the Company has aligned Spansion's two major product groups with Cypress's existing business segments: legacy Spansion flash memory products are reported in the Company's Memory Products Division and legacy Spansion microcontroller and analog products are reported in the Company's Programmable Systems Division.

Revenue

	Three Months Ended				Six Months Ended
	July 3, 2016		June 28, 2015		July 3, 2016		June 28, 2015
	(In thousands)
Programmable Systems Division	$	166,813	$	202,806	$	330,797	$	277,624
Memory Products Division		238,130		255,157		446,993		363,835
Data Communications Division		25,474		19,087		45,602		37,653
Emerging Technologies Division		19,710		7,728		45,699		14,803
Total revenue	$	450,127	$	484,778	$	869,091	$	693,915

CYPRESS SEMICONDUCTOR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Loss before Income Taxes

	Three Months Ended						Six Months Ended
	July 3, 2016			June 28, 2015			July 3, 2016			June 28, 2015
	(In thousands)
Programmable Systems Division	$	(5,478	)	$	12,999		$	(16,080	)	$	(6,975	)
Memory Products Division		53,370			49,838			90,199			(12,737	)
Data Communications Division		(7,238	)		(3,630	)		(15,697	)		(6,145	)
Emerging Technologies Division		2,341			(3,208	)		11,007			(5,998	)
Unallocated items:
Stock-based compensation		(18,849	)		(27,667	)		(42,387	)		(46,464	)
Amortization of intangible assets		(32,605	)		(42,670	)		(67,792	)		(69,707	)
Restructuring costs, including CEO severance		(5,154	)		(10,039	)		(5,424	)		(85,754	)
Changes in value of deferred compensation plan		(254	)		54			(840	)		(1,187	)
Impact of purchase accounting and other		(19,937	)		(61,974	)		(51,180	)		(101,215	)
Impairment of acquisition-related intangible assets		—			—			(33,944	)
Goodwill impairment charge		(488,504	)		—			(488,504	)		—
Loss before income taxes	$	(522,308	)	$	(86,297	)	$	(620,642	)	$	(336,182	)

The Company does not allocate goodwill and intangible assets impairment charges, impact of purchase accounting, IPR&D, severance and retention costs, acquisition-related costs, stock-based compensation, interest income and other, and interest expense to its segments. In addition, the Company does not allocate assets to its segments. The Company excludes these items consistent with the manner in which it internally evaluates its results of operations.

Geographical Information

The following table presents revenues by geographical locations ¹

	Three Months Ended				Six Months Ended
	July 3, 2016		June 28, 2015		July 3, 2016		June 28, 2015
	(In thousands)
United States	$	41,037	$	44,698	$	89,214	$	75,362
Europe		68,297		59,623		129,873		92,293
Asia:
Greater China ²		190,806		158,028		334,389		227,317
Japan		93,387		160,711		206,582		194,870
Rest of the World		56,600		61,718		109,033		104,073
Total revenue	$	450,127	$	484,778	$	869,091	$	693,915

Prior period numbers have been revised to conform to current period presentation. During the three months ended July 3, 2016, the Company started presenting this information based on location of customers to whom the sale of products was made.

Greater China includes China, Taiwan and Hong Kong.

CYPRESS SEMICONDUCTOR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

Property, plant and equipment, net, by geographic locations were as follows:

	As of
	July 3, 2016		January 3, 2016
	(In thousands)
United States	$	249,208	$	269,304
Philippines		88,160		90,356
Thailand		30,920		34,233
Japan		15,428		9,537
Other		18,653		21,573
Total property, plant and equipment, net	$	402,369	$	425,003

The Company tracks its assets by physical location. Although management reviews asset information on a corporate level and allocates depreciation expense by segment, the Company’s chief operating decision maker does not review asset information on a segment basis.

Customer Information

Outstanding accounts receivable from three of the Company's distributors accounted for 27.5%, 9.3% and 8.0% of its consolidated accounts receivable as of July 3, 2016. Outstanding accounts receivable from three of the Company's distributors, accounted for 42%, 11% and 9% of its consolidated accounts receivable as of January 3, 2016.

Revenue generated through one of the Company's distributors accounted for 24.0% of its consolidated revenue for the three months ended July 3, 2016. Revenue generated through one of the Company’s distributor accounted for 24.0% of its consolidated revenue for the six months ended July 3, 2016. No end customer accounted for 10% or more of the Company's revenues for the three and six months ended July 3, 2016.

Revenue generated through one of the Company's distributors accounted for 29% of its consolidated revenue for the three months ended June 28, 2015. Revenue generated through two of the Company’s distributors accounted for 23% and 10% of its consolidated revenue for the six months ended June 28, 2015. One end customer accounted for 10% or more of the Company’s revenue for the three and six months ended June 28, 2015.

NOTE 15. SUBSEQUENT EVENTS

Joinder and Amendment Agreement

On July 5, 2016 the Company entered into a Joinder and Amendment Agreement with the guarantors party thereto, the initial incremental term loan lenders party thereto and Morgan Stanley Senior Funding, Inc., as administrative agent and collateral agent . The Joinder Agreement supplements the Company’s existing Amended and Restated Credit and Guaranty Agreement, dated as of March 12, 2015, by and among the Company, the guarantors, the lenders, the Agent, and Morgan Stanley Bank, N.A., as issuing bank and others.

The Joinder and Amendment Agreement provides for the incurrence by the Company of an incremental term loan in an aggregate principal amount of $450.0 million. The incurrence of the Incremental Term Loan is permitted as an incremental loan under the Credit Agreement and is subject to the terms of the Credit Agreement and to additional terms set forth in the Joinder and Amendment Agreement. The Incremental Term Loan will initially bear interest at (i) with respect to any portion of the Incremental Term Loan that is a LIBOR rate loan 5.50% or (ii) with respect to any portion of the Incremental Term Loan that is a base rate loan, 4.50%. Following the Company’s delivery of a compliance certificate and financial statements for the Company’s third fiscal quarter of 2016, the Incremental Term Loan shall bear interest, at the Company’s option, at (i) an adjusted LIBOR rate plus an applicable margin of either 5.25% or 5.50%, or (ii) an adjusted base plus an applicable margin of either 4.25% or 4.50%, with the applicable margin in each case determined based on the Company’s total net leverage ratio for the trailing twelve month period ended as of the last day of the Company’s most recently ended fiscal quarter. The Company paid an upfront fee to the initial incremental lenders in an amount equal to 1.5% of the aggregate principal amount of the Incremental Term Loan funded. The Company is required to pay a prepayment premium of 1% of the principal amount prepaid if it prepays the Incremental Term Loan in certain circumstances prior to the date that is twelve months after the Closing Date. The Incremental Term Loan was fully funded on the Closing Date and matures on July 5, 2021.

CYPRESS SEMICONDUCTOR CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The proceeds of the Incremental Term Loan were used to finance a portion of purchase price for the Company’s acquisition of certain assets used in the operation of Broadcom Corporation’s Internet of Things business, and to pay fees and expenses incurred in connection with the acquisition.

Broadcom Asset Purchase Agreement

On July 5, 2016, the Company completed its acquisition of certain assets primarily related to the Internet of Things business of Broadcom Corporation pursuant to an Asset Purchase Agreement with Broadcom, dated April 28, 2016. In connection with the closing of the transaction the Company paid Broadcom $550 million in cash. The revenue from sales of Wi-Fi Bluetooth and Zigbee radio products acquired as part of this acquisition, will be reported in the Company’s Data Communications Division. The Company is currently evaluating the purchase price allocation for this transaction.

Deca Investment

On July 29, 2016, Deca Technologies Inc. (“Deca”), a partially owned subsidiary of the Company, completed a $111.4 million equity investment by certain investors pursuant to a Class I Preferred Share Purchase. In connection with the closing of the transaction, Deca repurchased $20.6 million of Class G preferred shares from the Company. Following the Closing, the Company’s ownership in Deca was reduced to 52.2% based on its shares outstanding on July 29, 2016.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Management’s Discussion and Analysis of Financial Condition and Results of Operations in this Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve risks and uncertainties, which are discussed in the “Forward-Looking Statements” section under Part I of this Quarterly Report on Form 10-Q.

EXECUTIVE SUMMARY

Overview

Cypress Semiconductor Corporation (“Cypress” or “the Company”) manufactures and sells in advanced embedded system solutions for automotive, industrial, home automation and appliances, consumer electronics and medical products. Cypress’s programmable systems-on-chip, general-purpose microcontrollers, analog ICs, wireless and USB-based connectivity solutions and memories help engineers design differentiated products and help with speed to market. Cypress is committed to providing customers with quality support and engineering resources.

Merger with Spansion

On March 12, 2015, we completed the merger (“Merger”) with Spansion Inc. ("Spansion") pursuant to the Agreement and Plan of Merger and Reorganization, dated as of December 1, 2014 (the "Merger Agreement"), for a total consideration of approximately $2.8 billion. In accordance with the terms of the Merger Agreement, Spansion shareholders received 2.457 Cypress shares for each Spansion share they owned. The Merger has been accounted for under the acquisition method of accounting in accordance with Financial Accounting Standards Board Accounting Standard Topic 805, Business Combinations, with Cypress treated as the accounting acquirer. To date, the Company has incurred $96.5 million of merger and integration costs in addition to restructuring and other items associated with the Merger and integration. The post-Merger company is expected to realize more than $180 million in cost synergies on an annualized basis within three years, and create a leading global provider of microcontrollers and specialized memories needed in today's embedded systems.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations includes the financial results of legacy Spansion beginning March 12, 2015. The comparability of our operating results for the six months ended July 3, 2016 to the same period in fiscal 2015 is significantly impacted by our merger with Spansion . In our discussion and analysis of comparative periods, we have quantified the contribution of additional revenue or expense resulting from this transaction wherever such amounts were material and identifiable. While identified amounts may provide indications of general trends, the analysis cannot completely address the effects attributable to integration efforts.

Divestiture of TrueTouch ^® Business

In connection with the sale of the TrueTouch ^® Mobile touchscreen business to Parade Technologies (“Parade”) on August 1, 2015, we entered into a Manufacturing Service Agreement (MSA) in which we agreed to sell finished wafers and devices to Parade during the one-year period following the close of the transaction. The terms of the MSA provide that we would sell finished products to Parade at agreed-upon prices that were considered below fair market value, indicating that there was an embedded fair value that would be realized by Parade through those terms. Accordingly, we have allocated approximately $19.9 million from the $98.6 million proceeds to the fair value of the MSA based on the forecasted wafer sales to Parade for the subsequent one-year period. That amount was deferred on our consolidated balance sheet initially and is being amortized to revenue as we sell products to Parade. During the three and six months ended July 3, 2016, we recognized approximately $3.7 million and $8.4 million of revenue from amortization of the deferred revenue.

Business Segments

We evaluate our reportable business segments in accordance with the accounting guidance. In connection with our Merger, we have aligned Spansion's two major product groups for embedded applications with our existing product divisions: Spansion's flash memory with our Memory Products Division and Spansion's microcontroller and analog products with our Programmable Systems Division.

We operate in the following four reportable business segments:

Business Segments		Description

PSD : Programmable Systems Division		PSD focuses on high-performance, programmable solutions. The portfolio includes Traveo™ automotive microcontrollers, PSoC ^® programmable system-on-chip products, ARM ^® Cortex ^® -M4, -M3, -M0+ microcontrollers and R4 CPUs, analog PMIC Power Management ICs and automotive LED drivers, CapSense ^® capacitive-sensing controllers, TrueTouch ^® touchscreen solutions, fingerprint reader products, and PSoC Bluetooth Low Energy solutions for the IoT. Effective March 12, 2015, PSD added Spansion’s microcontroller and analog products

MPD : Memory Products Division		MPD focuses on high-performance serial and parallel NOR Flash memories, NAND Flash memories, static random access memory (SRAM), and high-reliability F-RAM™ ferroelectric memory and nonvolatile SRAM (nvSRAM) devices. Effective March 12, 2015, MPD added Spansion’s Flash memory products.

DCD : Data Communications Division		DCD focuses on USB controllers, including solutions for the USB Type-C and USB Power Delivery standards; Wi-Fi, Bluetooth, Bluetooth Low Energy and ZigBee solutions; PRoC™ programmable radio-on-chip solutions; WirelessUSB™ solutions; and module solutions such as trackpads and Bluetooth Low Energy modules. Effective July 5, 2016, DCD added Broadcom’s wireless IoT products.

ETD : Emerging Technologies Division		Also known as our “startup” division, ETD includes subsidiaries AgigA Tech Inc. and Deca Technologies Inc., as well as our foundry business and other development-stage activities.

O ur primary focus is profitable growth in our key markets. With the addition of the legacy Spansion business and or acquisition of the Broadcom Corporations’ wireless IoT business (the “Broadcom IoT Business”) which closed July 5, 2016, we plan to capitalize on our expanded product portfolio and market positions in advanced embedded systems solutions to extend our penetration of global markets such as automotive, industrial, communications, consumer, computation, data communications and military. Our revenue model is based on the following product and market strategies: (a) growing revenue from our high-performance, programmable solutions and derivatives including PSoC programmable system-on-chip products and microcontrollers in the automotive and industrial markets, (b) increasing our DCD revenue through the integration of Wi-Fi, Bluetooth and ZigBee radios from the Broadcom IoT Business acquisition and through the introduction of new products such as USB Type-C solutions, SuperSpeed USB 3.0 peripheral controllers and Bluetooth® Low Energy solutions that leverage Cypress’s PRoC™ programmable radio-on-chip technology for the IoT and other applications, (c) increasing market share in our memory products by leveraging our market position and expanding our portfolio with new and complementary products, and (d) revenue growth from ETD, which includes our internal startup companies. For profitability, our focus is to finish integrating the acquired Spansion business successfully and fully realize the anticipated product cost and operational cost synergies. Our integration effort includes the re-focusing of portions of the legacy Spansion business to higher-margin opportunities, particularly in the Flash memory business. We monitor our operating expenses closely to improve our operating leverage.

In order to achieve our goals on revenue growth and profitability, Cypress will continue to pursue the following strategies:

Cross-sell products from Cypress’s expanded product portfolio in the wake of the Spansion Merger and Broadcom IoT Business acquisition . We will continue to pursue product and business synergies to reduce costs and grow our revenue.

Focus on large and growing markets, particularly automotive, industrial and Internet of Things. We will continue to pursue business opportunities in large and growing markets leveraging our unique mix of PSoC and microcontrollers, memories, Wi-Fi, Bluetooth, Bluetooth Low Energy and ZigBee wireless solutions, USB Type-C controllers, capacitive touch-sensing solutions, analog power management ICs and other products.

Successfully complete the integration of our business with Spansion. We are committed to integrating the businesses of Cypress and Spansion successfully to finish realizing the anticipated cost synergies and improve profitability.

Drive profitability through tight management of operating expenses . Cypress maintains a corporate wide focus on margin and operating expenses. We are committed to maintaining our operating expense management without compromising our new product development and investments in our Emerging Technologies Division.

Collaborate wi th customers to build system-level solutions. We work closely with our customers from initial product design through manufacturing and delivery to optimize their design efforts, help them achieve product differentiation, improve their time-to-market and he lp them to develop whole product solutions.

Drive programmable technologies, extend our leadership in programmable products and drive PSoC proliferation. We will continue to define, design and develop new programmable products and solutions that offer our customers increased flexibility and efficiency, higher performance, and higher levels of integration with a focus on analog functionality. We will continue to drive PSoC and microcontroller adoption in our key market segments.

Leverage flexible manufacturing. Our manufacturing strategy combines capacity from leading foundries with output from our internal manufacturing facilities. This enables us to adjust to rapid swings in customer demand while reducing the burden of fixed costs.

Pursue complementary strategic relationships. We will continue to assess opportunities to develop strategic relationships through acquisitions, investments, licensing and joint development projects. We also will continue to make investments in current ventures as well as new ventures.

As we continue to implement our strategies, there are many internal and external factors that could impact our ability to meet any or all of our objectives. Some of these factors are discussed under Part I Item 1A in our Annual Report on Form 10-K for the year ended January 3, 2016 as well as in Item 1A in this Quarterly Report on Form 10-Q.

Results of Operations

Revenues

Our total revenues decreased by $34.7 million or 7.1% to $450.1million for the three-month period ended July 3, 2016 compared to the same period in the prior year primarily due to decrease in revenue from TrueTouch® mobile business as a result of divestiture of the business on August 1, 2015 . The overall average selling price of our products for the three months ended July 3, 2016 was $1.20 and it did not change compared with the same period in the prior year.

Our total revenues increased by $175.2 million or 25.2% to $869.1 million for the six-month period ended July 3, 2016 compared to the same period in the prior year. For the six months ended July 3, 2016, approximately $209.1 million of the increase was attributable to revenue contributions from the acquired Spansion business which is included in the PSD and MPD divisions, which was offset by decrease in revenue from TrueTouch® mobile business as a result of divestiture of the business on August 1, 2015. The overall average selling price of our products for the six months ended July 3, 2016 was $1.19 which did not change compared with the same period in the prior year. Excluding Spansion products, our average selling price (“ASP”) for the six months ended July 3, 2016 was $1.13, which increased by $0.02 compared with the same period in the prior year.

Consistent with our accounting policies and generally accepted accounting principles, we have historically recognized a significant portion of revenue through distributors at the time the distributor resold the product to its end customer (also referred to as the sell-through basis of revenue recognition) given the difficulty in estimating the ultimate price of these product shipments and amount of potential returns. We continually reassess our ability to reliably estimate the ultimate price of these products and, over the past several years, we have made investments in our systems and processes around our distribution channel to improve the quality of the information we receive from our distributors. Given these ongoing investments, and based on the financial framework we use for estimating potential price adjustments, in the fourth quarter of 2014 the Company began recognizing revenue on certain product families and with certain distributors (less its estimate of future price adjustments and returns) upon shipment to the distributors (also referred to as the sell-in basis of revenue recognition).

During the three months ended July 3, 2016, we recognized an incremental $24.2 million of revenue, on additional product families for which revenue was previously recognized on a sell-through basis as we determined that we could reasonably estimate returns and pricing concessions at the time of shipment to distributors. This change resulted in a decrease to the net loss of $6.8 million or $0.02 per basic and diluted share for the three months ended July 3, 2016. During the three month ended June 28, 2015, there were no new product families or distributors for which we recognized revenue on a sell-in basis. During the six months ended July 3, 2016, we recognized approximately $40.6 million of incremental revenue from this change in revenue recognition, which resulted in a decrease to our net loss of approximately $14.2 million for the six months ended July 3, 2016, or approximately $0.05 per basic and diluted shares. During the six months ended June 28, 2015, we recognized approximately $22.7 million of incremental revenue from this change, which resulted in a decrease to our net loss of approximately $13.7 million for the six months ended June 28, 2015, or approximately $0.05 per basic and diluted shares.

During the three months ended July 3, 2016, we recognized approximately $306.5 million or 92.8% of distribution revenue on a sell-in basis. During the three months ended June 28, 2015, we recognized approximately $220.7 million or 62.5% of distribution revenue on a sell-in basis. During t he six months ended July 3, 2016, we recognized approximately $540.0 million or 86.9% of distribution revenue on a sell-in basis, respectively. During the six months ended June 28, 2015, we recognized approximately $329.1 million or 51.1% of distributio n revenue on a sell-in basis, respectively.

The following table summarizes our consolidated revenues by segments:

	Three Months Ended				Six Months Ended
	July 3, 2016		June 28, 2015		July 3, 2016		June 28, 2015
	(In thousands)
Programmable Systems Division	$	166,813	$	202,806	$	330,797	$	277,624
Memory Products Division		238,130		255,157		446,993		363,835
Data Communications Division		25,474		19,087		45,602		37,653
Emerging Technologies Division		19,710		7,728		45,699		14,803
Total revenue	$	450,127	$	484,778	$	869,091	$	693,915

Programmable Systems Division:

Revenues from the PSD decreased by $36.0 million and increased by $53.2 million in the three and six months ended July 3, 2016 or decreased by 17.7% and increased by19.2%, respectively, compared to the same prior-year period . The decrease in the three months ended July 3, 2016 as compared to the same prior-year period was driven by decrease in sales in the mobile market segment as a result of the sale of TrueTouch® mobile business on August 1, 2015. The increase for the six month period ended July 3, 2016 as compared to the same prior-year period was due to $87.7 million of revenue contributions from Spansion products. Excluding the impact of Spansion revenues, PSD decreased $34.5 million for the six months ended July 3, 2016 or $29.0%, compared to same prior-year period primarily due to a $36.2 million decrease in revenue from TrueTouch ^® mobile business as a result of divestiture of the business on August 1, 2015.

The overall average selling price of our products for PSD for the three and six months ended July 3, 2016 was $1.32 and $1.24 which increased by $0.25 and $0.23 compared with the same prior-year period.

Memory Products Division:

Revenues from the MPD decreased by approximately $17.1 million and increased by $83.2 million or decreased by 6.7% and increased by 22.9% in the three and six months ended July 3, 2016, compared to the same prior-year period. The decrease in the three months ended July 3, 2016 as compared to the same prior-year period was primary driven by decrease in the consumer market segment. The increase for the six months period ended July 3, 2016 as compared to the same prior-year period was due to $117.4 million of revenue contribution from the Spansion flash memory business. Excluding the impact of Spansion revenues, MPD decreased by $34.2 million in the six months ended July 3, 2016, or 20.5% compared to the same prior-year period, primarily driven by decrease in sales in the industrial market segment.

The overall ASP’s of our products for MPD for the three and six months ended July 3, 2016 were $1.27 and $1.28, respectively, which decreased by $0.11 and $0.18 compared with the same prior-year period.

Data Communications Division:

Revenues from the DCD increased by approximately $6.4 million and $8.0 million or 33.5% and 21.1% in the three and six months ended July 3, 2016, respectively, compared to the same prior-year period due to increasing revenue in our super speed USB, trackpad and Type C products.

The overall ASP’s of our products for DCD, for the three and six months ended July 3, 2016 were $0.59 and $0.63, respectively, which decreased by $0.22 and $0.18 compared with the same prior-year period.

Emerging Technologies Division:

Revenues from the ETD increased by approximately $12.0 million and $30.9 million or 155.0% and 208.7% in the three and six months ended July 3, 2016, respectively, compared to the same prior-year periods primarily due to the overall increase in customer demand at all of our ETD companies. The increase were also attributable to increases in our Foundry revenues as we began selling products to Parade Technologies in August 2015 under the Manufacturing Services Agreement, which was signed in connection with our disposition of the TrueTouch ^® Mobile business.

Cost of Revenues

	Three Months Ended						Six Months Ended
	July 3, 2016			June 28, 2015			July 3, 2016			June 28, 2015
	(In thousands)
Cost of revenues	$	291,349		$	346,705		$	584,528		$	597,535
As a percentage of revenue		65	%		72	%		67	%		86.1	%

Our cost of revenue ratio is significantly impacted by the mix of products we sell, which is often difficult to forecast with accuracy. Therefore, if we achieve significant revenue growth in our lower margin (i.e. revenue less cost of revenue) product lines, or if we are unable to earn as much revenue as we expect from higher margin product lines, our gross margin may be negatively impacted. Our cost of revenue ratio improved from 71.5% during the three months ended June 28, 2015 to 64.7% in the three months ended July 3, 2016. The primary driver of the improvement in the cost of revenue ratio was lower amortization of fair value adjustments, net of reserves, relating to acquired Spansion inventory. Write downs of inventories were $7.6 million and $13.9 million for the three months ended July 3, 2016 and June 28, 2015, respectively. Sale of inventory that was previously written-off or written-down aggregated $14.1 million and $6.7 million for the three months ended July 3, 2016 and June 28, 2015, respectively, which favorably impacted our cost of revenues ratio by 3.1% for the three months ended July 3, 2016 and by 1.4% for the three months ended June 28, 2015. This impact was offset by lower fab utilization, which was 53% in the second quarter of fiscal 2016, lower compared to same prior-year period.

Our cost of revenue ratio improved from 86.1% during the six months ended June 28, 2015 to 67.2% in the six months ended July 3, 2016. The primary driver of the improvement in the cost of revenue ratio was lower write downs of carrying value of inventory during the six months ended July 3, 2016 as compared to the same period in previous fiscal year. Included in the cost of revenues in the six months ended June 28, 2015 was $133.0 million write-down of carrying value of inventory assumed as a part of the Spansion Merger, as well as a write-down of $19.1 million of certain other inventories. In comparison, write-down of inventories in the six months ended July 3, 2016 was $15.6 million. Sale of inventory that was previously written-off or written-down aggregated $21.2 million and $8.2 million for the six months ended July 3, 2016 and June 28, 2015, respectively, which favorably impacted our cost of revenues ratio by 2.4% and 1.2% for the six months ended July 3, 2016 and June 28, 2015, respectively. This impact was offset by lower fab utilization which was 53% in the second quarter of fiscal 2016, lower as compared to prior -year.

Research and Development (“R&D”) Expenses

	Three Months Ended						Six Months Ended
	July 3, 2016			June 28, 2015			July 3, 2016			June 28, 2015
	(In thousands)
R&D expenses	$	70,171		$	81,227		$	144,138		$	131,749
As a percentage of revenues		15.6	%		16.8	%		16.6	%		19.0	%

R&D expenditures decreased by $11.1 million in the three months ended July 3, 2016 compared to the same prior-year period. The decrease was primarily attributable to $6.1 million of reduced labor costs primarily due to headcount reduction, $1.6 million decrease in stock based compensation expense and a decrease of $0.8 million in costs for outside services.

R&D expenditures increased by $12.4 million in the six months ended July 3, 2016 compared to the same prior-year period. The increase was primarily attributable to $6.9 million of higher labor costs due to additional headcount, $2.1 million of building, repairs and other overhead expenses and $1.5 million higher professional services and legal fees.

Selling, General and Administrative (“SG&A”) Expenses

	Three Months Ended						Six Months Ended
	July 3, 2016			June 28, 2015			July 3, 2016			June 28, 2015
	(In thousands)
SG&A expenses	$	81,836		$	91,840		$	156,336		$	162,300
As a percentage of revenues		18.2	%		18.9	%		18.0	%		23.4	%

SG&A expenses decreased by $10.0 million in the three months ended July 3, 2016 compared to the same prior-year period. The decrease was primarily attributable to $7.6 million decrease in stock based compensation expense and a decrease of $1.3 million in professional fees related to the ongoing Spansion merger integration activities.

SG&A expenses decreased by $6.0 in the six months ended July 3, 2016 compared to the same prior-year period. The decrease was mainly due to a decrease of $16.2 million in acquisition and integration related expenses and a $5.5 million decrease in stock based compensation expense primarily offset by $4.5 million for CEO severance costs, $3.3 million increase in labor costs, $4.0 million increase in building, supplies, repairs, other overhead expenses and professional services costs and $1.7 million higher marketing costs.

Amortization of acquisition-related intangible assets

Amortization expense decreased by $3.3 million in the three months ended July 3, 2016 compared to the same period in the prior year mainly due to certain intangibles that were fully amortized during fiscal 2016. The decrease was partially offset by amortization related to capitalized in-process research and development projects which started amortization fiscal 2015 as well as three months ended July 3, 2016.

Amortization expense increased by $24.5 million in the six months ended July 3, 2016 compared to the same period in the prior year. The increase was mainly due to the amortization on the intangibles acquired in connection with the Spansion Merger as well as capitalization of some in-process research and development projects.

Impairment of acquisition-related intangible assets

In the six months ended July 3, 2016, we recognized approximately $33.9 million of impairment charge related to two IPR&D projects that were cancelled due to certain change in our long-term product portfolio strategy during fiscal 2016.

Goodwill impairment charge

Our results for the three months ended July 3, 2016 included a non-cash goodwill impairment charge of $488.5 million related to our PSD reporting unit. The goodwill impairment charge resulted from a combination of factors including, (a) decreases in our forecasted operating results when compared with the expectations of the PSD reporting unit at the time of the Merger, primarily in consumer markets as the Company has subsequently increased its focus on the automotive and industrial end markets, (b) evaluation of business priorities due to recent changes in management, and (c) certain market conditions necessitated a quantitative impairment analysis for the carrying value of the Goodwill related to PSD.

Restructuring

In March 2015, we began the implementation of planned cost reduction and restructuring activities in connection with the Merger. The restructuring charges of $0.7 million and $0.9 million recorded for the three and six months ended July 3, 2016, respectively, primarily consisted of severance costs, lease termination costs and impairment of property, plant and equipment. The lease termination restructuring costs recorded in the six months ended June 28, 2015 included $17.9 million related to the buildings Spansion had leased prior to the Merger, which we decided not to occupy in the post-Merger period. The initial term of these leases commenced on January 1, 2015 and will expire on December 31, 2026.

The following table summarizes the restructuring charges recorded in our Condensed Consolidated Stat ements of Operations for the periods presented pursuant to the Spansion Integration-Related Restructuring Plan:

	Three Months Ended					Six Months Ended
	July 3, 2016		June 28, 2015			July 3, 2016		June 28, 2015
	(In thousands)					(In thousands)
Personnel costs	$	369	$	11,120		$	615	$	55,326
Lease termination costs and other related charges		285		(845	)		309		17,897
Impairment of property, plant and equipment		—		(236	)		—		12,531
Total restructuring and other charges	$	654	$	10,039		$	924	$	85,754

We anticipate that the remaining restructuring liability balance will be paid out in cash through the end of 2016 for employee terminations and over the remaining lease term through 2026 for the excess lease obligation.

As of July 3, 2016, we have realized approximately $165.5 million of synergy savings on an annualized basis from the restructuring actions taken. Upon completion of all of our actions, we anticipate our annualized synergy savings in fiscal year 2016 to be approximately $180 million. When complete, we estimate approximately 40% of the savings will impact cost of goods sold and the remaining 60% will impact operating expenses. There can be no assurance that we will achieve these anticipated savings.

Income Taxes

Our income tax benefit was $5.2 million and income tax expense was $2.9 million for the three months ended July 3, 2016 and June 28, 2015, respectively. Our income tax benefit was $1.5 million and $1.1 million for the six months ended July 3, 2016 and June 28, 2015, respectively. The tax benefit for the six months ended July 3, 2016 was primarily attributable to a release of previously accrued taxes related to the lapsing of statutes of limitation, primarily offset by income taxes associated with our non-US operations. The tax benefit for the six months ended June 28, 2015 was primarily a result of non-U.S. income taxes on income earned in foreign jurisdictions, which were more than offset by the tax impact of accounting for certain acquired assets and liabilities as a result of the Merger resulting in $5.3 million of the Company’s valuation allowance being released.

LIQUIDITY AND CAPITAL RESOURCES

The following table summarizes information regarding our cash and cash equivalents and short-term investments and working capital:

	As of
	July 3, 2016		January 3, 2016
	(In thousands)
Cash and cash equivalents	$	188,333	$	226,690
Short-term investments		970		871
Total cash, cash equivalents and short-term investments	$	189,303	$	227,561
Total current assets	$	863,005	$	850,772
Total current liabilities		533,227		528,396
Working capital	$	329,778	$	322,376

Key Components of Cash Flows

	Six Months Ended
	July 3, 2016			June 28, 2015
	(In thousands)
Net cash provided by (used in) operating activities	$	22,503		$	(53,016	)
Net cash provided by (used in) investing activities	$	(34,183	)	$	(135,311	)
Net cash provided by (used in) financing activities	$	(26,677	)	$	208,731

Operating Activities

Net cash provided by operating activities of $22.5 million during the six months ended July 3, 2016 was primarily due to a net loss of $623.8 million which included net non-cash expense items of $704.0 million. The non-cash expense items primarily consisted of depreciation and amortization of $122.7 million, a goodwill impairment charge of $488.5 million, a $33.9 million impairment charge for acquisition-related intangibles and stock based compensation expense of $42.2 million. This was partially offset by net cash used from increase in operating assets and liabilities for the six months ended July 3, 2016 of $57.7 million. The net cash used from changes in operating assets and liabilities during the six months ended July 3, 2016 was primarily due to the following:

an increase in accounts receivable of $32.4 million due to timing of shipments during the six months ended July 3, 2016. The days sales outstanding for the six months ended July 3, 2016 and January 3, 2016 were 68 days and 61 days respectively;

a decrease in inventories of $22.6 million as part of our lean inventory initiative pursuant to which we are running our manufacturing facilities below demand levels to burn through excess inventory from the Spansion Merger;

an increase in other current and long-term assets of $36.6 million, primarily due to timing of payments for certain licenses;

an increase in accounts payable, accrued and other liabilities of $43.3 million due to timing of payments;

a decrease in deferred income of $54.5 million due to the transition of additional product families to the sell-in basis of revenue recognition.

Investing Activities

During the six months ended July 3, 2016, we used approximately $34.2 million of cash in our investing activities primarily due to $25.8 million of cash used for property and equipment expenditures relating to purchases of certain tooling, laboratory and manufacturing facility equipment and $14.4 million cash paid for certain investments, of which $12.0 million related to our investment in a company that designs, develops and manufactures advanced battery storage products for mobile consumer devices.

Financing Activities

During the six months ended July 3, 2016, we used approximately $26.7 million of cash in our financing activities primarily related to the repurchase of stock in the amount of $175.7 million, net repayments of $82.0 million on the revolving credit facility, $70.8 million dividend payments, purchase of capped call for the 4.50% Senior Exchangeable Notes and repayments of capital leases and Term Loan A of $9.1 million. Such payments were primarily offset by our net borrowings on the 4.50% Senior Convertible Notes of $279.4 million and proceeds of $40.1 million from employee equity awards.

Liquidity and Contractual Obligations

Contractual Obligations

The following table summarizes our contractual obligations as of July 3, 2016:

	Total		2016		2017 and 2018		2019 and 2020		After 2020
	(In thousands)
Purchase obligations (1)	$	320,728	$	66,185	$	150,942	$	103,601	$	—
Equipment loan		1,511		1,511		—		—		—
Operating lease commitments (2)		77,047		9,406		28,720		14,154		24,767
Capital lease commitments		5,675		5,675		—		—		—
2.00% Senior Exchangeable Notes		149,990		—		—		149,990		—
4.50% Senior Exchangeable Notes		287,500		—		—		—		287,500
Term Loan A		97,500		2,500		15,000		80,000		—
Interest payment on debt		141,446		8,079		63,656		50,252		19,459
Senior Secured Revolving Credit Facility		367,000		—		—		367,000		—
Total contractual obligations	$	1,448,397	$	93,356	$	258,318	$	764,997	$	331,726

(1)

Purchase obligations primarily include non-cancelable purchase orders for materials, services, manufacturing equipment, building improvements and supplies in the ordinary course of business. Purchase obligations are defined as enforceable agreements that are legally binding on us and that specify all significant terms, including quantity, price and timing.

(2)

Operating leases includes payments relating to Spansion's lease for office space in San Jose for a new headquarters entered on May 22, 2014, which is no longer required. The lease is for a period of 12 years, with two options to extend for periods of five years each after the initial lease term. The term of the lease commenced on January 1, 2015 and expires on December 31, 2026.

As of July 3, 2016, our unrecognized tax benefits were $26.4 million, which were classified as long-term liabilities. We believe it is possible that we may recognize up to approximately $4.1 million of our existing unrecognized tax benefits within the next twelve months as a result of the lapse of statutes of limitations and the resolution of agreements with domestic and various foreign tax authorities.

Equity Investment Commitments

We have committed to purchase additional preferred stock from a company that operates in the area of advanced battery storage. During the three and six months ended July 3, 2016, we purchased an additional $7.0 million and $12.0 million, respectively, of preferred stock which was recorded as part of our investments in non-marketable securities. Subject to the attainment of certain milestones, we may purchase additional preferred stock of this company.

Capital Resources and Financial Condition

Our long-term strategy is to maintain a minimum amount of cash and cash equivalents for operational purposes and to invest the remaining amount of our cash in interest-bearing and highly liquid cash equivalents and debt securities, payments of regularly scheduled cash dividends, the repayment of our short-term debt, and the purchase of our stock through our stock buyback program. As of July 3, 2016, in addition to $188.3 million in cash and cash equivalents, we had $1.0 million invested in short-term investments for a total cash, cash equivalents and short-term investment balance of $189.3 million. As of July 3, 2016, approximately 15% of our cash, cash equivalents and available-for-sale investments were held in offshore funds. While these amounts are primarily invested in U.S. dollars, a portion is held in foreign currencies. All offshore balances are exposed to local political, banking, currency control and other risks. In addition, these amounts, if repatriated, may be subject to tax and other transfer restrictions.

On July 5, 2016 we entered into a Joinder and Amendment Agreement with the guarantor’s party thereto for an incremental term loan in an aggregate principal amount of $450.0 million. The incurrence of the Incremental Term Loan is permitted as an incremental loan under the Credit Agreement and is subject to the terms of the Credit Agreement and to additional terms set forth in the Joinder and Amendment Agreement. The proceeds of the Incremental Term Loan were used to finance a portion of purchase price for the Company’s acquisition of certain assets used in the operation of Broadcom Corporation’s Internet of Things business, and to pay fees and expenses incurred in connection with the acquisition. The contractual obligations table above does not include the commitments related to the said incremental term loan.

We believe that the liquidity provided by existing cash, cash equivalents and available-for-sale investments and our borrowing arrangements will provide sufficient capital to meet our requirements for at least the next twelve months. However, should prevailing economic conditions and/or financial, business and other factors beyond our control adversely affect the estimates of our future cash requirements; we could be required to fund our cash requirements by alternative financing. There can be no assurance that additional financing, if needed, would be available on terms acceptable to us or at all. In addition, we may choose at any time to raise additional capital or debt to strengthen our financial position, facilitate growth, enter into strategic initiatives including the acquisition of other companies and provide us with additional flexibility to take advantage of other business opportunities that arise.

Recent Accounting Pronouncements

See “Recent Accounting Pronouncements” in Note 1 of Notes to Consolidated Financial Statements under Item 8 in our Annual Report on Form 10-K for the year ended January 3, 2016 and Note 1 of Notes to Condensed Consolidated Financial Statements under Item 1 in our Quarterly Report on Form 10-Q for the period ended April 3, 2016.

Non-GAAP Financial Measures

To supplement its consolidated financial results presented in accordance with GAAP, Cypress uses the following non-GAAP financial measures which are adjusted from the most directly comparable GAAP financial measures:

Revenue

Research and development expenses

Selling, general and administrative expenses

Operating income (loss)

Net income (loss)

Diluted net income (loss) per share

Management believes that these non-GAAP financial measures reflect an additional and useful way of viewing aspects of the Company’s operations that, when viewed in conjunction with the Company’s GAAP results, provide a more comprehensive understanding of the various factors and trends affecting the Company’s business and operations. Management uses these non-GAAP measures for strategic and business decision-making, internal budgeting, forecasting and resource allocation processes. In addition, these non-GAAP financial measures facilitate management’s internal comparisons to the Company’s historical operating results and comparisons to competitors’ operating results.

Each of the non-GAAP financial measures excludes one or more of the following items:

Acquisition-related charges : Acquisition-related charges are not factored into management’s evaluation of potential acquisitions or the Company’s performance after completion of acquisitions, because they are not related to the Company’s core operating performance. However, a limitation of non-GAAP measures that exclude acquisition-related charges is that these charges may represent payments that reduce the cash available to the Company for other purposes. Acquisition-related expenses primarily include:

•

Amortization of purchased intangibles, including purchased technology, patents, customer relationships, trademarks, backlog and non-compete agreements;

•

Amortization of step-up in value of inventory recorded as part of purchase price accounting; and

•

One-time charges associated with completing an acquisition including items such as contract termination costs, severance and other acquisition-related restructuring costs; costs incurred in connection with integration activities, and legal and accounting costs.

Share-based compensation expense : Share-based compensation expense relates primarily to employee stock options, restricted stock units, performance stock units and the employee stock purchase plan. Share-based compensation expense is a non-cash expense that is affected by changes in market factors including the price of the Company’s common shares, which are not within the control of management. In addition, the valuation of share-based compensation is subjective, and the expense recognized by the Company may be significantly different than the expense recognized by other companies for similar equity awards, which makes it difficult to assess the Company’s results compared to its competitors. Accordingly, management excludes this item from its internal operating forecasts and models. However, a limitation of non-GAAP measures that exclude share-based compensation expense is that they do not reflect the full costs of compensating employees.

Other adjustments : These items are excluded from non-GAAP financial measures because they are not related to the core operating activities and ongoing operating performance of the Company. Excluding these items, which can vary significantly from quarter to quarter, allows management to better compare the Company’s period-over-period performance. However, limitations of non-GAAP measures that exclude these items include that these adjustments are often subjective and may not be comparable to similarly-titled non-GAAP financial measures used by other companies. Other adjustments primarily include:

•

Revenue from an intellectual property license,

•

Changes in value of deferred compensation plan assets and liabilities,

•

Investment-related gains or losses, including equity method investments,

•

Restructuring and related costs,

•

Debt issuance costs, including imputed interest related to the equity component of convertible debt,

•

Asset impairments,

•

Tax effects of non-GAAP adjustments,

•

Certain other expenses and benefits, and

•

Diluted weighted average shares non-GAAP adjustment – for purposes of calculating non-GAAP diluted earnings per share, the GAAP diluted weighted average shares outstanding is adjusted to exclude the benefits of share-based compensation expense attributable to future services not yet recognized in the financial statements that are treated as proceeds assumed to be used to repurchase shares under the GAAP treasury stock method.

Please refer to the tables below for GAAP to Non-GAAP reconciliation items related to the three and six months ended July 3, 2016 and June 28, 2015.

	Three Months Ended				Six Months Ended
	July 3, 2016		June 28, 2015		July 3, 2016		June 28, 2015
	(In thousands, except per share amounts)				(In thousands, except per share amounts)
Non-GAAP revenue	$	456,377	$	491,028	$	881,591	$	700,164
Non-GAAP cost of revenue	$	283,836	$	289,733	$	552,208	$	501,529
Non-GAAP research and development expenses	$	64,582	$	73,144	$	130,812	$	117,106
Non-GAAP selling, general and administrative expenses	$	58,670	$	67,206	$	117,351	$	107,484
Non-GAAP operating income (loss)	$	49,289	$	60,947	$	81,220	$	(25,955	)
Non-GAAP net income attributable to Cypress	$	40,196	$	52,870	$	63,180	$	(35,036	)
Non-GAAP net income per share attributable to Cypress—diluted	$	0.12	$	0.15	$	0.19	$	(0.13	)

CYPRESS SEMICONDUCTOR CORPORATION

RECONCILIATION OF GAAP FINANCIAL MEASURES TO NON-GAAP FINANCIAL MEASURES (a)

(In thousands, except per-share data)

(Unaudited)

Table A: Revenue	Three Months Ended				Six Months Ended
	July 3, 2016		June 28, 2015		July 3, 2016		June 28, 2015

GAAP revenue	$	450,127	$	484,778	$	869,091	$	693,915
Add: Revenue from Intellectual Property License		6,250		6,250		12,500		6,250
Non-GAAP revenue	$	456,377	$	491,028	$	881,591	$	700,165

Table B: GAAP to Non-GAAP reconciling items (Three months ended July 3, 2016)
	Cost of revenues		Research and development		SG&A		Amortization of Intangible assets		Goodwill impairment charge		Interest and other expense, net			Income tax benefit (provision)
GAAP	$	291,349	$	70,171	$	82,490	$	32,605	$	488,504	$	9,884		$	5,221
[1] Stock based compensation, including costs related to modification of equity awards		4,278		5,329		9,242		-				-			-
[2] Changes in value of deferred compensation plan		86		242		530		-		-		(604	)		-
[3] Merger, integration and related costs		3,149		19		8,514		-		-		-			-
[4] Losses from equity method investments		-		-		-		-		-		2,568			-
[5] Imputed interest on convertible debt and other		-		-		-		-		-		1,919			-
[6] Amortization of Intangible assets		-		-		-		32,605		-		-			-
[7] Restructuring costs, including CEO severance		-		-		5,153		-		-		-			-
[8] Goodwill impairment charge		-		-		-		-		488,504		-			-
[9] Tax impact of Non-GAAP adjustments		-		-		380		-		-		(292	)		(8,402	)
Non-GAAP	$	283,836	$	64,581	$	58,671	$	-	$	-	$	6,293		$	(3,181	)

Table C: GAAP to Non-GAAP reconciling items (Three months ended June 28, 2015)
	Cost of revenues		Research and development		SG&A		Amortization of Intangible assets		Interest and other expense, net			Income tax benefit (provision)
GAAP	$	346,705	$	81,227	$	101,879	$	35,928	$	6,795		$	(2,935	)
[1] Stock based compensation		3,802		7,007		16,859		-		-			-
[2] Changes in value of deferred compensation plan		46		153		276		-		(528	)		-
[3] Merger, integration and related costs		52,799		827		7,465		-		-			-
[4] Losses from equity method investments		-		-		-		-		1,382			-
[5] Imputed interest on convertible debt and other		-		-		-		-		993			-
[6] Amortization of Intangible assets		-		-		-		35,928		-			-
[7] Tax impact of Non-GAAP adjustments		-		-		-		-		-			(834	)
[8] Restructuring costs		-		-		10,073		-		-			-
[8] Other charges		325		96
Non - GAAP	$	289,733	$	73,144	$	67,206	$	-	$	4,948		$	(3,769	)

Table D: GAAP to Non-GAAP reconciling items (Six months ended July 3, 2016)
	Cost of revenues		Research and development		SG&A		Amortization of Intangible assets		Impairment of acquisition-related intangible assets		Goodwill impairment charge		Interest and other expense, net			Income tax benefit (provision)
GAAP	$	584,528	$	144,138	$	157,260	$	67,792	$	33,944		488,504	$	18,213		$	1,479
[1] Stock based compensation, including costs related to modification of equity awards		9,925		12,260		20,202		-		-		-		-			-
[2] Changes in value of deferred compensation plan		133		372		813		-		-		-		(478	)		-
[3] Merger, integration and related costs		22,262		694		13,090		-		33,944		-		-			-
[4] Losses from equity method investments		-		-		-		-		-		-		4,646			-
[5] Imputed interest on convertible debt and other		-		-		-		-		-		-		2,254			-
[6] Amortization of Intangible assets		-		-		-		67,792		-		-		-			-
[7] Goodwill impairment charge		-		-		-		-		-		488,504
[8] Tax impact of Non-GAAP adjustments		-		-		-		-		-		-		-			(8,241	)
[9] Restructuring costs, including CEO severance		-		-		5,804		-		-		-		-			-
Non - GAAP	$	552,208	$	130,812	$	117,351	$	-	$	-	$	-	$	11,791		$	(6,762	)

Table E: GAAP to Non-GAAP reconciling items (Six months ended June 28, 2015)
	Cost of revenues		Research and development		SG&A		Amortization of Intangible assets		Restructuring costs		Interest and other expense, net			Income tax benefit (provision)
GAAP	$	597,535	$	131,749	$	162,300	$	43,274	$	85,754	$	12,503		$	1,068
[1] Stock based compensation		8,021		12,757		25,686		-		-		-			-
[2] Changes in value of deferred compensation plan		235		770		1,386		-		-		(1,201	)		-
[3] Merger, integration and related costs		87,305		957		27,054		-		-		-			-
[4] Losses from equity method investments		-		-		-		-		-		3,018			-
[5] Imputed interest on convertible debt and other		-		-		-		-		-		4,787			-
[6] Amortization of Intangible assets		-		-		-		43,274		-		-			-
[7] Tax impact of Non-GAAP adjustments		-		-		-		-		-		-			(5,532	)
[8] Restructuring costs		-		-		-		-		85,754		-			-
[9] Other charges		445		158		690		-		-		-			-
Non - GAAP	$	501,529	$	117,107	$	107,484	$	-	$	-	$	5,899		$	(4,464	)

Table F: Operating income (loss)	Three Months Ended						Six Months Ended
	July 3, 2016			June 28, 2015			July 3, 2016			June 28, 2015

GAAP operating loss	$	(514,992	)	$	(80,961	)	$	(607,075	)	$	(326,697	)
Add: Net impact of Non-GAAP adjustments (see tables A,B,C, D and E)		564,281			141,907			688,295			300,742
Non-GAAP operating income (loss)	$	49,289		$	60,946		$	81,220		$	(25,955	)

Table G: Net income (loss)	Three Months Ended						Six Months Ended
	July 3, 2016			June 28, 2015			July 3, 2016			June 28, 2015

GAAP Net loss	$	(519,274	)	$	(90,051	)	$	(623,296	)	$	(336,849	)
Add: Net impact of Non-GAAP adjustments (see tables A,B,C, D and E)		559,470			142,921			686,476			301,813
Non-GAAP Net income (loss)	$	40,196		$	52,870		$	63,180		$	(35,036	)

Table H: Net income (loss) Per Share	Three Months Ended						Six Months Ended
	July 3, 2016			June 28, 2015			July 3, 2016			June 28, 2015

GAAP Net loss per share - Diluted	$	(1.65	)	$	(0.27	)	$	(1.96	)	$	(1.27	)
Excluded Items per share impact of Non-GAAP adjustments		1.77			0.42			2.15			1.14
Non-GAAP earnings per share-Diluted	$	0.12		$	0.15		$	0.19		$	(0.13	)

Table I: Weighted-average shares	Three Months Ended				Six Months Ended
	July 3, 2016		June 28, 2015		July 3, 2016		June 28, 2015
Weighted-average common shares outstanding basic - GAAP		314,305		333,334		317,330		264,547
Effect of dilutive securities:
Stock options, unvested restricted stock and other		12,858		13,764		12,114
Impact of convertible bond		12,577		15,668		12,577		—
Weighted-average common shares outstanding diluted Non-GAAP		339,740		362,766		342,021		264,547

(a)

Refer to the accompanying “Non-GAAP financial measures” for a detailed discussion of management’s use of non-GAAP financial measures.

CRITICAL POLICIES AND ESTIMATES

The discussion and analysis of our financial condition and results of operations are based upon our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q and the data used to prepare them. Our Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States and we are required to make estimates, judgments and assumptions in the course of such preparation. Note 1 of Notes to Condensed Consolidated Financial Statements under Part I Item 1 describes the significant accounting policies and methods used in the preparation of the consolidated financial statements. On an ongoing basis, we re-evaluate our judgments and estimates including those related to revenue recognition, allowances for doubtful accounts receivable, inventory valuation, valuation of long-lived assets, goodwill and financial instruments, stock-based compensation, and settlement costs, and income taxes. We base our estimates and judgments on historical experience, knowledge of current conditions and our beliefs of what could occur in the future considering available information. Actual results may differ from these estimates under different assumptions or conditions.

As discussed in Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended January 3, 2016, we consider the following accounting policies to be the most critical in understanding the judgments that are involved in preparing our consolidated financial statements:

Revenue Recognition

Business Combinations

Allowance for Doubtful Accounts Receivables

Valuation of Inventories

Valuation of Long-Lived Assets

Valuation of Goodwill

Fair Value of Financial Instruments

Cash Flow Hedges

Stock-Based Compensation

Employee Benefits Plan

Accounting for Income Taxes

There have been no changes to our critical accounting policies since the filing of our last Annual Report on Form 10-K.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risks

Our investment portfolio consists of a variety of financial instruments that expose us to interest rate risk, including, but not limited to, money market funds, certificate of deposit and corporate securities. These investments are generally classified as available-for-sale and, consequently, are recorded on our balance sheets at fair market value with their related unrealized gain or loss reflected as a component of accumulated other comprehensive income in stockholders’ equity. Due to the relatively short-term nature of our investment portfolio, we do not believe that an immediate 10% increase in interest rates would have a material effect on the fair market value of our portfolio. Since we believe we have the ability to liquidate this portfolio, we do not expect our operating results or cash flows to be materially affected to any significant degree by a sudden change in market interest rates on our investment portfolio.

Foreign Currency Exchange Risk

We operate and sell products in various global markets and purchase capital equipment using foreign currencies but predominantly the U.S. dollar. Pursuant to our Merger, we are exposed to certain risks associated with changes in foreign currency exchange rates in Japanese yen and other foreign currencies and are exposed to foreign currency exchange rate fluctuations.

For example,

sales of our products to Fujitsu are denominated in U.S. dollars, Japanese yen and Euros;

some of our manufacturing costs are denominated in Japanese yen, and other foreign currencies such as the Thai baht and Malaysian ringgit;

some of our operating expenses are denominated in Japanese yen and

some fixed asset purchases and sales are denominated in other foreign currencies.

Consequently, movements in exchange rates could cause our revenues and our expenses to fluctuate, affecting our profitability and cash flows. We use foreign currency forward contracts to reduce our foreign exchange exposure on our foreign currency denominated assets and liabilities. We also hedge a percentage of our forecasted revenue denominated in Japanese yen with foreign currency forward contracts. The objective of these contracts is to mitigate impact of foreign currency exchange rate movements to our operating results on a short term basis. We do not use these contracts for speculative or trading purposes.

We recognize derivative instruments from hedging activities as either assets or liabilities on the balance sheet and measure them at fair value. Gains and losses resulting from changes in fair value are accounted for depending on the use of the derivative and whether it is designated and qualifies for hedge accounting. To receive hedge accounting treatment, all hedging relationships are formally documented at the inception of the hedge, and the hedges must be highly effective in offsetting changes to future cash flows on hedged transactions. We record changes in the intrinsic value of these cash flow hedges in accumulated other comprehensive loss on the Condensed Consolidated Balance Sheets, until the forecasted transaction occurs. When the forecasted transaction occurs, we reclassify the related gain or loss on the cash flow hedge to the appropriate revenue or expense line of the Condensed Consolidated Statements of Operations. In the event the underlying forecasted transaction does not occur, or it becomes probable that it will not occur, we will reclassify the gain or loss on the related cash flow hedge from accumulated other comprehensive loss to interest and other income (expense), net in our Condensed Consolidated Statements of Operations at that time.

We evaluate hedge effectiveness at the inception of the hedge prospectively as well as retrospectively and record any ineffective portion of the hedging instruments in interest and other income (expense), net in our Condensed Consolidated Statements of Operations.

We analyzed our foreign currency exposure, including our hedging strategies, to identify assets and liabilities denominated in other currencies. For those assets and liabilities, we evaluated the effects of a 10% shift in exchange rates between those currencies and the U.S. dollar. We have determined that there would be an immaterial effect on our results of operations from such a shift. Please see Note 11 of the Notes to Condensed Consolidated Financial Statements for details on the contracts.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including the Office of the President and Chief Executive Officer, which currently performs the duties of the President and Chief Executive Officer, and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q and subject to the foregoing, the Office of the President and Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level.

Changes in Internal Control over Financial Reporting

During the six months ended July 3, 2016, the Company expanded the scope of its internal controls over financial reporting to include the former operations of Spansion and its subsidiaries. There were no other changes in our internal control over financial reporting that occurred during the three months period ended July 3, 2016 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II-OTHE R INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The information required by this item is included in Note 10 of Notes to Condensed Consolidated Financial Statements under Item 1, Part 1 of this Quarterly Report on Form 10-Q and is incorporated herein by reference.

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this report, including the following risk factors, you should carefully consider the risks and uncertainties discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended January 3, 2016, which could materially affect our business, financial condition or future results. Unless they change, risk factors in the 10-K are not repeated here, but are incorporated by reference from the 10-K. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be not material also may materially and adversely affect our business, financial condition and/or operating results.

The trading price of our common stock has been and will likely continue to be volatile due to various factors, some of which are beyond our control, and each of which could adversely affect our stockholders’ value.

The trading price of our common stock has been and will likely continue to be volatile due to various factors, some of which are beyond our control, including, but not limited to:

Revenue fluctuations due to unexpected shifts in customer orders;

Announcements about our earnings or the earnings of our competitors that are not in line with analyst expectations;

Our ability to achieve the planned synergies in the 2015 merger with Spansion;

The impact on our business and financial results of our July 2016 acquisition of the Internet of Things (“IoT”) business of Broadcom Corporation (“Broadcom”);

Credit conditions and our ability to refinance our existing debt at commercially reasonable terms, which may limit the Company’s working capital;

Quarterly variations in our results of operations or those of our competitors, including but not limited to fluctuations due to significant non-cash charges such as the $488.5 million goodwill impairment charge we recorded in the second quarter of 2016;

Announcements by us or our competitors of acquisitions, new products, significant contracts, design wins, commercial relationships or capital commitments;

The perceptions of general market conditions in the semiconductor industry and global market conditions;

Our ability to develop and market new and enhanced products on a timely basis;

Any major change in our board or senior management;

Changes in governmental regulations or in the status of our regulatory compliance that impact our business;

Recommendations by securities analysts or changes in earnings estimates concerning us or our customers or competitors;

The volume of short sales, hedging and other derivative transactions on shares of our common stock;

Economic conditions and growth expectations in the markets we serve;

Changes in our policy regarding dividends or our ability to declare a dividend; and

Our ability to execute our lean inventory initiative to reduce excess inventory, which could lead to a disruption in the supply of our products and adversely affect our business.

Further, the stock market in general, and the market for technology companies in particular, have experienced extreme price and volume fluctuations. These broad market and industry factors may seriously harm the market price of our common stock, regardless of our actual operating performance. In the past, following periods of volatility in the overall market and the market price of a company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources. Finally, our executive officers, who may hold a substantial number of shares of our common stock, may from time to time pledge all or a portion of their holdings as collateral

or include such holdings in margin accounts. If our stock price were to drop suddenly, such margin accoun ts could be called and the shares in such accounts may be automatically sold by a third party in the open market, even during a trading blackout period under our Insider Trading Policy.

Our search for a permanent President and Chief Executive Officer may cause uncertainty regarding the future of our business, impact employee hiring and retention, increase the volatility in our stock price, and adversely impact our revenue, operating results, and financial condition.

On April 28, 2016, Dr. T.J. Rodgers resigned as our President and Chief Executive Officer after leading the Company for over 30 years. In connection with Dr. Rodgers’ resignation, the Board formed an Office of the President and Chief Executive Officer (“OCEO”), consisting of Thad Trent, our Executive Vice President, Finance and Administration, and Chief Financial Officer, Hassane El-Khoury, Executive Vice President of our Programmable Systems Division, Dana Nazarian, Executive Vice President of our Memory Products Division and Joseph Rauschmayer, our Executive Vice President of World Wide Manufacturing, which reports directly to the Board and performs the duties of the President and Chief Executive Officer until such time as a successor for Dr. Rodgers is duly appointed. In addition, our Board formed a CEO transition committee, which is overseeing the OCEO and conducting the search for a President and Chief Executive Officer both internally and externally to succeed Dr. Rodgers. Upon appointment of a new President and Chief Executive Officer, Dr. Rodgers will offer his resignation as a member of the Board, which resignation shall be accepted or declined by the Board in its sole discretion. The Board has begun a search for a permanent replacement. The Board’s search for a President and Chief Executive Officer, and any related speculation and uncertainty regarding our future business strategy and direction in connection with the search and the appointment of a permanent President and Chief Executive Officer, may cause or result in:

disruption of our business or distraction of our employees and management;

difficulty recruiting, hiring, motivating and retaining talented and skilled personnel, including a permanent President and Chief Executive Officer;

increased stock price volatility; and

difficulty in establishing, maintaining or negotiating business or strategic relationships or transactions

If we are unable to mitigate these or other potential risks related to the uncertainty caused by the Board’s search for a President and Chief Executive Officer, it may disrupt our business or adversely impact our revenue, operating results, and financial condition. Further, there can be no assurance that we will be able to attract a qualified, permanent President and Chief Executive Officer who has the desired qualifications on acceptable terms, or at all. Our inability to attract a qualified, permanent President and Chief Executive Officer could have a material adverse effect on our business and results of operations.

In the second quarter of 2016, we incurred a material impairment charge with respect to our goodwill, and we may in the future incur additional impairments in the value of our goodwill, intangibles and property, plant and equipment.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. We test goodwill for impairment annually, and more frequently when events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. In the second quarter of 2016, we conducted impairment testing on the goodwill in our Programmable Systems Division reporting unit, which we acquired in the Spansion merger, and recorded an impairment charge of $488.5 million. In addition, our other long-lived assets which include intangibles and property, plant and equipment are evaluated for impairments whenever events or changes in circumstances indicate the carrying value may not be recoverable. Either of these situations may occur for various reasons, including changes in actual or expected income or cash. We continue to evaluate current conditions to assess whether any impairment exists. Additional impairments could occur in the future if any of the following occur: market or interest rate environments deteriorate, significant adverse changes in business climate, unanticipated competition, loss of key customers, changes in technology, expected future cash flows of our reporting units decline, or reporting unit carrying values change materially compared with changes in respective fair values.

We face significant risks in connection with our acquisition of the IoT business of Broadcom that could impact our future growth and profitability.

On July 5, 2016, we completed our acquisition of the IoT business of Broadcom. See Note 15 of the Notes to the Condensed Consolidated Financial Statements. The success of the transaction will depend on a number of factors, including but not limited to our ability to successfully integrate the assets of the IoT business (including employees) into our Data Communications Division operations; our ability to achieve the anticipated strategic benefits of the acquisition; and our ability to keep transaction costs within an

anticipated range. The integration may take longer than anticipated and/or be more costly than anticipated. The addition of Broadcom’s IoT assets may not improve our ability to address the IoT market as much or as quickly as we anticipate. We ha ve incurred significant costs associated with transaction fees, professional services and other costs related to the acquisition and we will continue to incur additional costs in connection with the integration of the business. If these costs exceed our ex pectations, it could have a material adverse impact on our operating results. Furthermore, we incurred substantial indebtedness to pay for the acquisition. See the risk factor entitled “We utilize debt financing and such indebtedness could adversely affec t our business, financial condition, results of operations and earnings per share. We may be unable to meet our payment obligations.”

We utilize debt financing and such indebtedness could adversely affect our business, financial condition, results of operations and earnings per share. We may be unable to meet our payment obligations.

We routinely incur indebtedness to finance our operations and from time to time we have significant amounts of outstanding indebtedness and substantial debt service requirements. Our amended and restated senior secured credit facility with a group of lenders led by Morgan Stanley Senior Funding, Inc. (the “Credit Agreement”), provides for a $540 million revolving credit facility and a $100 million term loan. The credit facility contains customary affirmative, negative and financial covenants, including a maximum total leverage ratio and a minimum fixed charge coverage ratio. Our ability to meet our payment and other obligations and covenants under our indebtedness depends on our ability to generate significant cash flow. This, to some extent, is subject to general economic, financial, competitive, legislative and regulatory factors as well as other factors that are beyond our control. There is no assurance that our business will generate cash flow from operations, or that future borrowings will be available to us under our existing or any amended credit facilities or otherwise, in an amount sufficient to enable us to meet payment obligations under indebtedness we may under take from time to time. If we are not able to generate sufficient cash flow to service our debt obligations or meet required debt covenants, we may need to refinance or restructure our debt, sell assets, reduce or delay capital investments, or seek to raise additional capital. There is no assurance that we will be able to implement any of these alternatives on commercially reasonable terms, if at all. If we are unable to implement one or more of these alternatives, we may not be able to meet our payment obligations under any indebtedness we owe.

As of July 3, 2016, our outstanding debt included 367.0 million related to our Senior Secured Revolving Credit Facility, $150 million of 2.00% Senior Exchange Notes assumed from Spansion, $94.6 million Term Loan A, net of costs, $287.5 million of 4.50% Exchangeable Senior Notes due 2022, $5.7 million of capital leases and $1.5 million of equipment loans. See Note 8 for more information on our Senior Secured Revolving Credit Facility, 2.00% Senior Exchangeable Notes assumed from Spansion, our Term Loan A, the 4.50% Senior Exchangeable Notes and our capital leases. See Note 15 for a description of our $450 million incremental term loan under our Credit Agreement, which closed on July 5, 2016.

We may dispose of certain businesses, product lines or assets, which could adversely affect our results of operations.

From time to time, we may divest certain businesses, product lines or assets, both acquired or otherwise, that are no longer strategically important, or we may exit minority investments, which could materially affect our cash flows and results of operations. If we decide to divest a business, product line or assets, we may encounter difficulty in finding or completing divestiture opportunities or alternative exit strategies on acceptable terms or in a timely manner. These circumstances could delay the achievement of our strategic objectives or cause us to incur additional expenses with respect to the business, product line or assets that we want to dispose of, or we may dispose of the business, product line or assets at a price or on terms that are less favorable than we had anticipated. Even following a divestiture, we may be contractually obligated with respect to certain continuing obligations to customers, vendors, landlords or other third parties. We may also have continuing obligations for pre-existing liabilities related to the assets or businesses. Such obligations may have a material adverse impact on our results of operations and financial condition. Any such dispositions could also result in disruption to other parts of our business, potential loss of employees or customers, incurring potential loss of revenue, negatively impacting margins, exposure to unanticipated liabilities or result in ongoing obligations and liabilities to us following any such divestiture. We may also incur significant costs associated with exit or disposal activities, related impairment charges, or both.

ITEM 2. UNREGISTERED SALES OF EQUI TY SECURITIES AND USE OF PROCEEDS

Issuer Purchase of Equity Securities

On October 20, 2015, we entered into a new $450 million stock buyback program. Refer Note 9 for further details.

The table below sets forth the information with respect to repurchases of common stock made in the second quarter of fiscal 2016 under the $450 million stock buyback program.

	Total number of shares purchased		Average price paid per share		Total shares purchased as part of the publicly announced programs		Total dollar value of shares that may yet be purchased under this program (In thousands)
Remaining balance available for purchases at the beginning of the period							$	210,968
Withholding of common shares for tax obligations on vested restricted shares
April 2016		61	$	8.49		61	$	1
May 2016		1,870	$	9.44		1,870	$	18
June 2016		1,929	$	10.07		1,929	$	19
Total repurchases during Q2 2016		3,860	$	9.74		3,860	$	210,930

Issuer Sale of Senior Exchangeable Notes

On June 23, 2016, the Company issued $287.5 million of Senior Convertible Notes due 2022 (the “Notes”) in a private placement to qualified institutional buyers under Rule 144A of the Securities Act of 1933, as amended. See Note 8 of the Notes to Condensed Consolidated Financial Statements for further details.

ITEM 3. DEFAULTS UPO N SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

		Incorporated by Reference
Exhibit	Description	Form	Filing Date	File No.	Filed
Number	Description	Form	Filing Date	File No.	Herewith

3.1	Amended and Restated Bylaws of Cypress Semiconductor Corporation.				X

4.1	Form of Capped Call Transaction.				X

4.2	Indenture, dated June 23, 2016, by and between Cypress Semiconductor Corporation and U.S. Bank National Association.	8-K	6/23/2016	001-10079

10.1+	Form of Change of Control Severance Agreement.				X

10.2	Purchase Agreement by and among Merrill Lynch, Pierce, Fenner & Smith Incorporated and Cypress Semiconductor Corporation dated as of June 20, 2016.				X

10.3+	Employment Agreement and Release between Cypress Semiconductor Corporation and T.J. Rodgers dated June 3, 2016.				X

10.4+	Severance Policy dated May 26, 2016.				X

31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X

31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X

32.1++	Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X

32.2++	Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X

101.INS	XBRL Instance Document.

101.SCH	XBRL Taxonomy Extension Schema Document.

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB	XBRL Taxonomy Extension Label Linkbase Document.

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.

+	Identifies a management contract or compensatory plan or arrangement.

Exhibits 32.1 and 32.2 are being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liability of that section, nor shall such exhibits be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise specifically stated in such filing.

SIGNAT URES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CYPRESS SEMICONDUCTOR CORPORATION

Date: August 9, 2016	By:	/s/ THAD TRENT
		Thad Trent
		Executive Vice President, Finance and Administration and Chief Financial Officer

EXHIBIT INDEX

Incorporated by Reference

Exhibit

Description

Form

Filing Date

File No.

Filed

Number

Herewith

3.1

Amended and Restated Bylaws of Cypress Semiconductor Corporation.

4.1

Form of Capped call Transaction.

4.2

Indenture, dated June 23, 2016, by and between Cypress Semiconductor Corporation and U.S. Bank National Association.

8-K

6/23/2016

001-10079

10.1+

Form of Change of Control Severance Agreement.

10.2

Purchase Agreement by and among Merrill Lynch, Pierce, Fenner & Smith Incorporated and Cypress Semiconductor Corporation dated as of June 20, 2016.

10.3+

Employment Agreement and Release between Cypress Semiconductor Corporation and T.J. Rodgers dated June 3, 2016.

10.4+

Severance Policy dated May 26, 2016.

31.1

Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1++

Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2++

Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

XBRL Instance Document.

101.SCH

XBRL Taxonomy Extension Schema Document.

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

XBRL Taxonomy Extension Label Linkbase Document.

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document.

+	Identifies a management contract or compensatory plan or arrangement.

Exhibit 3.1

AMENDED & RESTATED BYLAWS

CYPRESS SEMICONDUCTOR CORPORATION

Effective June 15, 2016

TABLE OF CONTENTS

ARTICLE I – CORPORATE OFFICES			1

1.1		Registered Office	1
1.2		Other Offices	1

ARTICLE II – MEETINGS OF STOCKHOLDERS			1

2.1		Place of Meetings	1
2.2		Annual Meetings	1
2.3		Special Meeting	1
2.4		Notice of Stockholders’ Meetings	1
2.5		Manner of Giving Notice: Affidavit of Notice	2
2.6		Quorum	2
2.7		Adjourned Meeting; Notice	2
2.8		Conduct of Business	2
2.9		Voting	3
2.10		Waiver of Notice	3
2.11		Stockholder Action by Written Consent Without A Meeting	3
2.12		Record Date for Stockholder Notice; Voting; Giving Consents	5
2.13		Proxies	6
2.14		List of Stockholders Entitled to Vote	6
2.15		Advance Notice Procedures	6

ARTICLE III – DIRECTORS			9

3.1		Powers	9
3.2		Number of Directors	9
3.3		Election, Qualification and Term of Office of Directors	9
3.4		Resignation and Vacancies	9
3.5		Place of Meetings; Meetings by Telephone	10
3.6		Regular Meetings	10
3.7		Special Meetings Notice	10
3.8		Quorum	10
3.9		Waiver of Notice	11
3.10		Board Action by Written Consent Without A Meeting	11
3.11		Fees and Compensation of Directors	11
3.12		Removal of Directors	11

ARTICLE IV – COMMITTEES			11

4.1		Committees of Directors	11
4.2		Committee Minutes	12
4.3		Meetings and Action of Committees	12
4.4		Executive Committee	12

ARTICLE V – OFFICERS			12

5.1	Officers		12
5.2	Subordinate Officers		12
5.3	Removal and Resignation of Officers		13

5.4	Vacancies in Offices	13
5.5	Chairman of the Board	13
5.6	President	13
5.7	Vice Presidents	13
5.8	Secretary	13
5.9	Chief Financial Officer	14
5.10	Inspector of Election	14
5.11	Authority and Duties of Officers	15

ARTICLE VI – INDEMNITY		15

6.1	Third Party Actions	15
6.2	Actions by or in the Right of the Corporation	15
6.3	Successful Defense	16
6.4	Determination of Conduct	16
6.5	Payment of Expenses in Advance	16
6.6	Indemnity Not Exclusive	16
6.7	Insurance Indemnification	16
6.8	The Corporation	16
6.9	Employee Benefit Plans	17
6.10	Continuation of Indemnification and Advancement of Expenses	17

ARTICLE VII – RECORDS AND REPORTS		17

7.1	Maintenance and Inspection of Records	17
7.2	Inspection by Directors	17
7.3	Annual Statement to Stockholders	17

ARTICLE VIII – GENERAL MATTERS		18

8.1	Checks	18
8.2	Execution of Corporate Contracts and Instruments	18
8.3	Stock Certificates: Partly Paid Shares	18
8.4	Special Designation on Certificates	18
8.5	Lost Certificates	19
8.6	Construction: Definitions	19
8.7	Dividends	19
8.8	Fiscal Year	19
8.9	Seal	19
8.10	Transfer of Stock	19
8.11	Stock Transfer Agreements	19
8.12	Registered Stockholders	20

ARTICLE IX – AMENDMENTS		20

ARTICLE X FORUM FOR ADJUDICATION OF DISPUTES		20

AMENDED AND RESTATED BY-LAWS

CYPRESS SEMICONDUCTOR CORPORATION

ARTICLE I

CORPORATE OFFICES

1.1 REGISTERED OFFICE

The registered office of the corporation shall be in the City of Wilmington, County of New Castle, State of Delaware. The name of the registered agent of the corporation at such location is The Corporation Trust Company.

1.2 OTHER OFFICES

The Board of Directors may also at any time establish other offices at any place or places where the corporation is qualified to do business.

ARTICLE II

MEETINGS OF STOCKHOLDERS

2.1 PLACE OF MEETINGS

Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the Board of Directors. In the absence of any such designation, stockholders’ meetings shall be held at the registered office of the corporation required to be maintain pursuant to Section 1.2.

2.2 ANNUAL MEETING

The annual meeting of stockholders shall be held each year on a date and at a time designated by the Board of Directors. At the meeting, directors shall be elected and any other proper business may be transacted.

2.3 SPECIAL MEETING

A special meeting of the stockholders may be called at any time by the Board of Directors, or by the chairman of the Board, or by the president , or by one or more stockholders holding shares in the aggregate entitled to cast not less than ten percent of the votes at that meeting,

If a special meeting is called by any person or persons other than the Board of Directors, the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the chairman of the Board, the president, or the secretary of the corporation. No business may be transacted at such special meeting otherwise than specified in such notice. The officer receiving the request shall cause notice to be promptly given to the stockholders entitled to vote, in accordance with the provisions of Sections 2.4 and 2.5, that a meeting will be held at the time requested by the person or persons who called the meeting, not less than thirty-five (35) nor more than sixty (60) days after the receipt of the request. If the notice is not given within twenty (20) days after the receipt of the request, the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph of this Section 2.3 shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board of Directors may be held.

2.4 NOTICE OF STOCKHOLDER’S MEETINGS

All notices of meetings with stockholders shall be in writing (“writing” shall include mail, telecopy, telegram, or other electronic or wireless means) and shall be sent or otherwise given in accordance with Section 2.5 of these Bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, date, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called.

2.5 MANNER OF GIVING NOTICE: AFFIDAVIT OF NOTICE

Written notice of any meeting of stockholders, shall be deemed to have been given, if mailed, when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the corporation, or at the time

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sent, if sent by telecopy, telegram ore other electronic means. An affidavit of the secretary or an assistant secretary or of the transfer agent of the cor poration that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

2.6 QUORUM

The holders of a majority of the stock’ issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum is not present or represented at any meeting of the stockholders, then either (i) the chairman of the meeting or (ii) the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting until a quorum is present or represented.

2.7 ADJOURNED MEETING; NOTICE

When a meeting is adjourned to another time or place, unless these Bylaws otherwise require, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed.

2.8 CONDUCT OF BUSINESS

The president of the corporation shall preside as the chairman of the meeting of shareholders, or in his absence by a person designated by the Board of Directors, or, in the absence of a person so designated by the Board of Directors, by the chief financial officer, if any, or in his or her absence by the secretary, if any, or in his or her absence by a chairman chosen at the meeting by the vote of a majority in interest of the stockholders present in person or represented by proxy and entitled to vote thereat. The secretary, or in his or her absence, a person whom the chairman of the meeting shall appoint shall act as secretary of the meeting and keep a record of the proceedings thereof.

The chairman of the meeting shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board of Directors, if any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, regulation of the manner of voting and the conduct of business, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to stockholders of record of the corporation and their duly authorized and constituted proxies, and such other persons as the chairman shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting and matters which are to be voted on by ballot. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with rules of parliamentary procedure.

2.9 VOTING

The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.12 of these by-lays, subject to the provisions of Sections 217 and 218 of the General Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners of stock and to voting trusts and other voting agreements).

The stockholders’ vote may be by voice vote, by electronic or other wireless vote, or in writing.

Except as provided in the last paragraph of this Section 2.9 or as may be otherwise provided in the Certificate of Incorporation, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder.

At a stockholders’ meeting at which directors are to be elected, each stockholder shall be entitled to cumulate votes (i.e., cast for any candidate a number of votes greater than the number of votes which such stockholder normally is entitled to cast) if the candidates names have been properly placed in nomination (in accordance with these Bylaws). Each holder of stock, or of any class or classes or of a series or series thereof, who elects to cumulate votes shall be entitled to as many votes as equals the number of votes which

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(absent this provision as to cumulative voting) he would be entitled to cast for the election of directors with -respect to his shares of stock multiplied by the number of directors to be elect ed by him, and he may cast all of such votes for a single director or may distribute them among the number to be voted for, or for any two or more of them, as he may see fit.

Any stockholder entitled to vote on any matter may vote part of the shares in favor of the proposal and refrain from voting the remaining shares or, except when the matter is the election of directors, may vote them against the proposal; but if the stockholder fails to specify the number of shares which the stockholder is voting affirmatively, it will be conclusively presumed that the stockholder’s approving vote is with respect to all shares which the stockholder is entitled to vote.

For all matters other than the election of directors, except as otherwise provided by the express provisions of the law of the state of Delaware, the Certificate of Incorporation or these Bylaws, the affirmative vote of the majority of shares present in person or represented by proxy at any meeting at which a quorum is present shall be the act of the stockholders and shall be valid and binding upon the corporation.

2.10 WAIVER OF NOTICE

Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the Certificate of Incorporation or these Bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice unless so required by the Certificate of Incorporation or these Bylaws.

2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING

(a) Unless otherwise provided in the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action that may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing setting forth the action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted.

Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. If the action which is consented to is such as would have required the filing of a certificate under any section of the General Corporation Law of Delaware, if such action had been voted on by stockholders at a meeting thereof, then the certificate filed under such section shall state, in lieu of any statement required by such section concerning any vote of stockholders, that written notice and written consent have been given as provided in Section 228 of the General Corporation Law of Delaware.

(b) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting shall be as fixed by the Board of Directors or as otherwise established under this Section 2.11. Any person seeking to have the stockholders authorize or take corporate action by written consent without a meeting shall, by written notice addressed to the secretary of the corporation and delivered to the corporation and signed by a stockholder of record, request that a record date be fixed for such purpose. The written notice must contain the information set forth in paragraph (c) of this section. Following receipt of the notice, the Board of Directors shall have ten days to determine the validity of the request, and if appropriate, adopt a resolution fixing the record date for such purpose. The record date for such purpose shall be no more than ten days after the date upon which the resolution fixing the record date is adopted by the Board of Directors and shall not precede the date such resolution is adopted. If the Board of Directors fails within ten days after the corporation receives such notice to fix a record date for such purpose, the record date shall be the day on which the first signed written consent is delivered to the corporation in the manner described in paragraph (e) of this section; except that, if prior action by the Board of Directors is required under the provisions of Delaware law, the record date shall be at the close of business on the day on which the Board of Directors adopts the resolution taking such prior action.

(c) Any stockholder's notice required by paragraph (b) of this section must describe the action that the stockholder proposes to take by consent. For each such proposal, every notice by a stockholder must (i) state for all matters other than the nomination or election of directors, the information described in clauses 2 through 6 of Section 2.15(a)(ii) and be followed by the supplement referenced in the second sentence of Section 2.15(a)(ii), (ii) state for the nomination or election of directors, the information described in Sections 2.15(b)(ii)(A), Section 2.15(b)(ii)(B), and Section 2.15(b)(iii), and (iii) state the text of the proposal (including the text of any resolutions to be effected by consent).

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(d) Every written consent purporting to take or authorize the taking of corporate action (each such written consent is referred to in this paragraph and in paragraph (e) as a "Consent") must bear the date of signature of each stockholder who signs the Consent , and no Consent shall be effective to take the corporate action referred to therein unless, within 60 days of the earliest dated Consent delivered in the manner required by this section, Consents signed by a sufficient number of stockholders to take such action are so delivered to the corporation.

(e) Consent must be delivered to the corporation by delivery to its registered office in the State of Delaware or its principal place of business. Delivery must be made by hand or by certified or registered mail, return receipt requested.

In the event of the delivery to the corporation of Consents, the secretary of the corporation, or such other officer of the corporation as the Board of Directors may designate, shall provide for the safe-keeping of such Consents and any related revocations and shall promptly conduct such ministerial review of the sufficiency of all Consents and any related revocations and of the validity of the action to be taken by stockholder consent as the secretary of the corporation, or such other officer of the corporation as the Board of Directors may designate, as the case may be, deems necessary or appropriate, including, without limitation, whether the stockholders of a number of shares having the requisite voting power to authorize or take the action specified in Consents have given consent; provided, however, that if the corporate action to which the Consents relate is the removal or replacement of one or more members of the Board of Directors, the secretary of the corporation, or such other officer of the corporation as the Board of Directors may designate, as the case may be, shall appoint an inspector or inspectors of election ("Inspectors"), who shall not be members of the Board of Directors, to serve as Inspectors with respect to such Consent and such Inspectors shall discharge the functions of the secretary of the corporation, or such other officer of the corporation as the Board of Directors may designate, as the case may be, under this section. If after such investigation the secretary of the corporation, such other officer of the corporation as the Board of Directors may designate, or the Inspectors, as the case may be, shall determine that the action purported to have been taken is duly authorized by the Consents, that fact shall forthwith be certified on the records of the corporation kept for the purpose of recording the proceedings of meetings of stockholders, and the Consents shall be filed in such records.

In conducting the investigation required by this section, the secretary of the corporation, such other officer of the corporation as the Board of Directors may designate, or the Inspectors, as the case may be, may, at the expense of the corporation, retain special legal counsel and any other necessary or appropriate professional advisors, and such other personnel as such person or persons may deem necessary or appropriate and shall be fully protected in relying in good faith upon the opinion of such counsel or advisors.

(f) No action by written consent without a meeting shall be effective until such date as the secretary of the corporation, such other officer of the corporation as the Board of Directors may designate, or the inspector of election, as applicable, certify to the corporation that the consents delivered to the corporation in accordance with paragraph (e) of this section, represent at least the minimum number of votes that would be necessary to take the corporate action.

(g) Nothing contained in this section 2.11 shall be construed in any way to suggest or imply that the Board of Directors of the corporation or any stockholder shall not be entitled to contest the validity of any Consent or related revocations, whether before or after such certification by the secretary of the corporation, such other officer of the corporation as the Board of Directors may designate, or the inspector of election, as the case may be, or to take any other action (including, without limitation, the commencement, prosecution, or defense of any litigation with respect thereto, and the seeking of injunctive relief in such litigation).

2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENT

In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date (i) in the case of determination of stockholders entitled to notice of or to vote at and any meeting of stockholders or any adjournment thereof, shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, (ii) in the case of determination of stockholders entitled to express consent to corporate action in writing without a meeting, shall be determined in accordance with section 2.11 and (iii) in the case of determination of stockholders for any other action, shall not be more than sixty (60) days prior to such other action.

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If the Board of Directors does not so fix a record date:

(i) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.

(ii) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary by law, shall be determined in accordance with section 2.11.

(iii) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

2.13 PROXIES

Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him by a written proxy, signed by the stockholder and filed with the secretary of the corporation, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. A proxy shall be deemed signed if the stockholder's name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the stockholder or the stockholder's attorney-in fact. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(c) of the General Corporation Law of Delaware.

2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE

The officer who has charge of the stock ledger of a corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, for a period of at least ten (10) days prior to the meeting, either (a) on a reasonable accessible network, provided the information required to gain access to such list is provided with the notice of meeting, or (b) during ordinary office hours, at the principal place of business of the corporation. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Such list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them.

2.15 ADVENACE NOTICE PROCEDURES

(a) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be brought: (A) pursuant to the corporation's proxy materials with respect to such meeting, (B) by or at the direction of the Board of Directors, or (C) by a stockholder of the corporation who (1) is a stockholder of record at the time of the giving of the notice provided for in these bylaws and on the record date for the determination of stockholders entitled to vote at the annual meeting and (2) has timely complied in proper written form with the notice procedures set forth in this Section 2.15(a). In addition, for business to be properly brought before an annual meeting by a stockholder, such business must be a proper matter for stockholder action pursuant to these bylaws and applicable law. For the avoidance of doubt, clause (C) above shall be the exclusive means for a stockholder to bring business before an annual meeting of stockholders.

(i) To comply with clause (C) of Section 2.15(a) above, a stockholder's notice must set forth all information required under this Section 2.15(a) and must be timely received by the secretary of the corporation. To be timely, a stockholder's notice must be received by the secretary at the principal executive offices of the corporation not later than the 45th day nor earlier than the 75th day before the one-year anniversary of the date on which the corporation first mailed its proxy materials or a notice of availability of proxy materials (whichever is earlier) for the preceding year's annual meeting; provided, however, that in the event that no annual meeting was held in the previous year or if the date of the annual meeting is advanced by more than 30 days prior to or delayed by more than 60 days after the one-year anniversary of the date of the previous year's annual meeting, then notice by the stockholder to be timely must be so received by the secretary not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of (x) the 90th day prior to such annual meeting, or (y) the tenth day following the day on which Public Announcement (as defined below) of the date of such annual meeting is first made. In no event shall any adjournment or

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postponement of an annual meeting or the announcement thereof commence a new time period for the giving of a stockholder's notice as described in this Section 2.15(a)(i) "Public Announcement" shall mean disclosure in a pr ess release reported by the Dow Jones News Service, Associated Press or a comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission (the "Commission") pursuant to Section 13, 14 or 15(d ) of the Securities Exchange Act of 1934, as amended, or any successor thereto (the "1934 Act").

(ii) To be in proper written form, a stockholder's notice to the secretary must set forth as to each matter of business the stockholder intends to bring before the annual meeting: (1) a brief description of the business intended to be brought before the stockholders and the reasons for conducting such business, (2) the name and address, as they appear on the corporation's books, of the stockholder proposing such business and any Stockholder Associated Person (as defined below), (3) the class and number of shares of the corporation that are held of record or are beneficially owned by the stockholder or any Stockholder Associated Person and any derivative positions held or beneficially held by the stockholder or any Stockholder Associated Person, (4) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of such stockholder or any Stockholder Associated Person with respect to any securities of the corporation, and a description of any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares), the effect or intent of which is to mitigate loss to or manage risk or benefit from share price changes for, or to increase or decrease the voting power of, such stockholder or any Stockholder Associated Person with respect to any securities of the corporation, (5) any material interest of the stockholder or a Stockholder Associated Person in such business and (6) a statement whether either such stockholder or any Stockholder Associated Person will deliver a proxy statement and form of proxy to holders of at least the percentage of the corporation's voting shares required under applicable law to carry the proposal (such information provided and statements made as required by clauses (1) through (6), a "Business Solicitation Statement"). In addition, to be in proper written form, a stockholder's notice to the secretary must be supplemented not later than ten days following the record date to disclose the information contained in clauses (3) and (4) above as of the record date. For purposes of this Section 2.15, Section 2.3 and Section 2.11, a "Stockholder Associated Person" of any stockholder shall mean (x) any person controlling, directly or indirectly, or acting in concert with, such stockholder, (y) any beneficial owner of shares of stock of the corporation owned of record or beneficially by such stockholder and on whose behalf the proposal or nomination, as the case may be, is being made and (z) any person controlling, controlled by or under common control with such person referred to in the preceding clauses (x) and (y).

(iii) Without exception, no business shall be conducted at any annual meeting except in accordance with the provisions set forth in this Section 2.15(a) and, if applicable, Section 2.15(b). In addition, business proposed to be brought by a stockholder may not be brought before the annual meeting if such stockholder or a Stockholder Associated Person, as applicable, takes action contrary to the representations made in the Business Solicitation Statement applicable to such business or if the Business Solicitation Statement applicable to such business contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading. The chairperson of the annual meeting shall, if the facts warrant, determine and declare at the annual meeting that business was not properly brought before the annual meeting and in accordance with the provisions of this Section 2.15(a), and, if the chairperson should so determine, he or she shall so declare at the annual meeting that any such business not properly brought before the annual meeting shall not be conducted.

(b) Notwithstanding anything in these bylaws to the contrary, only persons who are nominated in accordance with the procedures set forth in this Section 2.15(b) shall be eligible for election or re-election as directors at an annual meeting of stockholders. Nominations of persons for election to the Board of Directors of the corporation shall be made at an annual meeting of stockholders only (A) by or at the direction of the Board of Directors or (B) by a stockholder of the corporation who (1) was a stockholder of record at the time of the giving of the notice provided for in these bylaws and on the record date for the determination of stockholders entitled to vote at the annual meeting and (2) has complied with the notice procedures set forth in this Section 2.15(b). In addition to any other applicable requirements, for a nomination to be made by a stockholder, the stockholder must have given timely notice thereof in proper written form to the secretary of the corporation.

(i)To comply with clause (B) of Section 2.15(b) above, a nomination to be made by a stockholder must set forth all information required under this Section 2.15(b) and must be received by the secretary of the corporation at the principal executive offices of the corporation at the time and in accordance with the final three sentences of Section 2.15(a)(i) above.

(ii) To be in proper written form, such stockholder's notice to the secretary must set forth:

(A) as to each person (a "nominee") whom the stockholder proposes to nominate for election or re-election as a director: (1) the name, age, business address and residence address of the nominee, (2) the principal occupation or employment of the nominee, (3) the class and number of shares of the corporation that are held of record or are beneficially owned by the nominee and any derivative positions held or beneficially held by the nominee, (4) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of the nominee with respect to any securities of the corporation, and a description of

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any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares), the effect or intent of which is to mitigate loss to or manage risk or benefit of share price changes for, or to increase or decrease the voting power of the nominee, (5) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons ) pursuant to which the nominations are to be made by the stockholder, (6) a written statement executed by the nominee acknowledging that as a director of the corporation, the nominee will owe a fiduciary duty under Delaware law with respect to the corpora tion and its stockholders, and (7) any other information relating to the nominee that would be required to be disclosed about such nominee if proxies were being solicited for the election of the nominee as a director, or that is otherwise required, in each case pursuant to Regulation 14A under the 1934 Act (including without limitation the nominee's written consent to being named in the proxy statement, if any, as a nominee and to serving as a director if elected); and

(B) as to such stockholder giving notice, (1) the information required to be provided pursuant to clauses 2 through 5 of Section 2.15(a)(ii) above, and the supplement referenced in the second sentence of Section 2.15(a)(ii) above (except that the references to "business" in such clauses shall instead refer to nominations of directors for purposes of this paragraph), and (2) a statement whether either such stockholder or Stockholder Associated Person will deliver a proxy statement and form of proxy to holders of a number of the corporation's voting shares reasonably believed by such stockholder or Stockholder Associated Person to be necessary to elect such nominee(s) (such information provided and statements made as required by clauses (1) and (2) above, a "Nominee Solicitation Statement").

(iii) At the request of the Board of Directors, any person nominated by a stockholder for election as a director must furnish to the secretary of the corporation (1) that information required to be set forth in the stockholder's notice of nomination of such person as a director as of a date subsequent to the date on which the notice of such person's nomination was given and (2) such other information as may reasonably be required by the corporation to determine the eligibility of such proposed nominee to serve as an independent director of the corporation or that could be material to a reasonable stockholder's understanding of the independence, or lack thereof, of such nominee; in the absence of the furnishing of such information if requested, such stockholder's nomination shall not be considered in proper form pursuant to this Section 2.15(b).

(iv) Without exception, no person shall be eligible for election or re-election as a director of the corporation at an annual meeting of stockholders unless nominated in accordance with the provisions set forth in this Section 2.15(b). In addition, a nominee nominated by a stockholder pursuant to clause (B) of the second sentence of Section 2.15(b) above shall not be eligible for election or re-election if a stockholder or Stockholder Associated Person, as applicable, takes action contrary to the representations made in the Nominee Solicitation Statement applicable to such nominee or if the Nominee Solicitation Statement applicable to such nominee contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading. The chairperson of the annual meeting shall, if the facts warrant, determine and declare at the annual meeting that a nomination was not made in accordance with the provisions prescribed by these bylaws, and if the chairperson should so determine, he or she shall so declare at the annual meeting, and the defective nomination shall be disregarded.

(c) For a special meeting of stockholders at which directors are to be elected pursuant to Section 2.3, nominations of persons for election to the Board of Directors shall be made only (1) by or at the direction of the Board of Directors or (2) by any stockholder of the corporation who (A) is a stockholder of record at the time of the giving of the notice provided for in these bylaws and on the record date for the determination of stockholders entitled to vote at the special meeting and (B) delivers a timely written notice of the nomination to the secretary of the corporation that includes the information set forth in Sections 2.15(b)(ii) and (iii) above. To be timely, such notice must be received by the secretary at the principal executive offices of the corporation not later than the close of business on the later of the 90th day prior to such special meeting or the tenth day following the day on which Public Announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting. Additionally, if a stockholder who calls a special meeting pursuant to Section 2.3 provides the information required by this Section 2.15 regarding the nomination of a person for election to the Board of Directors in the written request for a special meeting required by Section 2.3, such notice will be considered timely for purposes of this Section 2.15(c). A person shall not be eligible for election or re-election as a director at a special meeting unless the person is nominated (i) by or at the direction of the Board of Directors or (ii) by a stockholder in accordance with the notice procedures set forth in this Section 2.15(c). In addition, a nominee nominated by a stockholder in accordance with clause (2) of the first sentence of this Section 2.15(c) shall not be eligible for election or re-election if a stockholder or Stockholder Associated Person, as applicable, takes action contrary to the representations made in the Nominee Solicitation Statement applicable to such nominee or if the Nominee Solicitation Statement applicable to such nominee contains an untrue statement of a material fact or omits to state a material fact necessary to make the statements therein not misleading. The chairperson of the special meeting shall, if the facts warrant, determine and declare at the meeting that a nomination or business was not made in accordance with the procedures prescribed by these bylaws, and if the chairperson should so determine, he or she shall so declare at the meeting, and the defective nomination or business shall be disregarded.

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(d) In addition to the foregoing provisions of this Section 2.15, a stockholder must also comply with all applicable requirements of state law and of the 1934 Act and the rules and regulations thereunder with respect to the ma tters set forth in this Section 2.15, including, with respect to business such stockholder intends to bring before a meeting that involves a proposal that such stockholder requests to be included in the corporation's proxy statement, the requirements of Ru le 14a-8 (or any successor provision) under the 1934 Act. Nothing in this Section 2.15 shall be deemed to affect any right of the corporation to omit a proposal from the corporation's proxy statement pursuant to Rule 14a-8 (or any successor provision) und er the 1934 Act.

ARTICLE III

DIRECTORS

3.1 POWERS

Subject to the provisions of the General Corporation Law of Delaware and any limitations in the Certificate of Incorporation or these Bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board of Directors.

3.2 NUMBER OF DIRECTORS

The board of directors shall consist of one or more members, each of whom shall be a natural person. The Board of Directors shall consist of seven (7) persons until changed by a proper amendment of this Section 3.2. No reduction of the authorized number of directors shall have the effect of removing any director before that director's term of office expires.

3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS

Except as provided in Section 3.4 of these Bylaws, directors shall be elected at each annual meeting of stockholders to hold office until the next annual meeting. Directors need not be stockholders unless so required by the Certificate of Incorporation or these Bylaws, wherein other qualifications for directors may be prescribed. Each director, including a director elected to fill a vacancy, shall hold office until his successor is elected and qualified or until his earlier resignation or removal. Elections of directors need not be by written ballot.

3.4 RESIGNATION AND VACANCIES

Any director may resign at any time upon written notice to the attention of the Secretary of the corporation. When one or more directors so resigns and the resignation is effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in this section in the filling of other vacancies.

Unless otherwise provided in the Certificate of Incorporation or these Bylaws:

(i) Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.

(ii) Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, vacancies and classes or series thereof then in office, or by a sole remaining director so elected.

If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the Certificate of Incorporation or these Bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the General Corporation Law of Delaware.

If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole Board (as constituted immediately prior to any such increase), then the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten (10) percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the General Corporation Law of Delaware as far as applicable.

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3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE

The Board of Directors of the corporation may hold meetings, both regular and special, either within or outside the State of Delaware. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.

3.6 REGULAR MEETINGS

Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board.

3.7 SPECIAL MEETINGS NOTICE

Special meetings of the Board of Directors for any purpose or purposes may be called at any time by the chairman of the Board, the president, the secretary, the chairman of any committee of the Board of Directors.

Notice of the time and place of special meetings shall be delivered to each director personally, by facsimile, electronic mail, by telephone to each director or sent by first-class mail or telegram, charges prepaid, addressed to each director at that director's address as it is shown on the records of the corporation. If the notice is mailed, it shall be deposited in the United States mail at least four (4) days before the time of the holding of the meeting. If the notice is delivered personally or by telephone or by telegram, it shall be delivered personally or by telephone or to the telegraph company at least forty-eight (48) hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director, who the person giving the notice has reason to believe will promptly communicate it to the director. Notice given by electronic mail shall be deemed given at the time sent. The notice need not specify the purpose or the place of the meeting, if the meeting is to be held at the principal executive office of the corporation.

3.8 QUORUM

At all meetings of the Board of Directors, a majority of the authorized number of directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation. If a quorum is not present at any meeting of the Board of Directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.

A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.

In the event of any emergency, disaster or catastrophe, as referred to in Section 110 of the Delaware General Corporation Law, or other similar emergency condition, as a result of which a quorum of the Board of Directors or a standing committee of the board cannot readily be convened for action, then the director or directors in attendance at the meeting shall constitute a quorum.

3.9 WAIVER OF NOTICE

Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the Certificate of Incorporation or these Bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, or members of a committee of the Board, need be specified in any written waiver of notice unless so required by the Certificate of Incorporation or these Bylaws.

3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING

Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the Board or committee.

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3.11 FEES AND COMPENSATION OF DIRECTORS

Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, the Board of Directors shall have the authority to fix the compensation of directors.

3.12 REMOVAL OF DIRECTORS

Unless otherwise restricted by statute, by the Certificate of Incorporation or by these Bylaws, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors; provided, however, that if less than the entire Board of Directors is to be removed, no director may be removed without cause if the votes cast against his or her removal would be sufficient to elect him or her if then cumulatively voted at an election of the entire Board of Directors.

No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director's term of office.

ARTICLE IV

COMMITTEES

4.1 COMMITTEES OF DIRECTORS

The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, with each committee to consist of one or more of the directors of the corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors or in the Bylaws of the corporation, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) amend the Certificate of Incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors as provided in Section 151(a) of the General Corporation Law of Delaware, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), (ii) adopt an agreement of merger or consolidation under Sections 251 or 252 of the General Corporation Law of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, (iv) recommend to the stockholders a dissolution of the corporation or a revocation of a dissolution, or (v) amend the Bylaws of the corporation; and, unless the Board resolution establishing the committee, the Bylaws or the Certificate of Incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend, to authorize the issuance of stock, or to adopt a certificate of ownership and merger pursuant to Section 253 of the General Corporation Law of Delaware.

4.2 COMMITTEE MINUTES

Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.

4.3 MEETINGS AND ACTION OF COMMITTEES

Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these Bylaws, Section 3.5 (place of meetings and meetings by telephone), Section 3.6 (regular meetings), Section 3.7 (special meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), and Section 3.10 (action without a meeting), with such changes in the context of those Bylaws as are necessary to substitute the committee and its members for the Board of Directors and its members; provided, however, that the time of regular meetings of committees may be determined either by resolution of the Board of Directors or by resolution of the committee, that special meetings of committees may also be called by resolution of the Board of Directors and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The Board of Directors may adopt rules for the government of any committee not inconsistent with the provisions of these Bylaws other regulatory requirements.

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4.4 EXECUTIVE COMMITTEE

In the event that the Board appoints an executive committee, such executive committee, in all cases in which specific directions to the contrary shall not have given by the Board, shall have and may exercise, during the intervals between the meetings of the Board, all powers and authority of the Board in the management of the business and affairs of the corporation (except as provided in Section 4.1 above) in such manner as the executive committee may deem in the best interest of the corporation

ARTICLE V

OFFICERS

5.1 OFFICERS

The officers of the corporation shall consist of a president, one or more vice presidents, a secretary, a chief financial officer, and a treasurer who shall be appointed by the Board. The corporation may also have, at the discretion of the Board of Directors, a chairman of the board, a chairman of the executive committee, and other officers as the Board may deem expedient, who shall be appointed in such manner and hold offices for such term as the Board may prescribe. Any number of offices may be held by the same person.

5.2 SUBORDINATE OFFICERS

In addition to the officers appointed by the Board in accordance with Section 5.1, the corporation may have one or more appointed non-corporate vice presidents, who may not be executive officers for purposes of Section 16 of the Securities Exchange Act of 1934 ("non corporate vice presidents"). The Board of Directors may appoint, or empower the president to appoint such non-corporate officers and shall have such duties as may be established by the Board, the president or their designate. The Board of Directors may designate one or more non-corporate vice presidents as executive vice presidents or senior vice presidents Non corporate vice presidents may be removed in accordance with Section 5.3 hereof.

5.3 REMOVAL AND RESIGNATION OF OFFICERS

Any officer of the corporation may be removed by an affirmative vote of the majority of the Board of Directors at any regular or special meeting of the Board or, by an officer upon whom such power of removal may be conferred by the Board.

Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.

5.4 VACANCIES IN OFFICES

Any vacancy occurring in any office of the corporation shall be filled by the Board of Directors.

5.5 CHAIRMAN OF THE BOARD

The chairman of the board, if such an officer is elected, shall, if present, preside at meetings of the Board of Directors and exercise and perform such other powers and duties as may from time to time be assigned to him by the Board of Directors or as may be prescribed by these Bylaws. If there is no president, then the chairman of the board shall act as president of the corporation and shall have the powers and duties prescribed in Section 5.6 of these Bylaws. In the event of disability or death of the president, the chairman of the Board shall assume the powers and duties of the president until a vice president is designated in accordance with Section 5.7.

5.6 PRESIDENT

Subject to such supervisory powers, if any, as may be given by the Board of Directors to the chairman of the board, if there be such an officer, the president shall be the chief executive officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction, and control of the business and the officers of the corporation. He shall preside at all meetings of the stockholders and, in the absence or nonexistence of a chairman of the board, at all meetings of the Board of Directors. He shall have the general powers and duties of management usually vested in the office of president of a corporation and shall have such other powers and duties as may be prescribed by the Board of Directors or these Bylaws.

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5.7 VICE PRESIDENTS

In the case of death or disability of the president, one of the appointed vice presidents, Board of Directors designated by the Board of Directors, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president, until the president returns or is no longer disabled, or in the event of death a new president is appointed. The vice president shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the Board of Directors, these Bylaws, the president or the chairman of the board.

5.8 SECRETARY

The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the Board of Directors may direct, a book of minutes of all meetings and actions of directors, committees of directors, and stockholders. The minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized and the notice given), the names of those present at directors' meetings or committee meetings, the number of shares present or represented at stockholders' meetings, and the proceedings thereof.

The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporation's transfer agent or registrar, as determined by resolution of the Board of Directors, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation.

The secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors required to be given by law or by these Bylaws. The Secretary shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or by these Bylaws.

5.9 CHIEF FINANCIAL OFFICER

The powers and duties of the chief financial officer are:

(i) To oversee the corporate-wide treasury functions and financial reporting to external bodies.

(ii) To have the custody of all funds, securities, evidence of indebtedness and other valuable documents of the corporation and, at the chief financial officer’s discretion, to cause any or all thereof to be deposited for account of the corporation at such depositary as may be designated from time to time by the Board of Directors or the chairman of the board or the president.

(iii) To receive or cause to be received, and to give or cause to be given, receipts and acceptances for monies paid in for the account of the corporation;

(iv) To disburse, or cause to be disbursed, all funds of the corporation as may be directed by the Board of Directors, the chairman of the board or the chief executive officer, taking proper vouchers for such disbursements;

(v) To render to the president and to the Board of Directors, whenever they may require, accounts of all transactions and of the financial condition of the corporation.

(vi) To do and perform all such duties as pertain to the office of chief financial officer or as may be required or prescribed by the Board of Directors; and

(vii) To vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority granted herein may be exercised either by the chief financial officer directly or by any other person authorized to do so by proxy or power of attorney duly executed by the chief financial officer.

5.10 INSPECTOR OF ELECTION

Before any meeting of stockholders, the Board of Directors shall appoint an inspector or inspectors of election to act at the meeting or its adjournment. The number of inspectors shall be as determined by the Board of Directors. If any person appointed as inspector fails to appear or fails or refuses to act, then the chairman of the meeting may, and upon the request of any stockholder or a stockholder’s proxy shall, appoint a person to fill that vacancy.

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Such inspector shall:

(i) determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies;

(ii) receive votes, ballots or consents;

(iii) hear and determine all challenges and questions in any way arising in connection with the right to vote;

(iv) count and tabulate all votes or consents;

(v) determine when the polls shall close;

(vi) determine the result; and

(vii) do any other acts that may be proper to conduct the election or vote with fairness to all stockholders.

5.11 AUTHORITY AND DUTIES OF OFFICERS

In addition to the foregoing authority and duties, all officers of the corporation shall respectively have such authority and perform such duties in the management of the business of the corporation as may be designated from time to time by the Board of Directors or the stockholders.

ARTICLE VI

INDEMNITY

6.1 THIRD PARTY ACTIONS

The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise ( as defined below in Section 6.9), and may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or contemplated action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was an employee or agent of the corporation, or is or was serving at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interest of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.

6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION

The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a. judgment in its favor by reason of the fact that he is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture; trust or other enterprise, and may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was an employee or agent of the corporation, or is or was serving at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the

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case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper..

6.3 SUCCESSFUL DEFENSE

To the extent that a director or officer of the corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 6.1 and 6.2,.or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith and to the extent that an employee or agent of the corporation has been Successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 6.1 and 6.2, or in defense of any claim, issue or matter therein, he may be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith.

6.4 DETERMINATION OF CONDUCT

Any indemnification under Sections 6.1 and 6.2 (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that the indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Sections 6.1 and 6.2. Such determination shall be made (a) by the Board of Directors or the Executive Committee by a majority vote of directors who are not parties to such action, suit or proceeding, even though less than a quorum or (b) or if such quorum is not obtainable or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders.

6.5 PAYMENT OF EXPENSES IN ADVANCE

Expenses incurred by a director or officer of the corporation in defending a civil or criminal action, suit or proceeding shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding and expenses incurred by an employee or agent in defending a civil or criminal action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized in this Article VI.

6.6 INDEMNITY NOT EXCLUSIVE

The indemnification and advancement of expenses provided or granted pursuant to the other subsections of this section shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any Bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office.

6.7 INSURANCE INDEMNIFICATION

The corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation, as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article VI.

6.8 THE CORPORATION

For purposes of this Article VI, references to “the corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, office, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under and subject to the provisions of this Article VI (including, without, limitation the provisions of Section 6.4) with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued.

6.9 EMPLOYEE BENEFIT PLANS

For purposes of this Article VI, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “serving at the request of the corporation” shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a

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person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the corporation” as referred to in this Article VI.

6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES

The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VI shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

ARTICLE VII

RECORDS AND REPORTS

7.1 MAINTENANCE AND INSPECTION OF RECORDS

The corporation shall, either at its principal executive officer or at such place or places as designated by the Board of Directors, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these Bylaws as amended to date, accounting books, and other records.

Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation’s stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person’s interest as a stockholder.

In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent to so act on behalf of the stockholder. The” demand under oath shall be directed to the corporation at its registered office in Delaware or at its principal place of business.

7.2 INSPECTION BY DIRECTORS

Any director shall have the right to examine the corporation’s stock ledger, a list of its stockholders, and its other books and records for a purpose reasonably related to his position as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court may summarily order the corporation to permit the director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper.

7.3 ANNUAL STATEMENT TO STOCKHOLDERS

The Board of Directors or a designate of the Board shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation.

ARTICLE VIII

GENERAL MATTERS

8.1 CHECKS

From time to time, the Board of Directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments.

8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS

The Board of Directors, except as otherwise provided in these Bylaws, may authorize any officer or officers, or agent or agents, and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract engagement or to pledge its creditor to render it liable for any purpose or for any amount.

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8.3 STOCK CERTIFICATES: PARTLY PAID SHARES

The shares of the corporation shall be represented by certificates, provided that the Board of Directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Notwithstanding the adoption of such a resolution by the Board of directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the corporation by the chairman or vice-chairman of the Board of Directors, or the president or vice-president, and by the chief financial officer or an assistant treasurer, or the secretary or an assistant secretary of such corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.

The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, upon the books and records of the corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.

8.4 SPECIAL DESIGNATION ON CERTIFICATES

If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock a statement that the corporation will furnish without charge to each stockholder who so requests of the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

8.5 LOST CERTIFICATES

Except as provided in this Section 8.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation-and-cancelled at the same time. The corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost stolen or destroyed certificate, or his legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

8.6 CONSTRUCTION: DEFINITIONS

Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the Delaware General Corporation Law shall govern the construction of these Bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term “person” includes both a corporation and a natural person.

8.7 DIVIDENDS

The directors of the corporation, subject to any restrictions contained in (i) the General Corporation Law of Delaware or (ii) the Certificate of Incorporation, may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property, or in shares of the corporation’s capital stock.

The directors of the corporation may set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve.

Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the corporation, and meeting contingencies.

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8.8 FISCAL YEAR

The fiscal year of the corporation shall be fixed by resolution of the Board of Directors and may be changed by the Board of Directors.

8.9 SEAL

The corporation may adopt a corporate seal, which may be altered at pleasure, and may use the same by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

8.10 TRANSFER OF STOCK

Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction in its books.

8.11 STOCK TRANSFER AGREEMENTS

The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one o~ more classes owned by such stockholders in any manner not prohibited by the General Corporation Law of Delaware.

8.12 REGISTERED STOCKHOLDERS

The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments the person registered on its books as the owner pf shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.

ARTICLE IX

AMENDMENTS

The Bylaws of the corporation may be adopted, amended or repealed by the stockholders entitled to vote; provided, however, that the corporation may, in its Certificate of Incorporation, confer the power to adopt, amend or repeal Bylaws upon the directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal Bylaws.

ARTICLE X

FORUM FOR ADJUDICATION OF DISPUTES

Unless the corporation consents in writing to the selection of an alternative forum, the Superior Court of California, County of Santa Clara (the “Specified Court”) (or, if the Specified Court does not have jurisdiction, the federal district court for the Northern District of California) shall, to the fullest extent permitted by law, be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the corporation, (b) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the corporation to the corporation or the corporation's stockholders, (c) any action asserting a claim against the corporation or any director or officer or other employee of the corporation arising pursuant to any provision of the General Corporation Law of the State of Delaware, the certificate of incorporation or the bylaws (in each case, as they may be amended from time to time), (d) any action against the corporation or any director, officer or other employee of the corporation to interpret, apply, enforce or determine the validity of the certificate of incorporation or the bylaws (in each case, as they may be amended from time to time) or (e) any action asserting a claim against the corporation or any director or officer or other employee of the corporation governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the corporation shall be deemed to have notice of and to have consented to the provisions of this Article X.

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Exhibit 4.1

	[ Date ]

To:	Cypress Semiconductor Corporation
	198 Champion Court
	San Jose, California 95134
	Attn:	Thad Trent, Executive Vice President Finance and Administration and Chief Financial Officer
	Telephone:	[____________]
	Facsimile:	[____________]

From:	[●]
	[●]
	Attn: [●]
	Telephone: [●]
	Facsimile: [●]

Re:	[Base] ¹ [Additional] ² Capped Call Transaction
	(Transaction Reference Number:	)

Ladies and Gentlemen:

The purpose of this communication (this “ Confirmation ”) is to set forth the terms and conditions of the above-referenced transaction entered into on the Trade Date specified below (the “ Transaction ”) between [●] (“ Dealer ”) and Cypress Semiconductor Corporation (“ Counterparty ”). This communication constitutes a “ Confirmation ” as referred to in the ISDA Master Agreement specified below.

1. This Confirmation is subject to, and incorporates, the definitions and provisions of the 2006 ISDA Definitions (including the Annex thereto) (the “ 2006 Definitions ”) and the definitions and provisions of the 2002 ISDA Equity Derivatives Definitions (the “ Equity Definitions ”, and together with the 2006 Definitions, the “ Definitions ”), in each case as published by the International Swaps and Derivatives Association, Inc. (“ ISDA ”). In the event of any inconsistency between the 2006 Definitions and the Equity Definitions, the Equity Definitions will govern. Certain defined terms used herein have the meanings assigned to them in the Indenture [to be] dated as of June [__], 2016 between Counterparty and U.S. Bank National Association as trustee (the “ Indenture ”) relating to the USD[__________] principal amount of [__]% Convertible Senior Notes due 2022 (the “ Base Convertible Securities ”) together with any [__]% Convertible Senior Notes due 2022 [that may be] ³ issued pursuant to the Initial Purchasers’ over-allotment option under the Purchase Agreement (as defined below) (the “ Optional Convertible Securities ” and, together with the Base Convertible Securities, the “ Convertible Securities ”). In the event of any inconsistency between the terms defined in the Indenture and this Confirmation, this Confirmation shall govern. [For the avoidance of doubt, references herein to sections of the Indenture are based on the draft of the Indenture most recently reviewed by the parties at the time of execution of this Confirmation. If any relevant sections of the Indenture are changed, added or renumbered following execution of this Confirmation but prior to the execution of the Indenture, the parties will amend this Confirmation in good faith to preserve the economic intent of the parties based on the draft of the Indenture so reviewed.] ⁴ The parties further acknowledge that references to the Indenture herein are references to the Indenture as in effect on the date of its execution and if the Indenture is, or the Convertible Securities are, amended, supplemented or modified following their execution, any such amendment,

¹	Include for confirmation relating to the base convert offering.

²	Include for confirmation relating to the greenshoe convert offering, if any.

³	Include for confirmation relating to the base convert offering.

⁴	Include for confirmation relating to the base convert offering and confirmation relating to the greenshoe convert offering, if executed before the initial closing.

supplement or modification (other than a Merger Supplemental Indenture (as defined below)) will be disregarded for purposes of this Confirmation (other than as provided in Section 8(a) below) unless the parties agree otherwise in writing.

This Confirmation evidences a complete and binding agreement between Dealer and Counterparty as to the terms of the Transaction to which this Confirmation relates. This Confirmation shall be subject to an agreement (the “ Agreement ”) in the form of the 2002 ISDA Master Agreement (the “ ISDA Form ”) as if Dealer and Counterparty had executed an agreement in such form (without any Schedule but with the elections set forth in this Confirmation and (i) the election that the “Cross Default” provisions of Section 5(a)(vi) of the Agreement shall apply to Dealer with a Threshold Amount” of three percent of shareholders’ equity of [Dealer/Dealer Parent], (ii) the deletion of the phrase “, or becoming capable at such time of being declared, ” from clause (1) of Section 5(a)(vi)) of the Agreement, (iii) the following language added to the end of Section 5(a)(vi) of the Agreement: “Notwithstanding the foregoing, a default under subsection (2) hereof shall not constitute an Event of Default if (x) the default was caused solely by error or omission of an administrative or operational nature; (y) funds were available to enable the party to make the payment when due; and (z) the payment is made within two Local Business Days of such party’s receipt of written notice of its failure to pay.”[,][and] (iv) the term “Specified Indebtedness” shall have the meaning specified in Section 14 of the Agreement, except that such term shall not include obligations in respect of deposits received in the ordinary course of a party’s banking business[ and (v) the designation of [___] as a Credit Support Provider in relation to Dealer] ⁵ ). For the avoidance of doubt, the Transaction shall be the only transaction under the Agreement.

All provisions contained in, or incorporated by reference to, the Agreement will govern this Confirmation except as expressly modified herein. In the event of any inconsistency between this Confirmation and either the Definitions or the Agreement, this Confirmation shall govern. For the avoidance of doubt, except to the extent of an express conflict, the application of any provision of this Confirmation, the Agreement or the Equity Definitions shall not be construed to exclude or limit the application of any other provision of this Confirmation, the Agreement or the Equity Definitions.

2. The Transaction constitutes a Share Option Transaction for purposes of the Equity Definitions. The terms of the particular Transaction to which this Confirmation relates are as follows:

General Terms:

	Trade Date:	[_______], 2016

	Effective Date:	The closing date of [the initial issuance of] ⁶ the Convertible Securities [issued pursuant to the Initial Purchasers’ over-allotment option under the Purchase Agreement (as defined below) exercised on the date hereof] ⁷ .

	Option Type:	Call

	Seller:	Dealer

	Buyer:	Counterparty

	Shares:	The common stock of Counterparty, par value USD0.01 per share (Ticker Symbol: “CY”).

⁵	Requested if Dealer is not the highest rated entity in group, typically from Dealer Parent.

⁶	Include for confirmation relating to the base convert offering.

⁷	Include for confirmation relating to the greenshoe convert offering, if any.

	Number of Options:	As provided in Annex A to this Confirmation. ⁸

	Applicable Percentage:	[__]%

	Number of Shares:	As of any date, the product of (i) the Number of Options, (ii) the Conversion Rate and (iii) the Applicable Percentage.

	Conversion Rate:	As of any date, the “Conversion Rate” (as defined in the Indenture) as of such date but without regard to any adjustments to the “Conversion Rate” pursuant to Section 14.03 or 14.04(h) of the Indenture.

	Strike Price:	The “Conversion Price” (as defined in the Indenture, but without regard to any adjustments to the “Conversion Rate” (as defined in the Indenture) pursuant to Section 14.03 or 14.04(h) of the Indenture).

	Cap Price:	As provided in Annex A to this Confirmation.

	Premium:	As provided in Annex A to this Confirmation.

	Premium Payment Date:	The Effective Date

	Exchange:	NASDAQ Global Select Market

	Related Exchange:	All Exchanges; provided that Section 1.26 of the Equity Definitions shall be amended to add the words “United States” before the word “exchange” in the tenth line of such section.

Procedures for Exercise:

	Exercise Dates:	Each Conversion Date.

	Conversion Date:	[Each “Conversion Date”, as defined in the Indenture, occurring during the period from and excluding the Trade Date to and including the Expiration Date, for Convertible Securities, each in denominations of USD1,000 principal amount, that are submitted for conversion on such Conversion Date in accordance with the terms of the Indenture, excluding Convertible Securities (i) that are Excluded Convertible Securities or (ii)(A) with respect to which Counterparty has made an “Exchange Election” pursuant to Section 14.13 of the Indenture and (B) that have been accepted by the designated financial institution pursuant to Section 14.13 of the Indenture (such Convertible Securities, other than those excluded as set forth above, the “ Relevant Convertible Securities ” for such Conversion Date).] ⁹

⁸

For the confirmation relating to the base convertible notes offering, the number of Convertible Securities in principal amount of $1,000 initially issued on the closing date for the Convertible Securities (excluding any Convertible Securities sold pursuant to the over-allotment option). For the confirmation relating to the greenshoe convertible notes offering, if any, the number of additional Convertible Securities in principal amount of $1,000.

⁹	Include for base capped call confirmation only.

				[Each “Conversion Date”, as defined in the Indenture, occurring during the period from and excluding the Trade Date to and including the Expiration Date, for Convertible Securities, each in denominations of USD1,000 principal amount, that are submitted for conversion on such Conversion Date in accordance with the terms of the Indenture (excluding Convertible Securities (i) that are Excluded Convertible Securities or (ii)(A) with respect to which Counterparty has made an “Exchange Election” pursuant to Section 14.13 of the Indenture and (B) that have been accepted by the designated financial institution pursuant to Section 14.13 of the Indenture) but are not “Relevant Convertible Securities” under, and as defined in, the confirmation between the parties hereto regarding the Base Convertible Capped Call Transaction dated [___], 2016 (Transaction Ref. No. [___]) (the “ Base Convertible Capped Call Transaction Confirmation ”) (such Convertible Securities, the “ Relevant Convertible Securities ” for such Conversion Date). For the purposes of determining whether any Convertible Securities will be Relevant Convertible Securities hereunder or under the Base Convertible Capped Call Transaction Confirmation, Convertible Securities that are converted pursuant to the Indenture shall be allocated first to the Base Convertible Capped Call Transaction Confirmation until all Options thereunder are exercised or terminated.] ¹⁰

		Required Exercise on
		Conversion Dates:		On each Conversion Date, a number of Options equal to the number of Relevant Convertible Securities for such Conversion Date in denominations of USD1,000 principal amount shall be automatically exercised.

		Excluded Convertible Securities:		[Convertible Securities surrendered for conversion on any date prior to October 15, 2021.] ¹¹ [Convertible Securities surrendered for conversion on any date prior to October 15, 2021 that are not “Excluded Convertible Securities” under, and as defined in, the Base Convertible Capped Call Transaction Confirmation. For purposes of determining whether any Convertible Securities will be Excluded Convertible Securities hereunder or under the Base Convertible Capped Call Transaction Confirmation, Convertible Securities that are converted prior to such date shall be allocated first to the Base Convertible Capped Call Transaction Confirmation until all Options thereunder are exercised or terminated.] ¹²

		Expiration Date:		The second “Scheduled Trading Day” immediately preceding the “Maturity Date” (each as defined in the Indenture).

		Automatic Exercise:		As provided above under “Required Exercise on Conversion Dates”.

		Exercise Notice Deadline:		The second Exchange Business Day immediately preceding the “Maturity Date” (as defined in the Indenture).

¹⁰	Include for additional capped call confirmation only.

¹¹	Include for base capped call confirmation only.

¹²	Include for additional capped call confirmation only.

¹³	Include for additional capped call confirmation only.

	Notice of Exercise:	Notwithstanding anything to the contrary in the Equity Definitions, Dealer shall have no obligation to make any payment or delivery in respect of any exercise of Options hereunder unless Counterparty notifies Dealer in writing prior to 4:00 PM, New York City time, on the Exercise Notice Deadline in respect of the aggregate number of Options being exercised hereunder[; provided that any “Notice of Exercise” delivered to Dealer pursuant to the Base Convertible Capped Call Transaction Confirmation shall deemed to be a Notice of Exercise pursuant to this Confirmation and the terms of such Notice of Exercise shall apply, mutatis mutandis , to this Confirmation] ¹³ .Counterparty acknowledges its responsibilities under applicable securities laws, and in particular Section 9 and Section 10(b) of the Exchange Act (as defined below) and the rules and regulations thereunder, in respect of any election of a settlement method with respect to the Convertible Securities. For the avoidance of doubt, if Counterparty fails to give such notice when due in respect of any exercise of Options hereunder, Dealer’s obligation to make any payment or delivery in respect of such exercise shall be permanently extinguished, and late notice shall not cure such failure; provided that notwithstanding the foregoing, such notice (and the related exercise of Options) in connection with any conversion of Relevant Convertible Securities during the period starting on and including October 15, 2021 and ending on and including the second “Scheduled Trading Day” immediately preceding the “Maturity Date” (each as defined in the Indenture) (the “ Final Conversion Period ”) shall be effective if given after the Exercise Notice Deadline, but prior to 4:00 PM New York City time, on the fifth Exchange Business Day following the Exercise Notice Deadline, in which event the Calculation Agent shall have the right to adjust the Delivery Obligation as appropriate to reflect the additional costs (including, but not limited to, hedging mismatches and market losses) and expenses reasonably incurred by Dealer in connection with its hedging activities (including the unwinding of any hedge position) as a result of Dealer not having received such notice on or prior to the Exercise Notice Deadline.

	Notice of Convertible Security

	Settlement Method:	Counterparty shall notify Dealer in writing before 4:00 P.M. (New York City time) on October 15, 2021 (the “ Final Settlement Method Election Date ”) of the irrevocable election by the Counterparty, in accordance with Section 14.02(a)(iii) of the Indenture, of the settlement method and, if applicable, the “Specified Dollar Amount” (as defined in the Indenture) applicable to Relevant Convertible Securities with a Conversion Date occurring on or after the Final Settlement Method Election Date. If Counterparty fails timely to provide such notice, Counterparty shall be deemed to have notified Dealer of combination settlement with a “Specified Dollar Amount” (as defined in the Indenture) of USD1,000 for all conversions occurring on or after the Final Settlement Method Election Date. Counterparty agrees that, to the extent it provides such a notice, it shall settle any Relevant Convertible Securities with a Conversion Date on or after the Final Settlement Method Election Date in the same manner as provided in the Notice of Convertible Security Settlement Method it provides hereunder.

	Dealer’s Telephone Number and Telex and/or Facsimile Number and Contact Details for purpose of Giving Notice:	To be provided by Dealer.

Settlement Terms:

		Settlement Date:		In respect of an Exercise Date occurring on a Conversion Date, the settlement date for the cash and/or Shares (if any) to be delivered in respect of the Relevant Convertible Securities converted on such Conversion Date pursuant to Section 14.02(c) of the Indenture; provided that the Settlement Date will not be prior to the Exchange Business Day immediately following the date Counterparty provides the Notice of Delivery Obligation prior to 4:00 PM, New York City time.

		Delivery Obligation:		In lieu of the obligations set forth in Sections 8.1 and 9.1 of the Equity Definitions, and subject to “Notice of Exercise” above and “Dividends” (under “Share Adjustments”) below, in respect of an Exercise Date occurring on a Conversion Date, Dealer will deliver to Counterparty, on the related Settlement Date, a number of Shares and/or amount of cash in USD equal to (a) the Applicable Percentage multiplied by (b) the aggregate number of Shares, if any, that Counterparty would be obligated to deliver to the holder(s) of the Relevant Convertible Securities converted on such Conversion Date pursuant to Section 14.02(a)(iv) of the Indenture and/or the aggregate amount of cash, if any, in excess of USD1,000 per Convertible Security (in denominations of USD1,000) that Counterparty would be obligated to deliver to holder(s) pursuant to Section 14.02(a)(iv) of the Indenture (except that such aggregate number of Shares shall be determined without taking into consideration any rounding pursuant to Section 14.02(j) of the Indenture and shall be rounded down to the nearest whole number) and cash in lieu of fractional Shares, if any, resulting from such rounding, if Counterparty had elected to satisfy its conversion obligation in respect of such Relevant Convertible Securities by the Convertible Security Settlement Method, as determined by the Calculation Agent by reference to such Sections of the Indenture, notwithstanding any different actual election by Counterparty with respect to the settlement of such Convertible Securities (this clause (b), the “ Convertible Obligation ”); provided that (i) if the Convertible Obligation exceeds the Capped Convertible Obligation, then the Delivery Obligation shall be the Applicable Percentage multiplied by the Capped Convertible Obligation; (ii) the Convertible Obligation (and, for the avoidance of doubt, the Capped Convertible Obligation) shall be determined (A) excluding any Shares and/or cash that Counterparty is obligated to deliver to holder(s) of the Relevant Convertible Securities as a result of any adjustments to the Conversion Rate pursuant to Section 14.03 or 14.04(h) of the Indenture and (B) without regard to the election, if any, by Counterparty to adjust the Conversion Rate (and, for the avoidance of doubt, the Delivery Obligation shall not include any interest payment on the Relevant Convertible Securities that the Counterparty is (or would have been) obligated to deliver to holder(s) of the Relevant Convertible Securities for such Conversion Date); and (iii) if such exercise relates to the conversion of Relevant Convertible Securities in connection with which holders thereof are entitled to receive additional Shares and/or cash pursuant to the adjustment to the Conversion Rate set forth in Section 14.03 of the Indenture, then, notwithstanding the foregoing, the Convertible Obligation shall include such additional Shares and/or cash (as determined by the Calculation Agent by reference to such Section of the Indenture), except that the Delivery Obligation shall be capped so that the value of the Delivery Obligation per Option (with the value

				of any Shares included in the Delivery Obligation determined by the Calculation Agent using the VWAP Price on the date the consideration is deliverable to the “Holder” of such Relevant Convertible Security pursuant to the Indenture) does not exceed the amount as determined by the Calculation Agent that would be payable by Dealer pursuant to Section 6 of the Agreement if such Conversion Date were an Early Termination Date resulting from an Additional Termination Event with respect to which the Transaction (except that, for purposes of determining such amount (x) the Number of Options shall be deemed to be equal to the number of Options exercised on such Exercise Date and (y) such amount payable will be determined as if Section 14.03 of the Indenture were deleted) was the sole Affected Transaction and Counterparty was the sole Affected Party (determined without regard to Section 8(b) of this Confirmation), it being understood that the cap described in this clause (iii) is in addition to, and cumulative with, clauses (i) and (ii) of this proviso. Notwithstanding the foregoing, and in addition to the caps described in clauses (i), (ii) and (iii) of the proviso above, in all events the Delivery Obligation shall be capped so that the value of the Delivery Obligation does not exceed the value of the Convertible Obligation multiplied by the Applicable Percentage (with the Convertible Obligation determined based on the actual settlement method elected by Counterparty with respect to such Relevant Convertible Securities instead of the Convertible Security Settlement Method and with the value of any Shares included in either the Delivery Obligation or such Convertible Obligation determined by the Calculation Agent using the VWAP Price on the date the consideration is deliverable to the “Holder” of such Relevant Convertible Security pursuant to the Indenture).

		Capped Convertible Obligation:		In respect of an Exercise Date occurring on a Conversion Date, the Convertible Obligation that would apply if the “Daily VWAP” for each “Trading Day” in the “Observation Period” (each as defined in the Indenture) or, if applicable, the assumed “Observation Period” specified in clause (ii) of “Convertible Security Settlement Method” below, were the lesser of (x) the Cap Price and (y) the actual “Daily VWAP” for such “Trading Day” (each as defined in the Indenture).

		Convertible Security Settlement Method:		For any Relevant Convertible Securities, if Counterparty has notified Dealer in the related Notice of Exercise (or in the Notice of Convertible Security Settlement Method, as the case may be) that it has elected to satisfy its conversion obligation in respect of such Relevant Convertible Securities in cash or in a combination of cash and Shares in accordance with Section 14.02(a) of the Indenture (a “ Cash Election ”) with a “Specified Dollar Amount” (as defined in the Indenture) of at least USD1,000, the Convertible Security Settlement Method shall be the settlement method actually so elected by Counterparty in respect of such Relevant Convertible Securities; otherwise, the Convertible Security Settlement Method shall (i) assume Counterparty made a Cash Election with respect to such Relevant Convertible Securities with a “Specified Dollar Amount” (as defined in the Indenture) of USD1,000 per Relevant Convertible Security and (ii) be calculated as if the relevant “Observation Period” (as defined in the Indenture) pursuant to Section 14.02(a)(iv)(C) of the Indenture consisted of 50 “Trading Days” commencing on the 52nd “Scheduled Trading Day” prior to the “Maturity Date” (each as defined in the Indenture).


	Notice of Delivery Obligation:	No later than the Exchange Business Day immediately following the last day of the relevant “Observation Period,” as defined in the Indenture, Counterparty shall give Dealer notice of the aggregate number of Shares and/or cash comprising the Convertible Obligations for all Relevant Convertible Securities (it being understood, for the avoidance of doubt, that the requirement of Counterparty to deliver such notice shall not limit Counterparty’s obligations with respect to Notice of Exercise or Notice of Convertible Security Settlement Method or Dealer’s obligations with respect to Delivery Obligation, each as set forth above, in any way).

	Other Applicable Provisions:	To the extent Dealer is obligated to deliver Shares hereunder, the provisions of Sections 9.1(c), 9.8, 9.9, 9.11 and 9.12 (except that the Representation and Agreement contained in Section 9.11 of the Equity Definitions shall be modified by excluding any representations therein relating to restrictions, obligations, limitations or requirements under applicable securities laws arising as a result of the fact that Counterparty is the Issuer of the Shares) of the Equity Definitions will be applicable as if “Physical Settlement” applied to the Transaction.

	Restricted Certificated Shares:	Notwithstanding anything to the contrary in the Equity Definitions, Dealer may, in whole or in part, deliver Shares required to be delivered to Counterparty hereunder in certificated form in lieu of delivery through the Clearance System. With respect to such certificated Shares, the Representation and Agreement contained in Section 9.11 of the Equity Definitions shall be modified by deleting the remainder of the provision after the word “encumbrance” in the fourth line thereof.

Share Adjustments:

	Method of Adjustment:	Notwithstanding Section 11.2 of the Equity Definitions, upon the occurrence of any event or condition set forth in Sections 14.04(a), (b), (c), (d) or (e) or Section 14.05 of the Indenture that the Calculation Agent determines would result in an adjustment under the Indenture by reference to such Sections thereof (any such event or condition, an “ Adjustment Event ”), the Calculation Agent shall make a corresponding adjustment to the terms relevant to the exercise, settlement or payment of the Transaction, subject to “Discretionary Adjustments” below. Immediately upon the occurrence of any Adjustment Event, Counterparty shall notify the Calculation Agent of such Adjustment Event; and once the adjustments to be made to the terms of the Indenture and the Convertible Securities in respect of such Adjustment Event have been determined, Counterparty shall immediately notify the Calculation Agent in writing of the details of such adjustments.

		In addition, Dealer may make a corresponding adjustment to the terms relevant to the exercise, settlement or payments of the Transaction (but without duplication of any adjustment pursuant to the foregoing paragraph) upon the occurrence of any event or condition that Dealer determines would result in an adjustment under Section 14.05 of the Indenture in respect of the Convertible Security Settlement Method.

		For the avoidance of doubt, Dealer shall not have any payment or delivery obligation hereunder in respect of, and no adjustment shall be made to the terms of the Transaction on account of, (x) any distribution of cash, property or securities by Counterparty to the holders of Convertible Securities (upon conversion or otherwise) or (y) any other transaction in which holders of Convertible Securities are entitled to participate, in each case, in lieu of an adjustment under the Indenture in respect of an Adjustment Event (including, without limitation, under the fourth sentence of Section 14.04(c) of the Indenture or the fifth sentence of Section 14.04(d) of the Indenture).

	Discretionary Adjustments:	Notwithstanding anything to the contrary herein or in the Equity Definitions, if the Calculation Agent in good faith disagrees with any adjustment under the Indenture that involves an exercise of discretion by Counterparty or its board of directors (including, without limitation, pursuant to Section 14.05 of the Indenture or pursuant to Section 14.07 of the Indenture any supplemental indenture entered into thereunder (a “ Merger Supplemental Indenture ”) or in connection with any proportional adjustment or the determination of the fair value of any securities, property, rights or other assets), then the Calculation Agent will determine the adjustment to be made to any one or more of the Strike Price, Number of Options, Option Entitlement and any other variable relevant to the exercise, settlement or payment of or under the Transaction in a commercially reasonable manner.

	Dividends:	If an ex-dividend date for a cash dividend on the Shares occurs on or after the Trade Date and on or prior to the Expiration Date and the amount of such dividend is less than the Ordinary Dividend Amount, or if no ex-dividend date for a cash dividend on the Shares occurs in any regular quarterly dividend period of Counterparty that falls, in whole or in part, after the Trade Date and on or prior to the Expiration Date, then the Calculation Agent will make adjustments to the Delivery Obligation in respect of each Exercise Date as it determines appropriate to account for the economic effect on the Transaction of such shortfall.

	Ordinary Dividend Amount:	For the first cash dividend on the Shares for which the ex dividend date occurs during any regular quarterly dividend period of Counterparty, USD0.11 (for the avoidance of doubt, subject to adjustment as contemplated by “Method of Adjustment” above and “Consequences of Merger Events and Tender Offer” below); for any other cash dividend on the Shares for which the ex dividend date occurs during the same regular quarterly dividend period, USD0.00.

Extraordinary Events:

	Merger Events:	Notwithstanding Section 12.1(b) of the Equity Definitions, except for purposes of “Announcement Event” and “Adjustments to Cap Price” below, a “Merger Event” means the occurrence of any event or condition set forth in Section 14.07 of the Indenture.

		Tender Offer:		Section 12.1(d) of the Equity Definitions is hereby amended by replacing the phrase “greater than 10% and less than 100% of the outstanding voting shares of the Issuer” in the third and fourth line thereof with “(a) greater than 15% and less than 100% of the outstanding Shares of the Issuer in the event that such offer, solicitation, proposal or other event is being made by any entity or person other than the Issuer or any subsidiary thereof or (b) greater than 20% and less than 100% of the outstanding Shares of the Issuer in the event that such offer, solicitation, proposal or other event is being made by the Issuer or any subsidiary thereof”.

		Consequences of Merger Events and Tender Offer:		Notwithstanding Sections 12.2 and 12.3 of the Equity Definitions, upon the occurrence of a Merger Event that the Calculation Agent determines by reference to Section 14.07 of the Indenture would result in an adjustment under the Indenture, the Calculation Agent shall make a corresponding adjustment to the terms relevant to the exercise, settlement or payment of the Transaction, subject to “Discretionary Adjustments” above; provided that such adjustment shall be made without regard to any adjustment to the Conversion Rate pursuant to Section 14.03 or 14.04(h) of the Indenture and the election, if any, by Counterparty to adjust the Conversion Rate; and provided further that if, with respect to a Merger Event, (A) the consideration for the Shares includes (or, at the option of a holder of Shares, may include) shares of an entity or person that is not a corporation organized under the laws of the United States, any State thereof or the District of Columbia, or (B) the Counterparty to the Transaction following such Merger Event will not be a corporation or will not be the Issuer following such Merger Event, in either case, Dealer may elect in its sole discretion that Cancellation and Payment (Calculation Agent Determination) shall apply.

		Consequences of Announcement

		Events:		Modified Calculation Agent Adjustment as set forth in Section 12.3(d) of the Equity Definitions; provided that (i) the Calculation Agent may not adjust any term of the Transaction other than the Cap Price on account of an Announcement Event and (ii) references to “Tender Offer” shall be replaced by references to “Announcement Event” and references to “Tender Offer Date” shall be replaced by references to “date of such Announcement Event”; provided further that in the event that the Calculation Agent makes any adjustment, determined in a commercially reasonable manner, to the Cap Price pursuant to this “Consequences of Announcement Events,” then the Calculation Agent shall make an adjustment to the Cap Price upon any announcement regarding the same event that gave rise to the original Announcement Event, including, without limitation, regarding the abandonment of any such event to the extent necessary to reflect the economic effect of such announcement on the Transaction. An Announcement Event shall be an “Extraordinary Event” for purposes of the Equity Definitions, to which Article 12 of the Equity Definitions is applicable.

		Announcement Event:		(i) The bona fide public announcement (as determined by the Calculation Agent) by any entity of any transaction or event that, if completed, would constitute a Merger Event or Tender Offer, (ii) the public announcement by Counterparty of an intention to enter into a Merger Event or Tender Offer, (iii) the public announcement by Counterparty of an intention to solicit or enter into, or to explore strategic alternatives or other similar undertaking that may include, a Merger Event or Tender Offer or (iv) any subsequent public announcement by any entity of a withdrawal, discontinuation, termination or other change to a transaction or intention that is the subject of an announcement of the type described in clause (i), (ii) or (iii) of this sentence, as determined, in each case, by the Calculation Agent. For purposes of this definition of “Announcement Event,” the remainder of the definition of “Merger Event” in Section 12.1(b) of the Equity Definitions following the definition of “Reverse Merger” therein shall be disregarded.

		Adjustments to Cap Price:		Upon the occurrence of a Merger Date or Tender Offer Date, or the declaration by Counterparty of the terms of any Potential Adjustment Event (as such terms are defined in the Equity Definitions, as amended herein) or any Adjustment Event, the Calculation Agent may, in its sole discretion, adjust the Cap Price as it determines appropriate to account for the effect of the relevant Merger Event, Tender Offer, Potential Adjustment Event or Adjustment Event; provided that in no event shall the Cap Price be less than the Strike Price.

		Notice of Merger Consideration:		Upon the occurrence of a Merger Event that causes the Shares to be converted into the right to receive more than a single type of consideration (determined based in part upon any form of stockholder election), Counterparty shall reasonably promptly (but, in any event prior to the effective time of such Merger Event) notify the Calculation Agent of (i) the weighted average of the types and amounts of consideration received by the holders of Shares entitled to receive cash, securities or other property or assets with respect to or in exchange for such Shares in any Merger Event who affirmatively make such an election or, if no holders of Shares affirmatively make such an election, the types and amounts of consideration actually received by holders of Shares and (ii) the details of the adjustment made under the Indenture in respect of such Merger Event.

		Nationalization, Insolvency or Delisting:		Cancellation and Payment (Calculation Agent Determination); provided that, in addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it shall also constitute a Delisting if the Shares are not immediately re-listed, re-traded or re-quoted on any of the New York Stock Exchange, The NASDAQ Global Select Market or The NASDAQ Global Market (or their respective successors); if the Shares are immediately re-listed, re-traded or re-quoted on any such exchange or quotation system, such exchange or quotation system shall thereafter be deemed to be the Exchange.

		Additional Disruption Events:

		(a) Change in Law:		Applicable; provided that Section 12.9(a)(ii) of the Equity Definitions is hereby amended by (i) replacing the parenthetical after the word “regulation” in the second line thereof with “(including, for the avoidance of doubt and without limitation, any tax law or the adoption or promulgation of new regulations authorized or mandated by existing statute)”; (ii) replacing the phrase “the interpretation” in the third line thereof with the phrase “, or public announcement of, the formal or informal interpretation”; (iii) adding the words “or any Hedge Positions” after the word “Shares” in the clause (X) thereof; (iv) by immediately following the word “Transaction” in clause (X) thereof, adding the phrase “in the manner contemplated by the Hedging Party on the Trade Date” and (v) adding the words “, or holding, acquiring or disposing of Shares or any Hedge Positions relating to,” after the words “obligations under” in clause (Y) thereof.

		(b) Failure to Deliver:		Applicable

		(c) Insolvency Filing:		Applicable

		(d) Hedging Disruption:		Applicable

		(e) Increased Cost of Hedging:		Not Applicable

		Hedging Party:		For all applicable Potential Adjustment Events and Extraordinary Events, Dealer

		Determining Party:		For all applicable Extraordinary Events, Dealer

		Non-Reliance:		Applicable

		Agreements and Acknowledgments

		Regarding Hedging Activities:		Applicable

		Additional Acknowledgments:		Applicable

		3. Calculation Agent :		Dealer. All determinations made by the Calculation Agent shall be made in good faith and in a commercially reasonable manner. Upon receipt of written request from Counterparty, the Calculation Agent shall promptly provide Counterparty with a written explanation describing in reasonable detail any calculation, adjustment or determination made by it (including any quotations, market data or information from internal or external sources used in making such calculation, adjustment or determination, as the case may be, but without disclosing Dealer’s proprietary or confidential models or other information that may be proprietary or confidential or subject to contractual, legal or regulatory obligations to not disclose such information), and shall use commercially reasonable efforts to provide such written explanation within five (5) Exchange Business Days from the receipt of such request.

4. Account Details :

Dealer Payment Instructions:		[●]
		[●]
		[●]
		Bank Routing: [●]
		Account Name: [●]
		Account No. : [●]

Counterparty Payment Instructions:		To be provided by Counterparty.

5. Offices:

The Office of Dealer for the Transaction is: [●]

The Office of Counterparty for the Transaction is: Not applicable

6. Notices: For purposes of this Confirmation:

Address for notices or communications to Counterparty:

To:		Cypress Semiconductor Corporation
		198 Champion Court
		San Jose, California 95134
Attn:		Thad Trent, Executive Vice President Finance and Administration and Chief Financial Officer
Telephone:		[____________]
Facsimile:		[____________]

Address for notices or communications to Dealer:

To:		[●]
		[●]
		[●]
Attn:		[●]
Telephone:		[●]
Facsimile:		[●]

7. Representations, Warranties and Agreements:

(a) In addition to the representations and warranties in the Agreement and those contained elsewhere herein, Counterparty represents and warrants to and for the benefit of, and agrees with, Dealer as follows:

(i) On the Trade Date, (A) none of Counterparty and its officers and directors is aware of any material nonpublic information regarding Counterparty or the Shares and (B) all reports and other documents filed by Counterparty with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”) when considered as a whole (with the more recent such reports and documents deemed to amend inconsistent statements contained in any earlier such reports and documents), do not contain any untrue statement of a material fact or any omission of a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances in which they were made, not misleading.

(ii) During (x) the “Observation Period” and any deemed “Observation Period” as set forth herein applicable to the Relevant Convertible Securities and (y) in the event an Early Termination Date is designated due to an Additional Termination Event as a result of an Excluded Conversion Event, a period starting on or about such Early Termination Date as reasonably determined by Dealer and notified to Counterparty (an “ Early Termination Period ”), the Shares or securities that are convertible into, or exchangeable or exercisable for, Shares will not be subject to a “restricted period,” as such term is defined in Regulation M under the Exchange Act (“ Regulation M ”).

(iii) On the Trade Date and on each day during the “Observation Period” and any deemed “Observation Period” as set forth herein applicable to the Relevant Convertible Securities and any Early Termination Period, neither Counterparty nor any “affiliate” or “affiliated purchaser” (each as defined in Rule 10b-18 under the Exchange Act (“ Rule 10b-18 ”)) shall directly or indirectly

(including, without limitation, by means of any cash-settled or other derivative instrument) purchase, offer to purchase, place any bid or limit order that would effect a purchase of, or commence any tender offer relating to, any Shares (or an equivalent interest, including a unit of beneficial interest in a trust or limited partnership or a depository share) or any security convertible into or exchangeable or exercisable for Shares, except through Dealer.

(iv) Without limiting the generality of Section 13.1 of the Equity Definitions, Counterparty acknowledges that Dealer is not making any representations or warranties or taking any position or expressing any view with respect to the treatment of the Transaction under any accounting standards including ASC Topic 260, Earnings Per Share , ASC Topic 815, Derivatives and Hedging , or ASC Topic 480, Distinguishing Liabilities from Equity and ASC 815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity (or any successor issue statements) or under FASB’s Liabilities & Equity Project.

(v) Without limiting the generality of Section 3(a)(iii) of the Agreement, the Transaction will not violate Rule 13e-1 or Rule 13e-4 under the Exchange Act.

(vi) Prior to the Trade Date, Counterparty shall deliver to Dealer a resolution of Counterparty’s board of directors authorizing the Transaction and such other certificate or certificates as Dealer shall reasonably request.

(vii) Counterparty is not entering into this Confirmation to create actual or apparent trading activity in the Shares (or any security convertible into or exchangeable for Shares) or to manipulate the price of the Shares (or any security convertible into or exchangeable for Shares) or otherwise in violation of the Exchange Act.

(viii) Counterparty is not, and after giving effect to the transactions contemplated hereby will not be, required to register as an “investment company” as such term is defined in the Investment Company Act of 1940, as amended.

(ix) On each of the Trade Date and the Premium Payment Date, Counterparty is not, or will not be, “insolvent” (as such term is defined under Section 101(32) of the U.S. Bankruptcy Code (Title 11 of the United States Code) (the “ Bankruptcy Code ”)) and Counterparty would be able to purchase the Shares hereunder in compliance with the laws of the jurisdiction of its incorporation.

(x) No state or local (including non-U.S. jurisdictions) law, rule, regulation or regulatory order applicable to the Shares would give rise to any reporting, consent, registration or other requirement (including without limitation a requirement to obtain prior approval from any person or entity) as a result of Dealer or its affiliates owning or holding (however defined) Shares.

(xi) The representations and warranties of Counterparty set forth in Section 3 of the Agreement and Section 1 of the Purchase Agreement dated as of [_______], 2016, between the Counterparty and Merrill Lynch, Pierce, Fenner & Smith Incorporated as representative of the Initial Purchasers party thereto (the “ Purchase Agreement ”) are true and correct and are hereby deemed to be repeated to Dealer as if set forth herein.

(xii) Counterparty understands no obligations of Dealer to it hereunder will be entitled to the benefit of deposit insurance and that such obligations will not be guaranteed by any affiliate of Dealer or any governmental agency.

(xiii) Counterparty (A) is capable of evaluating investment risks independently, both in general and with regard to all transactions and investment strategies involving a security or securities; (B) will exercise independent judgment in evaluating the recommendations of any

broker-dealer or its associated persons, unless it has otherwise notified the broker-dealer in writing; and (C) has total assets of at least USD50 million.

(b) Each of Dealer and Counterparty agrees and represents that it is an “eligible contract participant” as defined in Section 1a(18) of the U.S. Commodity Exchange Act, as amended.

(c) Each of Dealer and Counterparty acknowledges that the offer and sale of the Transaction to it is intended to be exempt from registration under the Securities Act of 1933, as amended (the “ Securities Act ”), by virtue of Section 4(a)(2) thereof. Accordingly, Counterparty represents and warrants to Dealer and Dealer represents and warrants to Counterparty that (i) it has the financial ability to bear the economic risk of its investment in the Transaction and is able to bear a total loss of its investment, (ii) it is an “accredited investor” as that term is defined in Regulation D as promulgated under the Securities Act, (iii) it is entering into the Transaction for its own account and without a view to the distribution or resale thereof, and (iv) the assignment, transfer or other disposition of the Transaction has not been and will not be registered under the Securities Act and is restricted under this Confirmation, the Securities Act and state securities laws.

(d) Counterparty agrees and acknowledges that Dealer is a “financial institution” and “financial participant” within the meaning of Sections 101(22) and 101(22A) of the Bankruptcy Code. The parties hereto further agree and acknowledge that it is the intent of the parties that (A) this Confirmation is a “securities contract,” as such term is defined in Section 741(7) of the Bankruptcy Code, with respect to which each payment and delivery hereunder or in connection herewith is a “termination value,” “payment amount” or “other transfer obligation” within the meaning of Section 362 of the Bankruptcy Code and a “settlement payment” within the meaning of Section 546 of the Bankruptcy Code, with respect to which each payment and delivery hereunder or in connection herewith is a “termination value,” “payment amount” or “other transfer obligation” within the meaning of Section 362 of the Bankruptcy Code and a “transfer,” as such term is defined in Section 101(54) of the Bankruptcy Code and a “payment or other transfer of property” within the meaning of Sections 362 and 546 of the Bankruptcy Code, and (B) Dealer is entitled to the protections afforded by, among other sections, Sections 362(b)(6), 362(b)(27), 362(o), 546(e), 546(j), 548(d)(2), 555 and 561 of the Bankruptcy Code.

(e) Counterparty shall deliver to Dealer an opinion of counsel substantially in the form attached hereto as Annex B.

8. Other Provisions :

(a) Additional Termination Events . The occurrence of (i) an “Event of Default” with respect to Counterparty under the terms of the Convertible Securities as set forth in Section 6.01 of the Indenture, (ii) an Amendment Event or (iii) an Excluded Conversion Event shall be an Additional Termination Event with respect to which the Transaction is the sole Affected Transaction and Counterparty is the sole Affected Party, and Dealer shall be the party entitled to designate an Early Termination Date pursuant to Section 6(b) of the Agreement; provided that in the case of an Excluded Conversion Event the Transaction shall be subject to termination only in respect of a number of Options equal to the number of Convertible Securities that cease to be outstanding in connection with or as a result of such Excluded Conversion Event. For the avoidance of doubt, in determining the amount payable in respect of such Affected Transaction pursuant to Section 6 of the Agreement in connection with an Excluded Conversion Event, the Calculation Agent shall assume that (x) the relevant Excluded Convertible Securities shall not have been converted and remain outstanding, and (y) in the case of an Induced Conversion, any adjustments, agreements, additional payments, deliveries or acquisitions by or on behalf of Counterparty or any affiliate of Counterparty in connection therewith had not occurred. Notwithstanding the foregoing, the amount payable in respect of such Affected Transaction pursuant to Section 6 of the Agreement in connection with an Excluded Conversion Event shall not exceed the value of the Convertible Obligation multiplied by the Applicable Percentage (with the Convertible Obligation determined (a) as set forth opposite the caption “Delivery Obligation” in Section 2 above as if the converted Convertible Securities were not Excluded Convertible Securities and (b) based on the actual settlement method elected by Counterparty with respect to such

Convertible Securities and with the value of any Shares included in such Convertible Obligation determined by the Calculation Agent using the VWAP Price on the date of such payment).

“ Amendment Event ” means that Counterparty amends, modifies, supplements, waives or obtains a waiver in respect of any term of the Indenture or the Convertible Securities governing the principal amount, coupon, maturity, repurchase obligation of Counterparty, any term relating to conversion of the Convertible Securities (including changes to the conversion rate, conversion rate adjustment provisions, conversion settlement dates or conversion conditions), or any term that would require consent of the holders of not less than 100% of the principal amount of the Convertible Securities to amend, in each case without the consent of Dealer.

“ Excluded Conversion Event ” means any conversion of any Excluded Convertible Securities.

“ Induced Conversion ” means a conversion of any Excluded Convertible Securities (A) in connection with (x) an adjustment to the Conversion Rate effected by Counterparty (whether pursuant to Section 14.04(h) of the Indenture or otherwise) that is not required under the terms of the Indenture or (y) an agreement by Counterparty with the holder(s) of such Convertible Securities whereby, in the case of either (x) or (y), the holder(s) of such Convertible Securities receive upon conversion or pursuant to such agreement, as the case may be, a payment of cash or delivery of Shares or any other property or item of value that was not required under the terms of the Indenture or (B) after having been acquired from a holder of Convertible Securities by or on behalf of Counterparty or any of its affiliates other than pursuant to a conversion by such Holder and thereafter converted by or on behalf of Counterparty or any affiliate of Counterparty.

(b) Alternative Calculations and Payment on Early Termination and on Certain Extraordinary Events . If Dealer shall owe Counterparty any amount pursuant to “Consequences of Merger Events” above or Sections 12.6, 12.7 or 12.9 of the Equity Definitions or pursuant to Section 6(d)(ii) of the Agreement (a “ Payment Obligation ”), Counterparty shall have the right, in its sole discretion, to require Dealer to satisfy any such Payment Obligation by the Share Termination Alternative (as defined below) by giving irrevocable telephonic notice to Dealer, confirmed in writing within one Scheduled Trading Day, no later than 9:30 A.M. New York City time on the relevant merger date, Announcement Date, Early Termination Date or date of cancellation or termination in respect of an Extraordinary Event, as applicable (“ Notice of Share Termination ”); provided that if Counterparty does not elect to require Dealer to satisfy its Payment Obligation by the Share Termination Alternative, Dealer shall have the right, in its sole discretion, to elect to satisfy its Payment Obligation by the Share Termination Alternative, notwithstanding Counterparty’s failure to elect or election to the contrary; and provided further that Counterparty shall not have the right to so elect (but, for the avoidance of doubt, Dealer shall have the right to so elect) in the event (i) of an Insolvency, a Nationalization or a Merger Event, in each case, in which the consideration or proceeds to be paid to holders of Shares consists solely of cash, (ii) of an Event of Default in which Counterparty is the Defaulting Party or a Termination Event in which Counterparty is the Affected Party or Extraordinary Event, which Event of Default, Termination Event or Extraordinary Event resulted from an event or events within Counterparty’s control or (iii) that Counterparty fails to remake the representation set forth in Section 7(a)(i) as of the date of such election. Upon such Notice of Share Termination, the following provisions shall apply on the Scheduled Trading Day immediately following the relevant merger date, Announcement Date, Early Termination Date or date of cancellation or termination in respect of an Extraordinary Event, as applicable:

Share Termination Alternative:		If applicable, means that Dealer shall deliver to Counterparty the Share Termination Delivery Property on the date on which the Payment Obligation would otherwise be due pursuant to “Consequences of Merger Events and Tender Offer” above, Section 12.7 or 12.9 of the Equity Definitions or Section 6(d)(ii) of the Agreement, as applicable, or such later date or dates as the Calculation Agent may reasonably determine (the “ Share Termination Payment Date ”), in satisfaction of the Payment Obligation.

Share Termination Delivery Property:		A number of Share Termination Delivery Units, as calculated by the Calculation Agent, equal to the Payment Obligation divided by the Share Termination Unit Price. The Calculation Agent shall adjust the Share Termination Delivery Property by replacing any fractional portion of the aggregate amount of a security therein with an amount of cash equal to the value of such fractional security based on the values used to calculate the Share Termination Unit Price.

Share Termination Unit Price:		The value of property contained in one Share Termination Delivery Unit on the date such Share Termination Delivery Units are to be delivered as Share Termination Delivery Property, as determined by the Calculation Agent in its discretion by commercially reasonable means and notified by the Calculation Agent to Dealer at the time of notification of the Payment Obligation.

Share Termination Delivery Unit:		In the case of a Termination Event, Event of Default, Delisting or Additional Disruption Event, one Share or, in the case of an Insolvency, Nationalization or Merger Event, one Share or a unit consisting of the number or amount of each type of property received by a holder of one Share (without consideration of any requirement to pay cash or other consideration in lieu of fractional amounts of any securities) in such Insolvency, Nationalization or Merger Event, as applicable. If such Insolvency, Nationalization or Merger Event involves a choice of consideration to be received by holders, such holder shall be deemed to have elected to receive the maximum possible amount of cash.

Failure to Deliver:		Applicable

Other applicable provisions:		If Share Termination Alternative is applicable, the provisions of Sections 9.8, 9.9 and 9.11 (except that the Representation and Agreement contained in Section 9.11 of the Equity Definitions shall be modified by excluding any representations therein relating to restrictions, obligations, limitations or requirements under applicable securities laws arising as a result of the fact that Counterparty is the issuer of the Shares or any portion of the Share Termination Delivery Units) of the Equity Definitions will be applicable as if “Physical Settlement” applied to the Transaction, except that all references to “Shares” shall be read as references to “Share Termination Delivery Units.”

(c) Disposition of Hedge Shares . Counterparty hereby agrees that if, in the good faith reasonable judgment of Dealer, based on the advice of legal counsel, any Shares (the “ Hedge Shares ”) acquired by Dealer for the purpose of hedging its obligations pursuant to the Transaction cannot be sold in the U.S. public market by Dealer without registration under the Securities Act, Counterparty shall, at its election: (i) in order to allow Dealer to sell the Hedge Shares in a registered offering, use commercially reasonable efforts to make available to Dealer an effective registration statement under the Securities Act to cover the resale of such Hedge Shares and (A) enter into an agreement, in form and substance reasonably satisfactory to Dealer, substantially in the form of an underwriting agreement for a registered offering for companies of a similar size in a similar industry, (B) provide accountant’s “comfort” letters in customary form for registered offerings of equity securities for companies of a similar size in a similar industry, (C) provide disclosure opinions of nationally recognized outside counsel to Counterparty in customary form for registered offerings of equity securities for companies of a similar size in a similar industry, (D) provide other customary opinions, certificates and closing documents customary in form for registered offerings of equity securities for companies of a similar size in a similar industry and (E) afford Dealer a reasonable opportunity to conduct a “due diligence” investigation with respect to Counterparty customary in scope for underwritten offerings of equity securities ; provided, however , that if Dealer, in its reasonable discretion, is not satisfied with access to due diligence materials, the results of its due diligence investigation, or the procedures and documentation for the registered offering referred to above, then clause (ii) or clause (iii) of this Section 8(c) shall apply at the election of Counterparty; (ii) in order to allow Dealer to sell the Hedge Shares in a private placement, enter into a private placement agreement substantially similar to private placement purchase agreements customary for private placements of equity securities of companies of a similar size in a similar industry, in form and substance reasonably satisfactory to Dealer, including customary representations, covenants, blue sky and other governmental filings and/or registrations, indemnities to Dealer, due diligence rights (for Dealer or any designated buyer of the Hedge Shares from Dealer), opinions and certificates and such other documentation as is customary for private placements agreements of equity securities of companies of a similar size in a similar industry, all reasonably

acceptable to Dealer (in which case, the Calculation Agent shall make any adjustments to the terms of the Transaction that are necessary, in its good faith and commercially reasonable judgment, to compensate Dealer for any discount from the public market price of the Shares incurred on the sale of Hedge Shares in a private placement); or (iii) purchase the Hedge Shares from Dealer at the VWAP Price on such Exchange Business Days, and in the amounts, requested by Dealer. “ VWAP Price ” means, on any Exchange Business Day, the per Share volume-weighted average price as displayed under the heading “Bloomberg VWAP” on Bloomberg Screen CY <Equity> VAP (or any successor thereto) in respect of the period from 9:30 a.m. to 4 :00 p.m. (New York City time) on such Exchange Business Day (or if such volume-weighted average price is unavailable or is manifestly incorrect, the market value of one Share on such Exchange Business Day, as determined by the Calculation Agent using a volume-weighted method).

(d) Amendment to Equity Definitions . The following amendment shall be made to the Equity Definitions:

(i) Section 11.2(e)(vii) of the Equity Definitions is hereby amended by deleting the words “diluting or concentrative” and replacing them with “material” and adding the phrase “or options on the Shares” at the end of the sentence; and

(ii) Section 12.6(a)(ii) of the Equity Definitions is hereby amended by (1) deleting from the fourth line thereof the word “or” after the word “official” and inserting a comma therefor, and (2) deleting the semi-colon at the end of subsection (B) thereof and inserting the following words therefor “or (C) at Dealer’s option, the occurrence of any of the events specified in Section 5(a)(vii) (1) through (9) of the ISDA Master Agreement with respect to that Issuer.”

(e) Repurchase Notices . Counterparty shall, at least 1 Scheduled Trading Day prior to effecting any repurchase of Shares, give Dealer a written notice of such repurchase (a “ Repurchase Notice ”) if, following such repurchase, the Notice Percentage as determined on the date of such Repurchase Notice is greater by 0.5% than the Notice Percentage included in the immediately preceding Repurchase Notice (or, in the case of the first such Repurchase Notice, greater by 0.5% than the Notice Percentage as of the date hereof). The “ Notice Percentage ” as of any day is the fraction, expressed as a percentage, the numerator of which is the Number of Shares plus the number of Shares underlying any other call options sold by Dealer to Counterparty and the denominator of which is the number of Shares outstanding on such day. In the event that Counterparty fails to provide Dealer with a Repurchase Notice on the day and in the manner specified in this Section 8(e) then Counterparty agrees to indemnify and hold harmless Dealer, its affiliates and their respective directors, officers, employees, agents and controlling persons (Dealer and each such person being an “ Indemnified Party ”) from and against any and all losses, claims, damages and liabilities (or actions in respect thereof), joint or several, to which such Indemnified Party may become subject under applicable securities laws, including without limitation, Section 16 of the Exchange Act, relating to or arising out of such failure. If for any reason the foregoing indemnification is unavailable to any Indemnified Party or insufficient to hold harmless any Indemnified Party, then Counterparty shall contribute, to the maximum extent permitted by law, to the amount paid or payable by the Indemnified Party as a result of such loss, claim, damage or liability. In addition, Counterparty will reimburse any Indemnified Party for all reasonable expenses (including reasonable counsel fees and expenses) as they are incurred (after notice to Counterparty) in connection with the investigation of, preparation for or defense or settlement of any pending or threatened claim or any action, suit or proceeding arising therefrom, whether or not such Indemnified Party is a party thereto and whether or not such claim, action, suit or proceeding is initiated or brought by or on behalf of Counterparty. This indemnity shall survive the completion of the Transaction contemplated by this Confirmation and any assignment and delegation of the Transaction made pursuant to this Confirmation or the Agreement shall inure to the benefit of any permitted assignee of Dealer. Counterparty will not be liable under the foregoing indemnity provision to the extent such loss, claim, damage, liability or expense is found in a final judgment by a court to have resulted from Dealer’s gross negligence or willful misconduct.

(f) Transfer and Assignment . Either party may transfer any of its rights or obligations under the Transaction with the prior written consent of the non-transferring party, such consent not to be unreasonably withheld or delayed. For the avoidance of doubt, Dealer may condition its consent on any of

the following, without limitation: (i) the receipt by Dealer of opinions and documents reasonably satisfactory to Dealer in connection with such assignment, (ii) such assignment being effected on terms reasonably satisfactory to Dealer with respect to any legal and regulatory requirements relevant to Dealer, (iii) Counterparty continuing to be obligated to provide notices hereunder relating to the Convertible Securities and continuing to be obligated with respect to “Disposition of Hedge Shares” and “Repurchase Notices” above, (iv) payment by Counterparty of all reasonable costs and expenses, including reasonable counsel fees, incurred by Dealer in connection with such assignment, (v) Dealer not being obliged, as a result of such assignment, to pay the assignee on any payment date, an amount greater than Dealer would have been required to pay in the absence of such assignment and (vi) no Event of Default, Potential Event of Default or Termination Event occurring as a result of such assignment. In addition, Dealer may transfer or assign without any consent of the Counterparty its rights and obligations hereunder and under the Agreement, in whole or in part, to (i) any of its affiliates whose obligations are guaranteed by Dealer or its ultimate parent, or (ii) any person with a long-term issuer rating or rating for its long-term, unsecured and unsubordinated indebtedness (or, if higher, such a rating for such transferee’s guarantor) at least equivalent to Dealer’s (or its guarantor’s), but in no event less than Baa1 from Moody’s Investor Service, Inc. or its successor or BBB+ from Standard and Poor’s Rating Group, Inc. or its successor; provided that (i) Dealer will notify Counterparty in writing prior to any proposed transfer or assignment, (ii) Counterparty will not become obliged, as a result of such transfer or assignment, to pay the assignee an amount greater than Counterparty would have paid, or receive from the assignee, after taking into account any Tax withheld or deducted and any gross-up payments as required under Section 2(d) of the Agreement, an amount less than Counterparty would have received, in the absence of such transfer or assignment, (iii) the transferee or assignee shall provide Counterparty with a complete and accurate U.S. Internal Revenue Service Form W-9 or W-8 (as applicable) prior to becoming a party to the Transaction and (iv) the transfer or assignment by Dealer does not result in a deemed exchange by Counterparty within the meaning of Section 1001 of the U.S. Internal Revenue Code of 1986, as amended (the “ Code ”). At any time at which any Excess Ownership Position or a Hedging Disruption exists, if Dealer, in its discretion, is unable to effect a transfer or assignment to a third party in accordance with the requirements set forth above after using its commercially reasonable efforts on pricing terms and within a time period reasonably acceptable to Dealer such that an Excess Ownership Position or a Hedging Disruption, as the case may be, no longer exists, Dealer may designate any Scheduled Trading Day as an Early Termination Date with respect to a portion (the “ Terminated Portion ”) of the Transaction, such that such Excess Ownership Position or Hedging Disruption, as the case may be, no longer exists. In the event that Dealer so designates an Early Termination Date with respect to a portion of the Transaction, a payment or delivery shall be made pursuant to Section 6 of the Agreement and Section 8(b) of this Confirmation as if (i) an Early Termination Date had been designated in respect of a Transaction having terms identical to the Terminated Portion of the Transaction, (ii) Counterparty shall be the sole Affected Party with respect to such partial termination and (iii) such portion of the Transaction shall be the only Terminated Transaction. “ Excess Ownership Position ” means any of the following: (i) the Equity Percentage exceeds 7.5%, (ii) Dealer or any “affiliate” or “associate” of Dealer would own in excess of 13% of the outstanding Shares for purposes of Section 203 of the Delaware General Corporation Law or (iii) Dealer, Dealer Group (as defined below) or any person whose ownership position would be aggregated with that of Dealer or Dealer Group (Dealer, Dealer Group or any such person, a “ Dealer Person ”) under any federal, state or local laws, regulations, regulatory orders or organizational documents or contracts of Counterparty that are, in each case, applicable to ownership of Shares (“ Applicable Restrictions ”), owns, beneficially owns, constructively owns, controls, holds the power to vote or otherwise meets a relevant definition of ownership in excess of a number of Shares equal to (x) the number of Shares that would give rise to reporting or registration obligations or other requirements (including obtaining prior approval by a state or federal regulator) of a Dealer Person, or could result in an adverse effect on a Dealer Person, under Applicable Restrictions, as determined by Dealer in its reasonable discretion, and with respect to which such requirements have not been met or the relevant approval has not been received or that would give rise to any consequences under the constitutive documents of Counterparty or any contract or agreement to which Counterparty is a party, in each case minus (y) 1% of the number of Shares outstanding on the date of determination. The “ Equity Percentage ” as of any day is the fraction, expressed as a percentage, (A) the numerator of which is the number of Shares that Dealer and any of its affiliates or any other person subject to aggregation with Dealer, for purposes of the “beneficial ownership” test under Section 13 of the Exchange Act, or any “group” (within the meaning of Section 13) of which Dealer is or may be deemed to be a part (Dealer and any such affiliates, persons

and groups, collectively, “ Dealer Group ”) beneficially owns (within the meaning of Section 13 of the Exchange Act), without duplication, on such day (or, to the extent that, as a result of a change in law, regulation or interpretation after the date hereof, the equivalent calculation under Section 16 of the Exchange Act and the rules and regulations thereunder results in a higher number, such number) and (B) the denominator of which is the number of Shares outstanding on such day.

(g) Staggered Settlement . If Dealer reasonably and in good faith determines that the number of Shares required to be delivered to Counterparty hereunder on any Settlement Date would result in the existence of an Excess Ownership Position, then Dealer may, by notice to Counterparty on or prior to any Settlement Date (a “ Nominal Settlement Date ”), elect to deliver the Shares on two or more dates (each, a “ Staggered Settlement Date ”) or at two or more times on the Nominal Settlement Date as follows:

(i) in such notice, Dealer will specify to Counterparty the related Staggered Settlement Dates (each of which will be on or prior to such Nominal Settlement Date, but not prior to the beginning of the related “Observation Period”, as defined in the Indenture) or delivery times and how it will allocate the Shares it is required to deliver under “Delivery Obligation” (above) among the Staggered Settlement Dates or delivery times; and

(ii) the aggregate number of Shares that Dealer will deliver to Counterparty hereunder on all such Staggered Settlement Dates and delivery times will equal the number of Shares that Dealer would otherwise be required to deliver on such Nominal Settlement Date; provided that in no event shall any Staggered Settlement Date be a date later than March 15, 2022.

(h) Right to Extend . Dealer may postpone or add, in whole or in part, any Exercise Date or Settlement Date or any other date of valuation or delivery by Dealer, with respect to some or all of the relevant Options (in which event the Calculation Agent shall make appropriate adjustments to the Delivery Obligation), if Dealer determines, in its reasonable discretion, that such extension or addition is reasonably necessary or appropriate (i) to preserve Dealer’s hedging or hedge unwind activity hereunder in light of existing liquidity conditions in the cash market, the stock loan market or any other relevant market or (ii) to enable Dealer to effect purchases of Shares in connection with its hedging, hedge unwind or settlement activity hereunder in a manner that would, if Dealer were Counterparty or an affiliated purchaser of Counterparty, be in compliance with applicable legal, regulatory or self-regulatory requirements, or with related policies and procedures applicable to Dealer (whether or not such requirements, policies or procedures are imposed by law or have been voluntarily adopted by Dealer).

(i) Adjustments . For the avoidance of doubt, whenever the Calculation Agent is called upon to make an adjustment pursuant to the terms of this Confirmation or the Definitions to take into account the effect of an event, the Calculation Agent shall make such adjustment by reference to the effect of such event on the Hedging Party, assuming that the Hedging Party maintains a commercially reasonable hedge position.

(j) Disclosure . Effective from the date of commencement of discussions concerning the Transaction, Counterparty and each of its employees, representatives, or other agents may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the Transaction and all materials of any kind (including opinions or other tax analyses) that are provided to Counterparty relating to such tax treatment and tax structure.

(k) Designation by Dealer . Notwithstanding any other provision in this Confirmation to the contrary requiring or allowing Dealer to purchase, sell, receive or deliver any Shares or other securities to or from Counterparty, Dealer may designate any of its affiliates to purchase, sell, receive or deliver such shares or other securities and otherwise to perform Dealer obligations in respect of the Transaction and any such designee may assume such obligations. Dealer shall be discharged of its obligations to Counterparty to the extent of any such performance.

(l) No Netting and Set-off . Each party waives any and all rights it may have to set off obligations arising under the Agreement and the Transaction against other obligations between the parties, whether arising under any other agreement, applicable law or otherwise.

(m) Equity Rights . Dealer acknowledges and agrees that this Confirmation is not intended to convey to it rights with respect to the Transaction that are senior to the claims of common stockholders in the event of Counterparty’s bankruptcy. For the avoidance of doubt, the parties agree that the preceding sentence shall not apply at any time other than during Counterparty’s bankruptcy to any claim arising as a result of a breach by Counterparty of any of its obligations under this Confirmation or the Agreement. For the avoidance of doubt, the parties acknowledge that this Confirmation is not secured by any collateral that would otherwise secure the obligations of Counterparty herein under or pursuant to any other agreement.

(n) Early Unwind . In the event the sale by Counterparty of the [Base Convertible Securities] ¹⁴ [Optional Convertible Securities] ¹⁵ is not consummated with the Initial Purchasers pursuant to the Purchase Agreement for any reason by the close of business in New York on [ Date ] (or such later date as agreed upon by the parties) ([ Date ] or such later date being the “ Early Unwind Date ”), the Transaction shall automatically terminate (the “ Early Unwind ”), on the Early Unwind Date and (i) the Transaction and all of the respective rights and obligations of Dealer and Counterparty thereunder shall be cancelled and terminated and (ii) each party shall be released and discharged by the other party from, and agrees not to make any claim against the other party with respect to, any obligations or liabilities of either party arising out of and to be performed in connection with the Transaction either prior to or after the Early Unwind Date. Dealer and Counterparty represent and acknowledge to the other that upon an Early Unwind, all obligations with respect to the Transaction shall be deemed fully and finally discharged.

(o) Wall Street Transparency and Accountability Act of 2010 . The parties hereby agree that none of (v) Section 739 of the Wall Street Transparency and Accountability Act of 2010 (“ WSTAA ”), (w) any similar legal certainty provision in any legislation enacted, or rule or regulation promulgated, on or after the Trade Date, (x) the enactment of WSTAA or any regulation under the WSTAA, (y) any requirement under WSTAA nor (z) an amendment made by WSTAA, shall limit or otherwise impair either party’s rights to terminate, renegotiate, modify, amend or supplement this Confirmation or the Agreement, as applicable, arising from a termination event, force majeure, illegality, increased costs, regulatory change or similar event under this Confirmation, the Equity Definitions incorporated herein, or the Agreement (including, but not limited to, rights arising from Change in Law, Hedging Disruption, an Excess Ownership Position or Illegality (as defined in the Agreement)).

(p) Tax Matters

(i) Withholding Tax imposed on payments to non-US counterparties under the United States Foreign Account Tax Compliance Act . “Tax” and “Indemnifiable Tax”, each as defined in Section 14 of the Agreement, shall not include any U.S. federal withholding tax imposed or collected pursuant to Sections 1471 through 1474 of the Code, any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b) of the Code, or any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such Sections of the Code (a “ FATCA Withholding Tax ”). For the avoidance of doubt, a FATCA Withholding Tax is a Tax the deduction or withholding of which is required by applicable law for the purposes of Section 2(d) of the Agreement.

(ii) HIRE Act . “Tax” and “Indemnifiable Tax”, each as defined in Section 14 of the Agreement, shall not include any tax imposed on payments treated as dividends from sources within the United States under Section 871(m) of the Code or any regulations issued thereunder (a

¹⁴	Include for base capped call confirmation only.

¹⁵	Include for additional capped call confirmation only.

“ Section 871(m) Tax ”). For the avoidance of doubt, a Section 871(m) Tax is a Tax the deduction or withholding of which is required by applicable law for the purposes of Section 2(d) of the Agreement.

(iii) Tax documentation . For the purpose of Section 4(a)(i) of the Agreement, Counterparty shall provide to Dealer a valid U.S. Internal Revenue Service Form W-9, or any successor thereto, and Dealer shall provide to Counterparty a valid U.S. Internal Revenue Service Form W-9 or the appropriate series of Form W-8, or any successor thereto, (i) on or before the date of execution of this Confirmation and (ii) promptly upon learning that any such tax form previously provided has become obsolete or incorrect. Additionally, Counterparty and Dealer shall, promptly upon request, provide such other tax forms and documents requested by the other party.

(iv) Tax Representations . For the purpose of Section 3(f) of the Agreement, Counterparty is a corporation for U.S. federal income tax purposes and is organized under the laws of the State of Delaware. Counterparty is a “U.S. person” (as that term is used in section 1.1441-4(a)(3)(ii) of United States Treasury Regulations) for U.S. federal income tax purposes.

(q) Waiver of Trial by Jury . EACH OF COUNTERPARTY AND DEALER HEREBY IRREVOCABLY WAIVES (ON ITS OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON BEHALF OF ITS STOCKHOLDERS) ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THE TRANSACTION OR THE ACTIONS OF DEALER OR ITS AFFILIATES IN THE NEGOTIATION, PERFORMANCE OR ENFORCEMENT HEREOF .

(r) Governing Law; Jurisdiction . THIS CONFIRMATION AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS CONFIRMATION SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN CONNECTION WITH ALL MATTERS RELATING HERETO AND WAIVE ANY OBJECTION TO THE LAYING OF VENUE IN, AND ANY CLAIM OF INCONVENIENT FORUM WITH RESPECT TO, THESE COURTS.

(s) Payment by Counterparty . Dealer and Counterparty hereby agree that notwithstanding anything to the contrary herein or in the Agreement, following the payment of the Premium, in the event that (a) an Early Termination Date as a result of an Event of Default (other than an Event of Default arising under Section 5(a)(ii) or 5(a)(iv) of the Agreement) or a Termination Event occurs or is designated with respect to the Transaction and, as a result, Counterparty owes to Dealer an amount calculated under Section 6(d) and Section 6(e) of the Agreement or (b) Counterparty owes to Dealer, pursuant to Sections 12.7 or 12.9 of the Equity Definitions, an amount calculated under Section 12.8 of the Equity Definitions, such amount shall be deemed to be zero.

[ Signature Page Follows ]

Counterparty hereby agrees (a) to check this Confirmation carefully and immediately upon receipt so that errors or discrepancies can be promptly identified and rectified and (b) to confirm that the foregoing (in the exact form provided by Dealer) correctly sets forth the terms of the agreement between Dealer and Counterparty with respect to the Transaction, by manually signing this Confirmation or this page hereof as evidence of agreement to such terms and providing the other information requested herein and immediately returning an executed copy to [●] via email: [●].

Yours faithfully,

[DEALER]

By:
		Name:
		Title:

Agreed and Accepted By:

CYPRESS SEMICONDUCTOR CORPORATION

By:
		Name:
		Title:

DRAFT

Annex A

Number of Options:		[_____].
Cap Price:		USD[_________]
Premium:		USD[_________] (Premium per Option USD[__]).

DRAFT

Annex B

1.	Counterparty has been duly incorporated and is an existing corporation in good standing under the laws of the State of Delaware.

2.	Counterparty is duly qualified as a foreign corporation for the transaction of business and is in good standing in the State of California.

3.	The Confirmation has been duly authorized, executed and delivered by Counterparty.

The execution and delivery by Counterparty of the Confirmation, and the undertaking by Counterparty of its obligations under the Confirmation and the consummation of the transactions therein contemplated, will not result in any violation by Counterparty of its Certificate of Incorporation or its Bylaws.

5.	The execution and delivery by Counterparty of the Confirmation, and the undertaking by Counterparty of its obligations under the Confirmation and the consummation of the transactions therein contemplated, will not constitute a violation of, or a default under, any reviewed agreement.

Exhibit 10.1

CYPRESS SEMICONDUCTOR INC.

CHANGE OF CONTROL SEVERANCE AGREEMENT

This Change of Control Severance Agreement (the “Agreement”) is made and entered into by and between _____________ (the “Employee”) and Cypress Semiconductor Inc., a Delaware corporation (the “Company”), effective as of _______________, 2016 (the “Effective Date”).

RECITALS

1. It is expected that the Company from time to time will consider the possibility of an acquisition by another company or other change of control transaction. The Board of Directors of the Company (the “Board”) recognizes that such consideration may be a distraction to the Employee and may cause the Employee to consider alternative employment opportunities. The Board has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication and objectivity of the Employee, notwithstanding the possibility, threat or occurrence of a “Change of Control” (as defined herein) of the Company.

2. The Board believes that it is in the best interests of the Company and its stockholders to provide the Employee with an incentive to continue his or her employment and to motivate the Employee to maximize the value of the Company upon a Change of Control for the benefit of its stockholders.

3. The Board believes that it is imperative to provide the Employee with certain severance benefits upon the Employee’s termination of employment in connection with a Change of Control. This Agreement is intended to provide the Employee with enhanced financial security and incentive and encouragement to remain with the Company notwithstanding the possibility of a Change of Control.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows:

1. Term of Agreement . This Agreement will have an initial term of two (2) years commencing on the Effective Date (the “Initial Term”). Commencing on the two (2) year anniversary of the Effective Date and on each one (1) year anniversary thereafter, this Agreement will renew automatically for additional, one (1) year terms (each, an “Additional Term”) unless either party provides the other party with written notice of nonrenewal at least four (4) months prior to the date of automatic renewal. Notwithstanding the foregoing, if a Change of Control occurs (i) when there are fewer than twelve (12) months remaining during the Initial Term or (b) during an Additional Term, the term of this Agreement will extend automatically through the date that is twelve ( 12) months following the date of the Change of Control. If Executive becomes entitled to the benefits under Section 4 of this Agreement, then the Agreement will not terminate until all of the obligations of the parties hereto with respect to this Agreement have been satisfied.

2. At-Will Employment . The Company and the Employee acknowledge that the Employee’s employment is and shall continue to be at-will, as defined under applicable law, except as may otherwise be specifically provided under the terms of any written formal employment agreement or offer letter agreement between the Company and the Employee (an “Employment Agreement”). If the Employee’s

employment terminates for any reason, including (without limitation) any termination outside of the Change of Control Period, the Employee shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement or under his or her Employment Agreement.

3. Termination of Employment . In the event Employee’s employment with the Company terminates for any reason, Employee will be entitled to any: (a) unpaid base salary accrued up to the effective date of termination, (b) unpaid, but earned and accrued annual incentive for any completed fiscal year as of his or her termination of employment, (c) pay for accrued but unused vacation, (d) benefits or compensation as provided under the terms of any employee benefit and compensation agreements or plans applicable to Employee, (e) unreimbursed business expenses required to be reimbursed to Employee, and (f) rights to indemnification Employee may have under the Company’s Articles of Incorporation, Bylaws, or separate indemnification agreement, as applicable. In addition, if the termination is by the Company other than for Cause, death or Disability (as defined herein), or Employee terminates his or her employment with the Company (or any parent or subsidiary of the Company) for Good Reason, Employee may be entitled to the amounts and benefits specified in Section 4.

4. Severance Benefits .

(a) Involuntary Termination Other than for Cause or Voluntary Termination for Good Reason within the Change of Control Period . If, within the Change of Control Period, (i) the Employee terminates his or her employment with the Company (or any parent or subsidiary of the Company) for Good Reason or (ii) the Company (or any parent or subsidiary of the Company) terminates the Employee’s employment for other than Cause, death or Disability, then the Employee shall receive from the Company the severance payments and benefits described in this Section 4(a), subject to the Employee signing and not revoking a standard release of claims with the Company (the “Release”) in a form reasonably acceptable to the Company (but which form does not impose post-employment obligations on the Employee other than those contained in the Agreement) within the period required by the Release and in no event later than sixty (60) days following the Employee’s termination of employment, inclusive of any revocation period set forth in the release of claims (collectively, the “Release Deadline Date”), provided that the Release shall not be required in the event of Employee’s death. If the Release does not become effective by the Release Deadline Date, the Employee will forfeit any rights to severance payments and benefits in Section 4(a) and under this Agreement. No severance will be paid or provided until the Release becomes effective. The Company must provide the form of Release to the Employee in a reasonable period of time following termination of employment so that the Employee has a reasonable opportunity to have the Release become effective before the Release Deadline Date.

(i) Severance Payment . The Employee shall be entitled to receive a lump-sum severance payment (less applicable withholdings) equal to fourteen (14) months of the Employee’s annual base salary (as in effect immediately prior to (A) the Change of Control, or (B) the Employee’s termination, whichever is greater) plus fourteen (14) months of the Employee’s annual target bonus for the fiscal year in which the Change of Control or the Employee’s termination occurs, whichever is greater.

(ii) Acceleration of Vesting of Equity-Based Compensation Awards . One-hundred percent (100%) of the then-unvested portion of all of Employee’s outstanding equity-based compensation awards shall become vested, and any performance based restrictions or requirements applicable to any equity-based compensation awards will be deemed to have been satisfied at 100% target level. Notwithstanding the foregoing, to the extent required to avoid imposition of any additional tax or income recognition under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), equity-based compensation awards

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shall be paid or settled at the same time or times that the awards otherwise would have been paid or settled in the absence of this Section 4(a)(ii).

(iii) Additional Cash Payment . The Employee shall be entitled to receive an additional lump-sum severance payment (less applicable withholdings) equal to the result of (A) times (B). For this purpose, “A” will equal fourteen (14), and “B” will equal the amount of the monthly premium that would be required for the first month of coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended and all applicable regulations (referred to collectively as “COBRA”), with the premium calculated on the assumption that the Employee in fact elects coverage for himself or herself, and any eligible spouse and/or dependents of the Employee that were enrolled in the applicable Company health plan immediately prior to the Change of Control. However, the Employee will be eligible for this taxable payment without regard to whether he or she actually elects COBRA continuation coverage.

(b) Timing of Severance Payments . If the Release required by Section 4(a) becomes effective by the Release Deadline Date, severance payments and benefits under this Agreement will be paid in a lump sum payment (less any applicable withholdings) on the first business day after the Release Deadline Date, but in no event later than March 15th of the calendar year immediately following the calendar year of the Employee’s termination of employment, except as required by Section 4(f). If the Employee should die before all amounts have been paid, such unpaid amounts shall be paid in a lump sum payment (less any applicable withholding taxes) to the Employee’s designated beneficiary, if living, or otherwise to the personal representative of the Employee’s estate, as described in Section 4(f) below.

(c) Voluntary Resignation; Termination for Cause, Death or Disability . If the Employee’s employment with the Company terminates (i) voluntarily by the Employee other than for Good Reason, (ii) for Cause by the Company or (iii) due to Employee’s death or Disability, then the Employee shall not be entitled to receive severance or other benefits except for those (if any) as may then be established under the Company’s then existing severance and benefits plans and practices or pursuant to other written agreements with the Company, including, without limitation, any Employment Agreement.

(d) Termination Outside of Change of Control Period . In the event the Employee’s employment is terminated for any reason outside of the Change of Control Period, then the Employee shall be entitled to receive severance and any other benefits only as may then be established under the Company’s existing written severance and benefits plans and practices or pursuant to other written agreements with the Company, including, without limitation, any Employment Agreement.

(e) Exclusive Remedy . In the event of a termination of Employee’s employment within the Change of Control Period, the provisions of this Section 4 are intended to be and are exclusive and in lieu of any other rights or remedies to which the Employee or the Company may otherwise be entitled, whether at law, tort or contract, in equity, or under this Agreement. The Employee shall be entitled to no benefits, compensation or other payments or rights upon termination of employment within the Change of Control Period other than those benefits expressly set forth in this Section 4.

(f) Section 409A .

(i) Six-Month Delay . Notwithstanding anything to the contrary in this Agreement, no Deferred Compensation Separation Benefits (as defined below) payable under this Agreement will be considered due or payable until the Employee has incurred a “separation from service” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended and the final regulations and any guidance promulgated thereunder (together, “Section 409A”). In

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addition, if the Employee is a “specified employee” within the meaning of Section 409A at the time of the Employee’s separation from service (other than due to death), then the severance benefits payable to the Employee under this Agreement, if any, and any other severance payments or separation benefits that may be considered deferred compensation under Section 409A (together, the “Deferred Compensation Separation Benefits”) otherwise due to the Employee on or within the six (6) month period following the Employee’s separation from service will accrue during such six (6) month period and will become payable in a lump sum payment (less any applicable withholding taxes) on the date six (6) months and one (1) day following the date of the Employee’s separation from service. All subsequent payments, if any, will be payable in accordance with the payment schedule applicable to each payment or benefit. In no event will the Employee have discretion to determine the taxable year of payment of any Deferred Compensation Separation Benefits. Notwithstanding anything herein to the contrary, if the Employee dies following his or her separation from service but prior to the six (6) month anniversary of his or her date of separation, then any payments delayed in accordance with this paragraph will be payable in a lump sum (less any applicable withholding taxes) to the Employee’s estate as soon as administratively practicable after the date of the Employee’s death and all other Deferred Compensation Separation Benefits will be payable in accordance with the payment schedule applicable to each payment or benefit.

(ii) Amendments to this Agreement to Comply with Section 409A . This provision is intended to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. Each payment and benefit payable under this Agreement is intended to constitute a separate payment under Section 1.409A ‑2(b)(2) of the Treasury Regulations. The Company and the Employee agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions, which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to the Employee under Section 409A. Notwithstanding anything to the contrary in this Agreement, in no event will the Company reimburse Employee for any taxes imposed or other costs incurred as a result of Section 409A.

(g) Non-disparagement & Non-solicitation . Employee agrees to the following covenants, to the extent permitted by applicable law, in the event Employee receives severance payments and benefits under Section 4(a) of this Agreement. Employee further acknowledges and agrees that the Company is relying on Employee’s compliance with this Section 4(g) as an essential term of this Agreement. The Company’s rights pursuant to this Section 4(g) are in addition to any remedies it may have for breach of contract or otherwise; further, the remaining terms of this Agreement, as well as the Release contemplated by Section 4(a), as applicable, will remain in full force and effect.

(i) Non-disparagement . For a period of fourteen (14) months immediately following the date of termination of Employee’s employment, Employee will refrain, in Employee’s capacity as a former executive officer, from any disparaging statements about the Company and its officers, directors and affiliates, including, without limitation, the business, products, intellectual property, financial standing, future, or employment/compensation/benefit practices of the Company; provided, however, that (a) nothing shall restrict Employee’s ability to make any statements of any nature as a stockholder or a director of the Company, (b) none of these restrictions shall apply to statements made in connection with legal proceedings, and (c) the foregoing requirements under this Section 4(g) will not apply to any statements that Employee makes in addressing any statements made by the Company, its officers and/or its directors regarding Employee or Employee’s performance as an employee of the Company so long as Employee’s statements are, in the good faith judgment of Employee, truthful; and

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(ii) Non-solicitation . For a period of fourteen (14) months immediately following the date of termination of Employee’s employment, Employee will not, either directly or indirectly, solicit, induce, recruit or encourage any of the Company’s employees to leave their employment, or hire or take away such employees, or attempt to solicit, induce, recruit, encourage, hire or take away employees of the Company, either for Employee’s own purposes, or for any other person or entity.

5. Limitation on Payments . In the event that the severance and other benefits provided for in this Agreement or otherwise payable to the Employee (a) constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) and (b) but for this Section 5, would be subject to the excise tax imposed by Section 4999 of the Code, then the Employee’s severance benefits under Section 4(a) or other benefits shall be either:

(i) delivered in full, or

(ii) delivered as to such lesser extent which would result in no portion of such severance benefits being subject to excise tax under Section 4999 of the Code,

whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by the Employee on an after-tax basis, of the greatest amount of severance benefits, notwithstanding that all or some portion of such severance benefits and other benefits may be taxable under Section 4999 of the Code.

In the event of a reduction in accordance with Section 5(ii), the reduction will occur, with respect to such severance and other benefits considered “parachute payments” within the meaning of Section 280G of the Code, in the following order: (i) reduction of cash payments in reverse chronological order (that is, the cash payment owed on the latest date following the occurrence of the event triggering the excise tax will be the first cash payment to be reduced ; (ii) cancellation of awards granted “contingent on a change in ownership or control” (within the meaning of Section 280G of the Code), (iii) cancellation of accelerated vesting of equity-based compensation awards in the reverse order of date of grant of the awards (that is, the vesting of the most recently granted awards will be cancelled first); and (iv) reduction of employee benefits in reverse chronological order (that is, the benefit owed on the latest date following the occurrence of the event triggering the excise tax will be the first benefit to be reduced. If two or more equity-based compensation awards are granted on the same date, each award will be reduced on a prorated basis. In no event shall the Employee have any discretion with respect to the ordering of payment reductions.

Unless the Company and the Employee otherwise agree in writing, any determination required under this Section 5 shall be made in writing by a nationally recognized accounting or valuation firm selected by the Company (the “Accountants”), whose determination shall be conclusive and binding upon the Employee and the Company for all purposes. For purposes of making the calculations required by this Section 5, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code. The Company and the Employee shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section 5. The Company shall bear all costs for payment of the Accountants services in connection with any calculations contemplated by this Section 5.

6. Definition of Terms . The following terms referred to in this Agreement shall have the following meanings:

(a) Cause . “Cause” shall mean (i) any act of personal dishonesty taken by the Employee in connection with his or her responsibilities as an employee and intended to result in substantial

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personal enrichment of the Employee, (ii) Employee being convicted of, or pleading no contest to, a felony or misdemeanor that the Company reasonably believes has had or will have a material detrimental effect on the Company’s reputation or business, (iii) a willful act by the Employee which constitutes illegal or gross misconduct and which is injurious to the Company, or (iv) Employee’s intentional unauthorized or wrongful use or disclosure of proprietary or confidential information of the Company (or any other party to whom Employee owes an obligation of nonuse or nondisclosure as a result of Employee’s employment relationship with the Company), including but not limited to trade secrets and customer lists; or (v) Employee’s willful and continued failure to substantially perform the duties and responsibilities of his or her position (other than due to physical or mental illness) after there has been delivered to the Employee a written demand for performance from the Company that describes the basis for the Company’s belief that the Employee has not substantially performed his or her duties and the Employee has not corrected such failure within thirty (30) days of such written demand.

(b) Change of Control . “Change of Control” means the occurrence of any of the following:

(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) (“Person”) becomes the “beneficial owner” (as defined in Rule 13d–3 under said Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company’s then outstanding voting securities; provided, however, that for purposes of this subsection, (1) the acquisition of additional stock by any Person, who is considered to own more than fifty percent (50%) of the total voting power of the stock of the Company will not be considered a Change of Control; and (2) if the stockholders of the Company immediately before such change in ownership continue to retain immediately after the change in ownership, in substantially the same proportions as their ownership of shares of the Company’s voting stock immediately prior to the change in ownership, direct or indirect beneficial ownership of more than fifty percent (50%) of the total voting power of the stock of the Company, such event shall not be considered a Change of Control under this subsection. For this purpose, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting securities of one or more corporations or other business entities which own the Company, as the case may be, either directly or through one or more subsidiary corporations or other business entities; or

(ii) Any action or event occurring within a twelve (12) month period, as a result of which fewer than a majority of the directors are Incumbent Directors. “Incumbent Directors” shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or

(iii) A change in the ownership of a substantial portion of the Company’s assets which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than fifty-percent (50%) of the total gross fair market value of all of the assets of the Company immediately prior to such acquisition or acquisitions; provided, however, that for purposes of this subsection (iii), the following will not constitute a change in the ownership of a substantial portion of the Company’s assets: (A) a transfer to an entity that is controlled by the Company’s stockholders immediately after the transfer, or (B) a transfer of assets by the Company to: (1) a stockholder of the Company (immediately before the asset transfer) in exchange for or with respect to the Company’s stock, (2) an entity, fifty-percent (50%) or

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more of the total value or voting power of which is owned, directly or indirectly, by the Company, (3) a Person, that owns, directly or indirectly, fifty-percent (50%) or more of the total value or voting power of all the outstanding stock of the Company, or (4) an entity, at least fifty-percent (50%) of the total value or voting power of which is owned, directly or indirectly, by a Person described in this subsection (iii)(B)(3). For purposes of this subsection (iii), gross fair market value means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

(c) Change of Control Period . “Change of Control Period” shall mean the period (i) commencing three (3) months before the occurrence of a Change of Control, and (ii) ending twelve (12) months after the Change of Control.

(d) Disability . “Disability” shall mean that the Employee has been unable to perform his or her Company duties as the result of his or her incapacity due to physical or mental illness, and such inability, at least twenty-six (26) weeks after its commencement, is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Employee or the Employee’s legal representative (such determination as to acceptability not to be unreasonably withheld). Termination resulting from Disability may only be effected after at least thirty (30) days’ written notice by the Company of its intention to terminate the Employee’s employment. In the event that the Employee resumes the performance of substantially all of his or her duties hereunder before the termination of his or her employment becomes effective, the notice of intent to terminate shall automatically be deemed to have been revoked.

(e) Good Reason . “Good Reason” means Employee’s resignation within thirty (30) days following the expiration of any Company cure period (discussed below) following the occurrence of one or more of the following, without Employee’s express written consent: (i) a material reduction by the Company of Employee’s base salary in effect immediately prior to such reduction (other than a one-time reduction that is equal to or less than fifteen percent (15%) of Employee’s base salary that also applies to substantially all of the similarly situated employees of the Company); (ii) a material reduction of Employee’s duties or responsibilities relative to Employee’s duties or responsibilities in effect immediately prior to such reduction provided, however, that continued employment following a Change of Control with substantially the same responsibility with respect to the Company’s business and operations will not constitute “Good Reason” (for example, “Good Reason” does not exist if the Employee is employed by the Company with substantially the same responsibilities with respect to the Company’s business that he or she had immediately prior to the Change of Control regardless of whether his or her title is revised to reflect his or her placement within the overall corporate hierarchy or whether he or she provides services to a subsidiary, affiliate, business unit or otherwise); or (iii) Employee’s relocation at the Company’s direction to a facility or location more than thirty-five (35) miles from Employee’s then present location of providing services. Employee’s resignation will not be deemed to be for Good Reason unless Employee has first provided the Company with written notice of the acts or omissions constituting the grounds for “Good Reason” within one hundred twenty (120) days of the initial existence of the grounds for “Good Reason” and a reasonable cure period of not less than thirty (30) days following the date the Company receives such notice, and such condition has not been cured during such period.

7. Successors .

(a) The Company’s Successors . Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets shall assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same

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extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term “Company” shall include any successor to the Company’s business and/or assets which executes and delivers an agreement pursuant to a purchase, merger, consolidation, liquidation or otherwise as described in this Section 7(a) or which becomes bound by the terms of this Agreement by operation of law.

(b) The Employee’s Successors . The terms of this Agreement and all rights of the Employee hereunder shall inure to the benefit of, and be enforceable by, the Employee’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

8. Notice .

(a) General . All notices and other communications required or permitted hereunder shall be in writing, shall be effective when given, and shall in any event be deemed to be given upon receipt or, if earlier, (i) five (5) days after deposit with the U.S. Postal Service or other applicable postal service, if delivered by first class mail, postage prepaid, (ii) upon delivery, if delivered by hand, (iii) one (1) business day after the business day of deposit with Federal Express or similar overnight courier, freight prepaid or (iv) one (1) business day after the business day of facsimile transmission, if delivered by facsimile transmission with copy by first class mail, postage prepaid, and shall be addressed (A) if to Employee, at his or her last known residential address and (B) if to the Company, at the address of its principal corporate offices (attention: Secretary), or in any such case at such other address as a party may designate by ten (10) days’ advance written notice to the other party pursuant to the provisions above.

(b) Notice of Termination . Any termination by the Company for Cause or by the Employee for Good Reason or as a result of any voluntary resignation shall be communicated by a notice of termination to the other party hereto given in accordance with this Section 8(b) of this Agreement. Such notice shall indicate the specific termination provision in this Agreement relied upon, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the provision so indicated, and shall specify the termination date (which shall be not more than thirty (30) days after the giving of such notice). The failure by the Employee to include in the notice any fact or circumstance which contributes to a showing of Good Reason shall not waive any right of the Employee hereunder or preclude the Employee from asserting such fact or circumstance in enforcing his or her rights hereunder.

9. Miscellaneous Provisions .

(a) No Duty to Mitigate . The Employee shall not be required to mitigate the amount of any payment contemplated by this Agreement, nor shall any such payment be reduced by any earnings that the Employee may receive from any other source.

(b) Waiver . No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by the Employee and by an authorized officer of the Company (other than the Employee). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

(c) Headings . All captions and section headings used in this Agreement are for convenient reference only and do not form a part of this Agreement.

(d) Entire Agreement . This Agreement, together with any equity-based compensation award agreement, constitutes the entire agreement of the parties hereto and supersedes in their entirety all prior representations, understandings, undertakings or agreements (whether oral or written and whether expressed or implied) of the parties with respect to the subject matter hereof. With respect

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to equity-based compensation awards granted on or after the date hereof, the acceleration of vesting provided herein will apply to such awards except to the extent otherwise explicitly provided in the applicable equity-based compensation award agreement.

(e) Choice of Law . The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. The Superior Court of Santa Clara County and/or the United States District Court for the Northern District of California shall have exclusive jurisdiction and venue over all controversies in connection with this Agreement.

(f) Severability . The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the validity or enforceability of any other provision hereof, which shall remain in full force and effect.

(g) Withholding . All payments made pursuant to this Agreement will be subject to withholding of applicable income and employment taxes.

(h) Counterparts . This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.

IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the day and year set forth below.

COMPANY		CYPRESS SEMICONDUCTOR INC.

		By:

		Title:
		Date:

EMPLOYEE		By:

		Title:
		Date:

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Exhibit 10.2

CYPRESS SEMICONDUCTOR CORPORATION

(a Delaware corporation)

$250,000,000

4.50% Convertible Senior Notes due 2022

PURCHASE AGREEMENT

Dated: June 20, 2016

CYPRESS SEMICONDUCTOR CORPORATION

(a Delaware corporation)

$250,000,000

4.50% Convertible Senior Notes due 2022

PURCHASE AGREEMENT

June 20, 2016

Merrill Lynch, Pierce, Fenner & Smith

Incorporated

as Representative of the several Initial Purchasers

One Bryant Park

New York, New York 10036

Ladies and Gentlemen:

Cypress Semiconductor Corporation, a Delaware corporation (the “Company”), confirms its agreement with Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”) and each of the other Initial Purchasers named in Schedule A hereto (collectively, the “Initial Purchasers,” which term shall also include any initial purchaser substituted as hereinafter provided in Section 11 hereof), for whom Merrill Lynch is acting as the representative (in such capacity, the “Representative”), with respect to (i) the sale by the Company and the purchase by the Initial Purchasers, acting severally and not jointly, of the respective principal amounts set forth in said Schedule A of $250,000,000 aggregate principal amount of the Company’s 4.50% Convertible Senior Notes due 2022 (the “Initial Securities”) and (ii) the grant by the Company to the Initial Purchasers, acting severally and not jointly, of the option to purchase all or any part of an additional $37,500,000 aggregate principal amount of its 4.50% Convertible Senior Notes due 2022 (the “Option Securities” and, together with the Initial Securities, the “Securities”) to cover overallotments. The Securities are to be issued pursuant to an indenture dated as of June 23, 2016 (the “Indenture”) between the Company and U.S. Bank National Association , as trustee (the “Trustee”). The Securities will be convertible into cash, shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”) or a combination thereof, as set forth, and subject to the limitations contained, in the Indenture.

In connection with the offering of the Initial Securities, the Company is separately entering into capped call transactions with one or more financial institutions (the “Counterparties”) pursuant to capped call confirmations (the “Base Capped Call Confirmations”) to be dated the date hereof, and in connection with the issuance of any Option Securities, the Company and the Counterparties may enter into additional capped call confirmations (the “Additional Capped Call Confirmations”) dated each date on which the option granted to the Initial Purchasers pursuant to Section 2(b) to purchase such Option Securities is exercised (such Additional Capped Call Confirmations, together with the Base Capped Call Confirmations, the “Capped Call Confirmations”).

The Company understands that the Initial Purchasers propose to make an offering of the Securities on the terms and in the manner set forth herein and agrees that the Initial Purchasers may resell, subject to the conditions set forth herein, all or a portion of the Securities to purchasers (“Subsequent Purchasers”) at any time after this Agreement has been executed and delivered. The Securities are to be

offered and sold through the Initial Purchasers without being registered under the Securities Act of 1933, as amended (the “1933 Act”), in reliance upon exemptions therefrom. Pursuant to the terms of the Securities and the Indenture, investors that acquire Securities may only resell or otherwise transfer such Securities if such Securities are hereafter registered under the 1933 Act or if an exemption from the registration requirements of the 1933 Act is available (including the exemption afforded by Rule 144A (“Rule 144A” ) of the rules and regulations promulgated under the 1933 Act (the “1933 Act Regulations”) by the Securities and Exchange Commission (the “Commission”)).

On April 28, 2016, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Broadcom Corporation (“Broadcom”), pursuant to which Cypress has agreed, subject to the conditions therein, to acquire certain assets primarily related to Broadcom’s internet of things business for a purchase price of $550 million in cash payable at the closing of the transaction (the “Acquisition”).

The Company has prepared and delivered to each Initial Purchaser copies of a preliminary offering memorandum dated June 20, 2016 prior to the Applicable Time (as defined below) (the “Preliminary Offering Memorandum”) and has prepared and will deliver to each Initial Purchaser, on the date hereof or the next succeeding day, copies of a final offering memorandum dated June 20, 2016 (the “Final Offering Memorandum”), each for use by such Initial Purchaser in connection with its solicitation of purchases of, or offering of, the Securities. “Offering Memorandum” means, with respect to any date or time referred to in this Agreement, the most recent offering memorandum (whether the Preliminary Offering Memorandum or the Final Offering Memorandum, or any amendment or supplement to either such document), including exhibits thereto and any documents incorporated therein by reference, which has been prepared and delivered by the Company to the Initial Purchasers, in the case of the Preliminary Offering Memorandum prior to the Applicable Time, in connection with their solicitation of purchases of, or offering of, the Securities. The Company will prepare a final term sheet reflecting the final terms of the Securities, in the form set forth in Schedule B hereto (the “Final Term Sheet”), and will deliver such Final Term Sheet to the Initial Purchasers prior to the Applicable Time in connection with their solicitation of purchases of, or offering of, the Securities. Each party agrees that, unless it obtains the prior written consent of the other party, it will not make any offer relating to the Securities by any written materials other than the Offering Memorandum and the Issuer Written Information. “Issuer Written Information” means (i) any writing intended for general distribution to investors as evidenced by its being specified in Schedule C hereto, including the Final Term Sheet, and (ii) any “road show” that is a “written communication” within the meaning of the 1933 Act. “General Disclosure Package” means the Preliminary Offering Memorandum and any Issuer Written Information specified on Schedule C hereto and issued at or prior to 9:05 P.M., New York City time, on June 20, 2016 or such other time as agreed by the Company and Merrill Lynch (such date and time, the “Applicable Time”).

All references in this Agreement to financial statements and schedules and other information which is “contained,” “included” or “stated” in the Offering Memorandum (or other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which are incorporated by reference in the Offering Memorandum; and all references in this Agreement to amendments or supplements to the Offering Memorandum shall be deemed to mean and include the filing of any document under the Securities Exchange Act of 1934 (the “1934 Act”) which is incorporated by reference in the Offering Memorandum.

SECTION 1. Representations and Warranties .

(a) Representations and Warranties by the Company . The Company represents and warrants to each Initial Purchaser as of the date hereof, the Applicable Time, the Closing Time (as defined below) and any Date of Delivery (as defined below), and agrees with each Initial Purchaser, as follows:

(i) General Disclosure Package; Rule 144A Eligibility . The Company hereby confirms that it has authorized the use of the General Disclosure Package, including the Preliminary Offering Memorandum and the Final Term Sheet, and the Final Offering Memorandum in connection with the offer and sale of the Securities by the Initial Purchasers. The Securities satisfy the requirements set forth in Rule 144A(d)(3).

(ii) No Registration Required; No General Solicitation . Subject to compliance by the Initial Purchasers with the representations and warranties of the Initial Purchasers and the procedures set forth in Section 6 hereof, it is not necessary in connection with the offer, sale and delivery of the offered Securities to the Initi al Purchasers and to each Subsequent Purchaser in the manner contemplated by this Agreement, the General Disclosure Package and the Final Offering Memorandum to register the Securities under the 1933 Act or to qualify the Indenture under the Trust Indenture Act of 1939, as amended (the “1939 Act”). None of the Company, its Affiliates or any person acting on its or any of their behalf (other than the Initial Purchasers and persons acting on their behalf, as to whom the Company makes no representation) has engaged, in connection with the offering of the offered Securities, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the 1933 Act Regulations.

(iii) Accurate Disclosure . As of the Applicable Time, neither (A) the General Disclosure Package nor (B) any Issuer Written Information, when considered together with the General Disclosure Package, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Final Offering Memorandum, as of its date, at the Closing Time or at any Date of Delivery, did not, does not and will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The documents incorporated or deemed to be incorporated by reference in the General Disclosure Package and the Final Offering Memorandum, when such documents incorporated by reference were filed with the Commission, when read together with the other information in the General Disclosure Package or the Final Offering Memorandum, as the case may be, did not, does not and will not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

The representations and warranties in this subsection shall not apply to statements in or omissions from the General Disclosure Package or the Final Offering Memorandum made in reliance upon and in conformity with written information furnished to the Company by any Initial Purchaser through Merrill Lynch expressly for use therein. For purposes of this Agreement, the only information so furnished shall be the information in the first paragraph under the heading “Plan of Distribution–Price Stabilization, Short Positions,” and the first sentence of each of the third and fourth paragraphs under the heading “Plan of Distribution–Capped Call Transactions” in the Offering Memorandum (collectively, the “Initial Purchaser Information”).

(iv) Incorporation of Documents by Reference . The documents incorporated or deemed to be incorporated by reference in the Offering Memorandum, when they became effective or at

the time they were or hereafter are filed with the Commission, com plied and will comply in all material respects with the requirements of the 1934 Act and the rules and regulations of the Commission under the 1934 Act (the “1934 Act Regulations”).

(v) Independent Accountants . The accountants who certified the financial statements and supporting schedules included in the Offering Memorandum are independent public accountants as required by the 1933 Act, the 1933 Act Regulations, the 1934 Act, the 1934 Act Regulations and the Public Company Accounting Oversight Board.

(vi) Financial Statements; Non-GAAP Financial Measures . The financial statements included or incorporated by reference in the General Disclosure Package and the Final Offering Memorandum, together with the related schedules and notes, present fairly in all material respects the financial position of the Company and its consolidated subsidiaries at the dates indicated and the statement of operations, stockholders’ equity and cash flows of the Company and its consolidated subsidiaries for the periods specified; said financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) applied on a consistent basis throughout the periods involved subject, in the case of unaudited financial statements, to the absence of footnotes and to normal year-end audit adjustments . The supporting schedules, if any, present fairly in all material respects in accordance with GAAP the information required to be stated therein. The selected financial data and the summary financial info rmation included in the Offering Memorandum present fairly in all material respects the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included therein. All disclosures contained in the General Disclosure Package or the Final Offering Memorandum, or incorporated by reference therein, regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission) comply in all material respects with Regulation G of the 1934 Act and Item 10 of Regulation S-K of the 1933 Act, to the extent applicable. The interactive data in eXtensible Business Reporting Language included or incorporated by reference in the General Disclosure Package and the Final Offering Memorandum fairly presents the information called for in all material respects and has been prepared in accordance with the Commission's rules and guidelines applicable thereto.

(vii) No Material Adverse Change in Business . Except as otherwise stated therein, since the respective dates as of which information is given in the General Disclosure Package or the Final Offering Memorandum, (A) there has been no material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business (a “Material Adverse Effect”), and (B) there have been no transactions entered into by the Company or any of its subsidiaries, other than those in the ordinary course of business, which are material with respect to the Company and its subsidiaries considered as one enterprise.

(viii) Good Standing of the Company . The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware and has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the General Disclosure Package and the Final Offering Memorandum and to enter into and perform its obligations under this Agreement; and the Company is duly qualified as a foreign corporation to transact business and is in good standing in each other jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure so to qualify or to be in good standing would not result in a Material Adverse Effect.

(ix) Good Standing of Subsidiaries . Each “significant subs idiary ” (as such term is defined in Rule 1-02 of Regulation S-X) (each, a “Subsidiary” and, collectively, the “Subsidiaries”) of the Company has been duly organized and is validly existing in good standing under the laws of the jurisdiction of its incorpor ation or organization, has corporate or similar power and authority to own, lease and operate its properties and to conduct its business as described in the General Disclosure Package and the Final Offering Memorandum and is duly qualified to transact busi ness and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or to be in good standing would not resu lt in a Material Adverse Effect. Except as otherwise disclosed in the General Disclosure Package and the Final Offering Memorandum, all of the issued and outstanding capital stock of each Subsidiary has been duly authorized and validly issued, is fully pa id and non ‑assessable and is owned by the Company, directly or through subsidiaries, free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity. None of the outstanding shares of capital stock of any Subsidiary was issue d in violation of the preemptive or similar rights of any securityholder of such Subsidiary . The Company does not own or control, directly or indirectly, any Subsidiary other than the Subsidiaries listed in Exhibit 21 to the Company’s Annual Report on Form 10-K for the fiscal year ended January 3, 2016.

(x) Capitalization . The authorized, issued and outstanding shares of capital stock of the Company are as set forth in the General Disclosure Package and the Final Offering Memorandum in the column entitled “Actual” under the caption “Capitalization” (except for subsequent issuances, if any, pursuant to this Agreement, pursuant to reservations, agreements or employee benefit plans referred to in the General Disclosure Package and the Final Offering Memorandum or pursuant to the exercise of convertible securities or options referred to in the General Disclosure Package and the Final Offering Memorandum).

(xi) Authorization of Agreement . This Agreement has been duly authorized, executed and delivered by the Company.

(xii) Authorization of the Indenture . The Indenture has been duly authorized by the Company and, when duly executed and delivered by the Company and the Trustee, will constitute a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors’ rights generally and except as enforcement thereof is subject to general principles of equity, including the principles of good faith, commercial reasonableness and fair dealing (regardless of whether enforcement is considered in a proceeding in equity or at law).

(xiii) Authorization of the Securities and the Maximum Number of Underlying Shares . The Securities have been duly authorized and, at the Closing Time, will have been duly executed by the Company and, when authenticated, issued and delivered in the manner provided for in the Indenture and delivered against payment of the purchase price therefor as provided in this Agreement, will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except as the enforcement thereof may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting enforcement of creditors’ rights generally and except as enforcement thereof is subject to general principles of equity, including the principles of good faith, commercial reasonableness and fair dealing (regardless of whether enforcement is considered in a proceeding in equity or at law), and will be in the form

contemplated by, and entitled to the benefits of, the Indenture. The maximum numbe r of shares of Common Stock initially issuable upon conversion of the Securities (including the maximum number of shares of Common Stock that may be issued upon conversion of the Securities in connection with a Make-Whole Fundamental Change (as such term i s defined in the Indenture), and assuming the Company elects to issue and deliver solely shares of Common Stock in respect of all such conversions) (the “Maximum Number of Underlying Shares”) have been duly authorized and reserved for issuance upon such co nversion by all necessary corporate action and such Maximum Number of Underlying Shares, when issued upon such conversion, will be validly issued and will be fully paid and non-assessable; no holder of such Maximum Number of Underlying Shares will be subje ct to personal liability by reason of being such a holder; and the issuance of such Maximum Number of Underlying Shares upon such conversion will not be subject to the preemptive or other similar rights of any securityholder of the Company.

(xiv) Description of the Securities, the Common Stock and the Indenture . The Securities and the Indenture will conform in all material respects to the respective statements relating thereto contained in the General Disclosure Package and the Final Offering Memorandum. The Common Stock conforms to all statements relating thereto contained or incorporated by reference in the General Disclosure Package and the Final Offering Memorandum and such description conforms to the rights set forth in the instruments defining the same.

(xv) Absence of Violations, Defaults and Conflicts . Neither the Company nor any of its Subsidiaries is (A) in violation of its charter, by-laws or similar organizational document, (B) in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other agreement or instrument to which the Company or any of its Subsidiaries is a party or by which it or any of them may be bound or to which any of the properties or assets of the Company or any subsidiary is subject (collectively, “Agreements and Instruments”), except for such defaults that would not, singly or in the aggregate, result in a Material Adverse Effect, or (C) in violation of any law, statute, rule, regulation, judgment, order, writ or decree of any arbitrator, court, governmental body, regulatory body, administrative agency or other authority, body or agency having jurisdiction over the Company or any of its subsidiaries or any of their respective properties, assets or operations (each, a “Governmental Entity”), except for such violations that would not, singly or in the aggregate, result in a Material Adverse Effect. The execution, delivery and performance of this Agreement, the Indenture and the Securities and the consummation of the transactions contemplated herein and therein and in the General Disclosure Package and the Final Offering Memorandum (including the issuance and sale of the Securities and the Maximum Number of Underlying Shares issuable upon conversion of the Securities and the use of the proceeds from the sale of the Securities as described therein under the caption “Use of Proceeds”) and compliance by the Company with its obligations hereunder and thereunder have been duly authorized by all necessary corporate action and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any properties or assets of the Company or any subsidiary pursuant to, the Agreements and Instruments (except for such conflicts, breaches, defaults or Repayment Events or liens, charges or encumbrances that would not, singly or in the aggregate, result in a Material Adverse Effect), nor will such action result in any violation of the provisions of the charter, by-laws or similar organizational document of the Company or any of its subsidiaries or any law, statute, rule, regulation, judgment, order, writ or decree of any Governmental Entity. As used herein, a “Repayment Event” means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder’s behalf)

the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or any of its subsidiaries.

(xvi) Absence of Labor Dispute . No labor dispute with the employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, is imminent, and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its or any subsidiary’s principal suppliers, manufacturers, customers or contractors, which, in either case, would result in a Material Adverse Effect.

(xvii) Absence of Proceedings . Except as disclosed in the General Disclosure Package and the Final Offering Memorandum, there is no action, suit, proceeding, inquiry or investigation before or brought by any Governmental Entity now pending or, to the knowledge of the Company, threatened, against or affecting the Company or any of its subsidiaries, which might result in a Material Adverse Effect, or which might materially and adversely affect their respective properties or assets or the consummation of the transactions contemplated by this Agreement, the Indenture and the Securities or the performance by the Company of its obligations hereunder or thereunder.

(xviii) Absence of Further Requirements . No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any Governmental Entity is necessary or required for the performance by the Company of its obligations under this Agreement or, in connection with the offering, issuance or sale of the Securities under this Agreement or the consummation of the transactions contemplated by this Agreement or for the due execution, delivery and performance of the Indenture and the Securities (including, without limitation, the issuance and delivery of the Securities and the Maximum Number of Underlying Shares issuable upon conversion of the Securities and the use of the proceeds from the sale of the Securit ies as described therein under the caption “Use of Proceeds”), except such as have been already obtained or such as may be required under the Blue Sky or similar laws of any jurisdiction in connection with the purchase and distribution of the Securities by the Initial Purchasers in the manner contemplated by this Agreement and in the Offering Memorandum and the rules and regulations of the NASDAQ Global Select Market.

(xix) Possession of Licenses and Permits . The Company and its subsidiaries possess such permits, licenses, approvals, consents and other authorizations (collectively, “Governmental Licenses”) issued by the appropriate Governmental Entities necessary to conduct the business now operated by them, except where the failure so to possess would not, singly or in the aggregate, result in a Material Adverse Effect. The Company and its subsidiaries are in compliance with the terms and conditions of all Governmental Licenses, except where the failure so to comply would not, singly or in the aggregate, result in a Material Adverse Effect. All of the Governmental Licenses are valid and in full force and effect, except when the invalidity of such Governmental Licenses or the failure of such Governmental Licenses to be in full force and effect would not, singly or in the aggregate, result in a Material Adverse Effect. Neither the Company nor any of its subsidiaries has received any notice of proceedings relating to the revocation or modification of any Governmental Licenses which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect.

(xx) Title to Property . The Company and its subsidiaries have good and marketable title to all real property owned by them and good title to all other properties owned by them, in each case, free and clear of all mortgages, pledges, liens, security interests, claims, restrictions or encumbrances of any kind except such as (A) are described in the General Disclosure Package and the Final Offering Memorandum or (B) do not, singly or in the aggregate, materially affect

the value of such property and do not interfere with the use made and proposed to be made of such property by the Company or any of its subsidiaries; and all of the leases and subleases mat erial to the business of the Company and its subsidiaries, considered as one enterprise, and under which the Company or any of its subsidiaries holds properties described in the General Disclosure Package and the Final Offering Memorandum, are in full forc e and effect, and neither the Company nor any such subsidiary has any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or any subsidiary under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company or such subsidiary to the continued possession of the leased or subleased premises under any such lease or sublease.

(xxi) Possession of Intellectual Property . The Company and its subsidiaries own or possess adequate rights to use, or can acquire on commercially reasonable terms, adequate patents, patent rights, licenses, inventions, copyrights, know‑how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names or other intellectual property (collectively, “Intellectual Property”) material to the conduct of its business as currently conducted. Neither the Company nor any of its subsidiaries has received any notice in writing or is otherwise aware of any infringement of or conflict with asserted rights of others with respect to any Intellectual Property or of any facts or circumstances which would render any Intellectual Property invalid or inadequate to protect the interest of the Company or any of its subsidiaries therein, and which infringement or conflict (if the subject of any unfavorable decision, ruling or finding) or invalidity or inadequacy, singly or in the aggregate, would result in a Material Adverse Effect.

(xxii) Environmental Laws . Except as described in the General Disclosure Package and the Final Offering Memorandum or would not, singly or in the aggregate, result in a Material Adverse Effect, (A) neither the Company nor any of its subsidiaries is in violation of any federal, state, local or foreign statute, law, rule, regulation, ordinance, code, policy or rule of common law or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent, decree or judgment, relating to pollution or protection of human health, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products, asbestos-containing materials or mold (collectively, “Hazardous Materials”) or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, “Environmental Laws”), (B) the Company and its subsidiaries have all permits, authorizations and approvals required under any applicable Environmental Laws and are each in compliance with their requirements, (C) there are no pending or, to the knowledge of the Company, threatened administrative, regulatory or judicial actions, suits, demands, demand letters, claims, liens, notices of noncompliance or violation, investigation or proceedings relating to any Environmental Law against the Company or any of its subsidiaries and (D) there are no events or circumstances that would reasonably be expected to form the basis of an order for clean-up or remediation, or an action, suit or proceeding by any private party or Governmental Entity, against or affecting the Company or any of its subsidiaries relating to Hazardous Materials or any Environmental Laws.

(xxiii) Accounting Controls and Disclosure Controls . The Company and each of its subsidiaries maintain effective internal control over financial reporting (as defined under Rule 13‑a15 and 15d‑15 under the 1934 Act Regulations) and a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with

management’s general or specific authorization; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets; (C) access to assets is permitted only in accordance with management’s general or specific authorization; (D) the recorded accountability for assets is compared with th e existing assets at reasonable intervals and appropriate action is taken with respect to any differences; and (E) the interactive data in eXtensible Business Reporting Language included or incorporated by reference in the General Disclosure Package and th e Final Offering Memorandum fairly presents the information called for in all material respects and is prepared in accordance in all material respects with the Commission's rules and guidelines applicable thereto. Except as described in the General Disclos ure Package and the Final Offering Memorandum, since the end of the Company’s most recent audited fiscal year, there has been (1) no material weakness in the Company’s internal control over financial reporting (whether or not remediated) and (2) no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company and each of its subsidiaries maintain an effective s ystem of disclosure controls and procedures (as defined in Rule 13a ‑15 and Rule 15d ‑15 under the 1934 Act Regulations) that are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the 19 34 Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and is accumulated and communicated to the Company’s management, including its principal executive officer or officers and princi pal financial officer or officers, as appropriate, to allow timely decisions regarding disclosure.

(xxiv) Compliance with the Sarbanes-Oxley Act. There is and, in the last five years, has been no failure on the part of the Company or any of the Company’s directors or officers, in their capacities as such, to comply in all material respects with any provision of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith, including Section 402 related to loans and Sections 302 and 906 related to certifications.

(xxv) Payment of Taxes . All material United States federal income tax returns of the Company and its subsidiaries required by law to be filed have been filed and all taxes shown by such returns or otherwise assessed, which are due and payable, have been paid, except assessments against which appeals have been or will be promptly taken and as to which adequate reserves have been provided. The United States federal income tax returns of the Company through the fiscal year ended December 31, 2015 have been settled and no assessment in connection therewith has been made against the Company. The Company and its subsidiaries have filed all other tax returns that are required to have been filed by them pursuant to applicable foreign, state, local or other law, and has paid all taxes due pursuant to such returns or pursuant to any assessment received by the Company and its subsidiaries, except for such taxes, if any, as are being contested in good faith and as to which adequate reserves have been established by the Company, except, in each case, insofar as the failure to file such returns would not result in a Material Adverse Effect. The charges, accruals and reserves on the books of the Company in respect of any income and corporation tax liability for any years not finally determined are adequate to meet any assessments or re-assessments for additional income tax for any years not finally determined, except to the extent of any inadequacy that was described in the General D isclosure Package and the Final Offering Memorandum or would not result in a Material Adverse Effect.

(xxvi) Insurance . The Company and its subsidiaries carry or are entitled to the benefits of insurance, with financially sound and reputable insurers, in such amounts and covering such risks as is generally maintained by companies of established repute engaged in the same or similar

business, and all such insurance is in full force and effect. The Company has no reason to believe that it or any of its sub sidiaries will not be able (A) to renew its existing insurance coverage as and when such policies expire or (B) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cos t that would not result in a Material Adverse Effect. Neither of the Company nor any of its subsidiaries has been denied any insurance coverage which it has sought or for which it has applied.

(xxvii) Investment Company Act . The Company is not required, and upon the issuance and sale of the Securities as herein contemplated and the application of the net proceeds therefrom as described in the General Disclosure Package and the Final Offering Memorandum will not be required, to register as an “investment company” under the Investment Company Act of 1940, as amended (the “1940 Act”).

(xxviii) Absence of Manipulation . Neither the Company nor any affiliate of the Company has taken, nor will the Company or any affiliate take, directly or indirectly, any action which is designed, or would be expected, to cause or result in, or which constitutes a violation of Regulation M under the 1934 Act.

(xxix) Foreign Corrupt Practices Act . None of the Company, any of its subsidiaries or, to the knowledge of the Company, any director, officer, agent, employee, controlled affiliate or other person acting on behalf of the Company or any of its subsidiaries is aware of or has taken any action, directly or indirectly, that would result in a violation by such persons of the Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations thereunder (the “FCPA”), including, without limitation, making use of the mails or any means or instrumentality of interstate commerce corruptly in furtherance of an offer, payment, promise to pay or authorization of the payment of any money, or other property, gift, promise to give, or authorization of the giving of anything of value to any “foreign official” (as such term is defined in the FCPA) or any foreign political party or official thereof or any candidate for foreign political office, in contravention of the FCPA and the Company and, to the knowledge of the Company, its controlled affiliates have conducted their businesses in compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith.

(xxx) Money Laundering Laws . The operations of the Company and its subsidiaries are and have been conducted at all times in compliance in all material respects with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Entity (collectively, the “Money Laundering Laws”); and no action, suit or proceeding by or before any Governmental Entity involving the Company or any of its subsidiaries with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened.

(xxxi) OFAC . None of the Company, any of its subsidiaries or, to the knowledge of the Company, any director, officer, agent, employee, affiliate or representative of the Company or any of its subsidiaries is an individual or entity (“Person”) currently the subject or, to the Company’s knowledge, the target of any sanctions administered or enforced by the United States Government, including, without limitation, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), the United Nations Security Council (“UNSC”), the European Union, Her Majesty’s Treasury (“HMT”), or other relevant sanctions authority (collectively, “Sanctions”), nor is the Company located, organized or resident in a country or territory that is

the subject of Sanctions; and the Company will not directly or indirectly use the proceeds of the sale of the Secur ities, or lend, contribute or otherwise make available such proceeds to any subsidiaries, joint venture partners or other Person, to fund any activities of or business with any Person, or in any country or territory, that, at the time of such funding, is t he subject of Sanctions or in any other manner that will result in a violation by any Person (including any Person participating in the transaction, whether as underwriter, advisor, investor or otherwise) of Sanctions.

(xxxii) Lending Relationship . Except as disclosed in the General Disclosure Package and the Final Offering Memorandum, the Company (i) does not have any material lending or other relationship with any bank or lending affiliate of any Initial Purchaser and (ii) does not intend to use any of the proceeds from the sale of the Securities to repay any outstanding debt owed to any affiliate of any Initial Purchaser.

(xxxiii) Statistical and Market-Related Data . Any statistical and market-related data included in the General Disclosure Package or the Final Offering Memorandum are based on or derived from sources that the Company believes, after reasonable inquiry, to be reliable and accurate and, to the extent required, the Company has obtained the written consent to the use of such data from such sources.

(xxxiv) Representations and Warranties Contained in the Asset Purchase Agreement . With respect to the representations and warranties of Seller (as defined in the Asset Purchase Agreement) in Sections 3.1 through 3.21 of the Asset Purchase Agreement, no facts have come to the Company’s attention that have caused it to believe that such representations and warranties (after taking into account the exceptions to such representations and warranties set forth in Seller’s disclosure schedules to the Asset Purchase Agreement) are not true and correct in all material respects; provided, however, that the Company makes this representation without having conducted any further inquiry or taken any further steps, since the date that the Asset Purchase Agreement was signed, to determine whether such representations and warranties remain true and correct.

(b) Officer’s Certificates . Any certificate signed by any officer of the Company or any of its subsidiaries delivered to the Representative or to counsel for the Initial Purchasers shall be deemed a representation and warranty by the Company to each Initial Purchaser as to the matters covered thereby.

SECTION 2. Sale and Delivery to Initial Purchasers; Closing .

(a) Initial Securities . On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company agrees to sell to each Initial Purchaser, severally and not jointly, and each Initial Purchaser, severally and not jointly, agrees to purchase from the Company, at the price set forth in Schedule A, the aggregate principal amount of Initial Securities set forth in Schedule A, plus any additional principal amount of Initial Securities which such Initial Purchaser may become obligated to purchase pursuant to the provisions of Section 11 hereof, subject to such adjustments as Merrill Lynch in its discretion shall make to ensure that any sales or purchases are in authorized denominations.

(b) Option Securities . In addition, on the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Company hereby grants an option to the Initial Purchasers, severally and not jointly, to purchase the Option Securities, at the price set forth in Schedule A. The option hereby granted may be exercised in whole or in part from time to time only for the purpose of covering overallotments upon notice by the Representative to the Company setting forth

the amount of Option Securities as to which the sev eral Initial Purchasers are then exercising the option and the time and date of payment and delivery for such Option Securities. Any such time and date of delivery (a “Date of Delivery”) shall occur within a period of 13 days beginning on, and including, the date the Initial securities are first issued, but shall not be later than seven full business days after the exercise of said option, nor in any event prior to the Closing Time. If the option is exercised as to all or any portion of the Option Securit ies, each of the Initial Purchasers, acting severally and not jointly, will purchase that proportion of the total principal amount of Option Securities then being purchased which the number of Initial Securities set forth in Schedule A opposite the name of such Initial Purchaser bears to the total principal amount of Initial Securities, subject in each case to such adjustments as Merrill Lynch in its discretion shall make to ensure that any sales or purchases are in authorized denominations.

(c) Payment . Payment of the purchase price for, and delivery of certificates or security entitlements for, the Initial Securities shall be made at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153, or at such other place as shall be agreed upon by the Representative and the Company, at 9:00 A.M. (New York City time) on the third (fourth, if the pricing occurs after 4:30 P.M. (New York City time) on any given day) business day after the date hereof (unless postponed in accordance with the provisions of Section 11), or such other time not later than ten business days after such date as shall be agreed upon by the Representative and the Company (such time and date of payment and delivery being herein called “Closing Time”).

In addition, in the event that any or all of the Option Securities are purchased by the Initial Purchasers, payment of the purchase price for, and delivery of certificates or security entitlements for, such Option Securities shall be made at the above‑mentioned offices, or at such other place as shall be agreed upon by the Representative and the Company, on each Date of Delivery as specified in the notice from Merrill Lynch to the Company.

Payment shall be made to the Company by wire transfer of immediately available funds to a bank account designated by the Company, against delivery to the Representative for the respective accounts of the Initial Purchasers of certificates or security entitlements for the Securities to be purchased by them. It is understood that each Initial Purchaser has authorized the Representative, for its account, to accept delivery of, receipt for, and make payment of the purchase price for, the Initial Securities and the Option Securities, if any, which it has agreed to purchase. Merrill Lynch, individually and not as representative of the Initial Purchasers, may (but shall not be obligated to) make payment of the purchase price for the Initial Securities or the Option Securities, if any, to be purchased by any Initial Purchaser whose funds have not been received by the Closing Time or the relevant Date of Delivery, as the case may be, but such payment shall not relieve such Initial Purchaser from its obligations hereunder.

SECTION 3. Covenants of the Company . The Company covenants with each Initial Purchaser as follows:

(a) Delivery of Offering Memorandum . The Company has delivered to each Initial Purchaser, without charge, as many copies of the Preliminary Offering Memorandum (as amended or supplemented) thereto and documents incorporated by reference therein as such Initial Purchaser reasonably requested, and the Company hereby consents to the use of such copies. The Company will furnish to each Initial Purchaser, without charge, such number of copies of the Final Offering Memorandum thereto and documents incorporated by reference therein as such Initial Purchaser may reasonably request.

(b) Notice and Effect of Material Events . If at any time prior to the completion of resales of the Securities by the Initial Purchasers, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the Initial Purchasers or for the Company, to amend or supplement the General Disclosure Package or the Final Offering Memorandum in order that the General

Dis closure Package or the Final Offering Memorandum, as the case may be, will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstanc es existing at the time it is delivered to a Subsequent Purchaser, the Company will promptly (A) give the Representative notice of such event and (B) prepare any amendment or supplement as may be necessary to correct such statement or omission and, a reaso nable amount of time prior to any proposed use or distribution, furnish the Representative with copies of any such amendment or supplement; provided that the Company shall not use or distribute any such amendment or supplement to which the Representative o r counsel for the Initial Purchasers shall object. The Company will furnish to the Initial Purchasers such number of copies of such amendment or supplement as the Initial Purchasers may reasonably request.

(c) Reporting Requirements . Until the completion of resales of the Securities by the Initial Purchasers, the Company will file all documents required to be filed with the Commission pursuant to the 1934 Act within the time periods required by the 1934 Act and the 1934 Act Regulations. The Company has given the Representative notice of any filings made pursuant to the 1934 Act or 1934 Act Regulations within 48 hours prior to the Applicable Time; the Company will give the Representative notice of its intention to make any such filing from the Applicable Time to the Closing Time and will furnish the Representative with copies of any such documents a reasonable amount of time prior to such proposed filing, as the case may be, and will not file or use any such document to which the Representative or counsel for the Initial Purchasers shall reasonably object except as reasonably required by recommendation of counsel for the Company.

(d) Blue Sky Qualifications . The Company will use its commercially reasonable efforts, in cooperation with the Initial Purchasers, to qualify the Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Representative may designate and to maintain such qualifications in effect so long as required to complete the distribution of the Securities; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject.

(e) Use of Proceeds . The Company will use the net proceeds received by it from the sale of the Securities in the manner specified in the General Disclosure Package and the Final Offering Memorandum under “Use of Proceeds.”

(f) DTCC . The Company will cooperate with the Initial Purchasers and use its commercially reasonable efforts to permit the offered Securities to be eligible for clearance and settlement through the facilities of The Depository Trust & Clearing Corporation (“DTCC”).

(g) Listing . The Company will use its commercially reasonable efforts to effect and maintain the listing of a number of shares of Common Stock equal to the Maximum Number of Underlying Shares on the Nasdaq Global Select Market.

(h) Restriction on Sale of Securities . During a period of 90 days from the date of the Final Offering Memorandum, the Company will not, without the prior written consent of Merrill Lynch, (i) directly or indirectly, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or file any registration statement under the 1933 Act with respect to any of the foregoing or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Common Stock, whether any

such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash or otherwise. The foregoing sentence shall not apply to (A) the Securities to be sold hereunder and any shares of Common Stock issued upon conversion of the Securities, (B) any shares of Common Stock issued by the Company upon the exercise of an option or warrant, the vesting or any settlement of any restricted stock unit or the conversion of a security outstanding on the date hereof and referred to in the General Disclosure Package and the Final Offering Memorandum , (C) any sh ares of Common Stock issued or options to purchase Common Stock or restricted stock granted pursuant to existing employee benefit plans of the Company referred to in the General Disclosure Package and the Final Offering Memorandum or (D) any shares of Comm on Stock issued pursuant to any non-employee director stock plan or dividend reinvestment plan referred to in the General Disclosure Package and the Final Offering Memorandum . For the avoidance of doubt, nothing in this paragraph shall prevent the entry i nto and performance under or termination of the Capped Call Confirmations by the Company or the Counterparty.

(i) Reservation . The Company will reserve and keep available at all times, free of preemptive rights, a number of shares of Common Stock equal to the Maximum Number of Underlying Shares.

(j) Acquisition . To the extent the Acquisition is consummated, the Company shall consummate the Acquisition in a manner consistent in all material respects with the description thereof contained or incorporated by reference in the General Disclosure Package and the Final Offering Memorandum.

SECTION 4. Payment of Expenses .

(a) Expenses . The Company will pay or cause to be paid all expenses incident to the performance of their obligations under this Agreement, including (i) preparation, issuance and delivery of the Securities to the Initial Purchasers and the Maximum Number of Underlying Shares issuable upon conversion thereof and any charges of DTCC in connection therewith, (ii) the fees and disbursements of the Company’s counsel, accountants and other advisors, (iii) the qualification of the Securities under securities laws in accordance with the provisions of Section 3(d) hereof, including filing fees and the reasonable fees and disbursements of counsel for the Initial Purchasers in connection therewith and in connection with the preparation of the Blue Sky Survey and any supplement thereto, (iv) the preparation, printing and delivery to the Initial Purchasers of copies of each Preliminary Offering Memorandum, any Issuer Written Information, the Final Term Sheet and the Final Offering Memorandum and any amendments or supplements thereto and any costs associated with electronic delivery of any of the foregoing by the Initial Purchasers to investors, (v) all fees and expenses of the Trustee and any expenses of any transfer agent or registrar for the Securities or the Maximum Number of Underlying Shares issuable upon conversion of the Securities, (vi) the costs and expenses of the Company relating to investor presentations on any “road show” undertaken in connection with the marketing of the Securities, including without limitation, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations, travel and lodging expenses of the representatives and officers of the Company and any such consultants, and the cost of aircraft and other transportation chartered in connection with the road show, (vii) the fees and expenses incurred in connection with the listing of the Maximum Number of Underlying Shares issuable upon conversion of the Securities on the Nasdaq Global Select Market and (viii) the actual costs and expenses (including, without limitation, any damages or other amounts payable in connection with legal or contractual liability) customarily associated with the reforming of any contracts for sale of the Securities made by the Initial Purchasers and/or unwinding any trade in connection with the Securities caused by a breach of the representation contained in the first sentence of Section 1 (a)(iii) or the failure to meet any condition contained in Section 5 .

(b) Termination of Agreement . If this Agreement is terminated by the Representative in accordance with the provisions of Section 5, Section 10(a)(i) or (iii) or Section 11 hereof, the Company shall reimburse the Initial Purchasers for all of their out ‑of ‑pocket expenses, including the reasonable fees and disbursements of counsel for the Initial Purchasers.

SECTION 5. Conditions of Initial Purchasers’ Obligations . The obligations of the several Initial Purchasers hereunder are subject to the accuracy of the representations and warranties of the Company contained herein or in certificates of any officer of the Company or any of its subsidiaries, to the performance by the Company of its covenants and other obligations hereunder, and to the following further conditions:

(a) Opinion of Counsel for Company . At the Closing Time, the Representative shall have received the opinion, dated the Closing Time, of Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel for the Company, in form and substance satisfactory to counsel for the Initial Purchasers, together with signed or reproduced copies of such letter for each of the other Initial Purchasers to the effect set forth in Exhibit A hereto.

(b) Opinions of Counsel for Initial Purchasers . At the Closing Time, the Representative shall have received the opinion, dated the Closing Time, of each of Weil, Gotshal & Manges LLP and Davis Polk & Wardwell LLP, counsel for the Initial Purchasers, together with signed or reproduced copies of such letter for each of the other Initial Purchasers, in form and substance satisfactory to the Representative. In giving such opinion such counsel may rely, as to all matters governed by the laws of jurisdictions other than the law of the State of New York, the General Corporation Law of the State of Delaware and the federal securities laws of the United States, upon the opinions of counsel satisfactory to the Representative. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of officers and other representatives of the Company and its subsidiaries and certificates of public officials.

(c) Officers’ Certificate . At the Closing Time, there shall not have been, since the date hereof or since the respective dates as of which information is given in the General Disclosure Package or the Final Offering Memorandum, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, and the Representative shall have received a certificate of the Chief Executive Officer or the President of the Company and of the chief financial or chief accounting officer of the Company, dated the Closing Time, to the effect that (i) there has been no such material adverse change, (ii) the representations and warranties of the Company in this Agreement are true and correct with the same force and effect as though expressly made at and as of the Closing Time and (iii) the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to the Closing Time.

(d) Chief Financial Officer’s Certificate . At the time of execution of this Agreement and at the Closing Time, the Representative shall have received a certificate, dated the respective dates of delivery thereof and addressed to the Representative, of the chief financial officer of the Company with respect to certain financial data contained in the Offering Memorandum , in form and substance satisfactory to the Representative.

(e) Accountant’s Comfort Letter . At the time of the execution of this Agreement, the Representative shall have received from PricewaterhouseCoopers LLP a letter, dated such date, in form and substance satisfactory to the Representative, together with signed or reproduced copies of such letter for each of the other Initial Purchasers containing statements and information of the type ordinarily

included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information contained in the Offering Memorandum.

(f) Bring-down Comfort Letter . At the Closing Time, the Representative shall have received from PricewaterhouseCoopers LLP a letter, dated as of the Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (e) of this Section, except that the specified date referred to shall be a date not more than three business days prior to the Closing Time.

(g) Approval of Listing . At the Closing Time, a number of shares of Common Stock equal to the Maximum Number of Underlying Shares shall have been approved for listing on the Nasdaq Global Select Market, subject only to official notice of issuance.

(h) Lock-up Agreements . At the date of this Agreement, the Representative shall have received an agreement substantially in the form of Exhibit B hereto signed by the persons listed on Schedule D hereto.

(i) Maintenance of Rating . Since the execution of this Agreement, there shall not have been any decrease in or withdrawal of the rating of any securities of the Company or any of its subsidiaries by any “nationally recognized statistical rating organization” (as defined in Section 3(a)(62) of the 1934 Act) or any notice given of any intended or potential decrease in or withdrawal of any such rating or of a possible change in any such rating that does not indicate the direction of the possible change.

(j) Conditions to Purchase of Option Securities . In the event that the Initial Purchasers exercise their option provided in Section 2(b) hereof to purchase all or any portion of the Option Securities, the representations and warranties of the Company contained herein and the statements in any certificates furnished by the Company and any of its subsidiaries hereunder shall be true and correct as of each Date of Delivery and, at the relevant Date of Delivery, the Representative shall have received:

(i) Officers’ Certificate . A certificate, dated such Date of Delivery, of the President or a Vice President of the Company and of the chief financial or chief accounting officer of the Company confirming that the certificate delivered at the Closing Time pursuant to Section 6(c) hereof remains true and correct as of such Date of Delivery.

(ii) Chief Financial Officer’s Certificate . If requested by the Representative, a certificate, dated such Date of Delivery, of the chief financial officer of the Company, to the same effect as the certificate required by Section 5(d) hereof.

(iii) Opinion of Counsel for Company . If requested by the Representative, the opinion of Wilson Sonsini Goodrich & Rosati, P.C., counsel for the Company, in form and substance satisfactory to counsel for the Initial Purchasers, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 6(a) hereof.

(iv) Opinions of Counsel for Initial Purchasers . If requested by the Representative, the opinion of Weil, Gotshal & Manges LLP and Davis Polk & Wardwell LLP, counsel for the Initial Purchasers, dated such Date of Delivery, relating to the Option Securities to be purchased on such Date of Delivery and otherwise to the same effect as the opinion required by Section 5(b) hereof.

(v) Bring-down Comfort Letter . If requested by the Representative, a letter from PricewaterhouseCoopers LLP, in form and substance satisfactory to the Representative and dated such Date of Delivery, substantially in the same form and substance as the letter furnished to the

Representative pursuant to Section 5(f) hereof, except that the “specified date” in the letter furnished pursuant to this paragraph shall be a date not more than three business days prior to such Date of Delivery.

(k) Additional Documents . At the Closing Time and at each Date of Delivery (if any), counsel for the Initial Purchasers shall have been furnished with such documents and opinions as they may require for the purpose of enabling them to pass upon the issuance and sale of the Securities as herein contemplated, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Securities as herein contemplated shall be satisfactory in form and substance to the Representative and counsel for the Initial Purchasers.

(l) Termination of Agreement . If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement, or, in the case of any condition to the purchase of Option Securities on a Date of Delivery which is after the Closing Time, the obligations of the several Initial Purchasers to purchase the relevant Option Securities, may be terminated by the Representative by notice to the Company at any time at or prior to Closing Time or such Date of Delivery, as the case may be, and such termination shall be without liability of any party to any other party except as provided in Section 4 and except that Sections 1, 7, 8, 9, 14, 15, 16 and 17 shall survive any such termination and remain in full force and effect.

SECTION 6. Subsequent Offers and Resales of the Securities .

(a) Offer and Sale Procedures . Each of the Initial Purchasers and the Company hereby establish and agree to observe the following procedures in connection with the offer and sale of the Securities:

(i) Offers and Sales . Offers and sales of the Securities shall be made to such persons and in such manner as is contemplated by the Offering Memorandum. Each Initial Purchaser severally agrees that it will not offer, sell or deliver any of the Securities in any jurisdiction outside the United States except under circumstances that will result in compliance with th e applicable laws thereof, and that it will take at its own expense whatever action is required to permit its purchase and resale of the Securities in such jurisdictions. The Company has not entered into any contractual arrangement, other than this Agreement, with respect to the distribution of the Securities or any Common Stock issuable upon conversion of the Securities and the Company will not enter into any such arrangement except as contemplated thereby.

(ii) No General Solicitation . No general solici tation or general advertising (within the meaning of Rule 502(c) under the 1933 Act Regulations) will be used in the United States in connection with the offering or sale of the Securities.

(iii) Legends . Each of the Securities will bear, to the extent applicable, the legend contained in “Notice to Investors” in the General Disclosure Package and the Final Offering Memorandum for the time period and upon the other terms stated therein.

(iv) Minimum Principal Amount . No sale of the Securities to any one Subsequent Purchaser will be for less than U.S. $1,000 principal amount and no Security will be issued in a smaller principal amount. If the Subsequent Purchaser is a non-bank fiduciary acting on behalf of others, each person for whom it is acting must purchase at least U.S. $1,000 principal amount of the Securities.

(b) Covenants of the Company . The Company covenants with each Initial Purchaser as follows:

(i) Integration . The Company agrees that it will not and will cause its Affiliates not to, directly or indirectly, solicit any offer to buy, sell or make any offer or sale of, or otherwise negotiate in respect of, securities of the Company of any class if, as a result of the doctrine of “integration” referred to in Rule 502 under the 1933 Act Regulations, such offer or sale would render invalid (for the purpose of (i) the sale of the offered Securities by the Company to the Initial Purchasers, (ii) the resale of the offered Securities by the Initial Purchasers to Subsequent Purchasers or (iii) the resale of the offered Securities by such Subsequent Purchasers to others) the exemption from the registration requirements of the 1933 Act provided by Section 4(2) thereof or by Rule 144A thereunder or otherwise.

(ii) Rule 144A Information . The Company agrees th at so long as any of the Securities or the Conversion Shares constitute “restricted securities” within the meaning of Rule 144A(a)(3), in order to render the offered Securities eligible for resale pursuant to Rule 144A, it will make available, upon request, to any holder of offered Securities or prospective purchasers of Securities the information specified in Rule 144A(d)(4), unless the Company furnishes information to the Commission pursuant to Section 13 or 15(d) of the 1934 Act.

(iii) Restriction on Repurchases . Until the expiration of one year after the last original issuance of the offered Securities, the Company will not, and will cause its Affiliates not to, resell any offered Securities which are “restricted securities” (as such term is defined under Rule 144(a)(3)), whether as beneficial owner or otherwise (except as agent acting as a securities broker on behalf of and for the account of customers in the ordinary course of business in unsolicited broker’s transactions).

(c) Representations, Warranties and Agreements of the Initial Purchasers . Each Initial Purchaser severally and not jointly represents and warrants to, and agrees with, the Company that it is a Qualified Institutional Buyer and an “accredited investor” within the meaning of Rule 501( a) under the 1933 Act Regulations. Each Initial Purchaser understands that the offered Securities have not been and will not be registered under the 1933 Act and may not be offered or sold within the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the 1933 Act. Each Initial Purchaser severally represents and agrees that it has not offered or sold, and will not offer or sell, any offered Securities constituting part of its allotment within the United States except in accordance with Rule 144A or another applicable exemption from the registration requirements of the 1933 Act. Accordingly, neither it nor any person acting on its behalf has made or will make offers or sales of the Securities in the United States by means of any form of general solicitation or general advertising (within the meaning of Regulation D) in the United States . Each Initial Purchaser will take reasonable steps to inform, and cause each of its affiliates (as such term is defined in Rule 501(b) under the 1933 Act Regulations (each, an “Affiliate”)) to take reasonable steps to inform, persons acquiring Securities from such Initial Purchaser or Affiliate, as the case may be, in the United States that the Securities (A) have not been and will not be registered under the 1933 Act, (B) are being sold to them without registration under the 1933 Act in reliance on Rule 144A or in accordance with another exemption from registration under the 1933 Act, as the case may be, and (C) may not be offered, sold or otherwise transferred except (1) to the Company, (2) outside the United States in accordance with Regulation S or (3) inside the United States in accordance with (x) Rule 144A to a person whom the seller reasonably believes is a Qualified Institutional Buyer that is purchasing such Securities for its own account or for the account of a Qualified Institutional Buyer to whom notice is given that the offer, sale or transfer is being made in reliance on Rule 144A or (y) pursuant to another available exemption from registration under the 1933 Act.

SECTION 7. Indemnification .

(a) Indemnification of Initial Purchasers . The Company agrees to indemnify and hold harmless each Initial Purchaser, its Affiliates, its selling agents and each person, if any, who controls any Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:

(i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact included in any Preliminary Offering Memorandum, the Final Offering Memorandum, the information contained in the Final Term Sheet, any Issuer Written Information or any other information used by or on behalf of the Company in connection with the offer or sale of the Securities (or any amendment or supplement to the foregoing) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading;

(ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission; provided that (subject to Section 7(d) below) any such settlement is effected with the written consent of the Company;

(iii) against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by Merrill Lynch), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above;

provided, however, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in any Preliminary Offering Memorandum, the Final Offering Memorandum or the information contained in the Final Term Sheet (or any amendment or supplement to the foregoing) in reliance upon and in conformity with the Initial Purchaser Information.

(b) Indemnification of Company, Directors and Officers . Each Initial Purchaser severally agrees to indemnify and hold harmless the Company, its directors, its officers and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in any Preliminary Offering Memorandum, the Final Offering Memorandum or the information contained in the Final Term Sheet (or any amendment or supplement to the foregoing) in reliance upon and in conformity with the Initial Purchaser Information.

(c) Actions against Parties; Notification . Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 7(a) above, counsel to the indemnified parties shall be selected by Merrill Lynch, and, in the case of parties

indemnified pursuant to Section 7(b) above, counsel to the indemnified parties shall be selected by the Company. An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local co unsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party sh all, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 7 or Section 8 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or con sent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party.

(d) Settlement without Consent if Failure to Reimburse . If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 7(a)(ii) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.

SECTION 8. Contribution . If the indemnification provided for in Section 7 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, on the one hand, and the Initial Purchasers, on the other hand, from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and of the Initial Purchasers, on the other hand, in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations.

The relative benefits received by the Company, on the one hand, and the Initial Purchasers, on the other hand, in connection with the offering of the Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Securities pursuant to this Agreement (before deducting expenses) received by the Company, on the one hand, and the total underwriting discount received by the Initial Purchasers, on the other hand, bear to the aggregate initial offering price of the Securities as set forth on the cover of the Final Offering Memorandum.

The relative fault of the Company, on the one hand, and the Initial Purchasers, on the other hand, shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or by the Initial Purchasers and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

The Company and the Initial Purchasers agree that it would not be just and equitable if contribution pursuant to this Section 8 were determined by pro rata allocation (even if the Initial Purchasers were treated as one entity for such purpose ) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 8. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 8 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission.

Notwithstanding the provisions of this Section 8, no Initial Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Securities purchased by it and distributed to the public were offered to the public exceeds the amount of any damages that such Initial Purchaser has otherwise been required to pay by reason of any such untrue or alleged untrue statement or omission or alleged omission.

No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

For purposes of this Section 8, each person, if any, who controls an Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act and each Initial Purchaser’s Affiliates and selling agents shall have the same rights to contribution as such Initial Purchaser, and each director of the Company, each officer of the Company, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company. The Initial Purchasers’ respective obligations to contribute pursuant to this Section 8 are several in proportion to the aggregate principal amount of Initial Securities set forth opposite their respective names in Schedule A hereto and not joint.

SECTION 9. Representations, Warranties and Agreements to Survive . All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Company or any of its subsidiaries submitted pursuant hereto, shall remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of any Initial Purchaser or its Affiliates or selling agents, any person controlling any Initial Purchaser, its officers or directors or any person controlling the Company and (ii) delivery of and payment for the Securities.

SECTION 10. Termination of Agreement .

(a) Termination . The Representative may terminate this Agreement, by notice to the Company, at any time at or prior to the Closing Time (i) if there has been, in the judgment of the Representative, since the time of execution of this Agreement or since the respective dates as of which information is given in the General Disclosure Package or the Final Offering Memorandum, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, or (ii) if there has occurred any material adverse change in the financial markets in the United States or the international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of the Representative, impracticable or inadvisable to proceed with the completion of the offering or to enforce contracts for the sale of the Securities, or (iii) if trading in any securities of the Company has been suspended or materially limited by the Commission or the Nasdaq

Global Select Market, or (iv) if trading generally on the NYSE MKT or the New York Stock Exchange or in the Nasdaq Global Select Market has been suspended or materially limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of said exchanges or by order of the Commission, FINRA or any other governmental authority, or (v) a material disruption has occurred in commercial banking or securities settlement or clearance services in the United States, or (vi) if a banking morato rium has been declared by either Federal or New York authorities.

(b) Liabilities . If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party except as provided in Section 4 hereof, and provided further that Sections 1, 7, 8, 9, 14, 15,16 and 17 shall survive such termination and remain in full force and effect.

SECTION 11. Default by One or More of the Initial Purchasers . If one or more of the Initial Purchasers shall fail at the Closing Time or a Date of Delivery to purchase the Securities which it or they are obligated to purchase under this Agreement (the “Defaulted Securities”), the Representative shall have the right, within 24 hours thereafter, to make arrangements for one or more of the non‑defaulting Initial Purchasers, or any other initial purchasers, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth; if, however, the Representative shall not have completed such arrangements within such 24‑hour period, then:

(i) if the principal amount of Defaulted Securities does not exceed 10% of the aggregate principal amount of the Securities to be purchased on such date, each of the non‑defaulting Initial Purchasers shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non‑defaulting Initial Purchasers, or

(ii) if the principal amount of Defaulted Securities exceeds 10% of the aggregate principal amount of the Securities to be purchased on such date, this Agreement or, with respect to any Date of Delivery which occurs after the Closing Time, the obligation of the Initial Purchasers to purchase, and the Company to sell, the Option Securities to be purchased and sold on such Date of Delivery, shall terminate without liability on the part of any non‑defaulting Initial Purchaser.

No action taken pursuant to this Section shall relieve any defaulting Initial Purchaser from liability in respect of its default.

In the event of any such default which does not result in a termination of this Agreement or, in the case of a Date of Delivery which is after the Closing Time, which does not result in a termination of the obligation of the Initial Purchasers to purchase and the Company to sell the relevant Option Securities, as the case may be, either the (i) Representative or (ii) the Company shall have the right to postpone Closing Time or the relevant Date of Delivery, as the case may be, for a period not exceeding seven days in order to effect any required changes in the General Disclosure Package or the Final Offering Memorandum or in any other documents or arrangements. As used herein, the term “Initial Purchaser” includes any person substituted for an Initial Purchaser under this Section 11.

SECTION 12. Notices . All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Initial Purchasers shall be directed to Merrill Lynch at One Bryant Park, New York, New York 10036, attention of Syndicate Department (facsimile: (646) 855-3073), wi th a copy to ECM Legal (facsimile: (212) 230-8730); notices to the Company shall be directed to it at 198 Champion Court, San Jose, California 95134 , attention of Thad Trent, Executive Vice President Finance and Administration and Chief Financial Officer .

SECTION 13. No Advisory or Fiduciary Relationship . The Company acknowledges and agrees that (a) the purchase and sale of the Securities pursuant to this Agreement, including the determination of the initial offering price of the Securities and any related discounts and commissions, is an arm’s-length commercial transaction between the Company, on the one hand, and the several Initial Purchasers, on the other hand, (b) in connection with the offering of the Securities and the process leading thereto, each Initial Purchaser is and has been acting solely as a principal and is not the agent or fiduciary of the Company, any of its subsidiaries or their respective stockholders, creditors, employees or any other party, (c) no Initial Purchaser has assumed or will assume an advisory or fiduciary responsibility in favor of the Company with respect to the offering of the Securities or the process leading thereto (irrespective of whether such Initial Purchaser has advised or is currently advising the Company or any of its subsidiaries on other matters) and no Initial Purchaser has any obligation to the Company with respect to the offering of the Securities except the obligations expressly set forth in this Agreement, (d) the Initial Purchasers and their respective affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Company and (e) the Initial Purchasers have not provided any legal, accounting, regulatory or tax advice with respect to the offering of the Securities and the Company has consulted its own respective legal, accounting, regulatory and tax advisors to the extent it deemed appropriate.

SECTION 14. Parties . This Agreement shall each inure to the benefit of and be binding upon the Initial Purchasers and the Company and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Initial Purchasers and the Company and their respective successors and the controlling persons and officers and directors referred to in Sections 7 and 8 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the Initial Purchasers and the Company and their respective successors, and said controlling persons and officers and directors and their heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of Securities from any Initial Purchaser shall be deemed to be a successor by reason merely of such purchase.

SECTION 15. Trial by Jury . The Company (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) and each of the Initial Purchasers hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.

SECTION 16. GOVERNING LAW . THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF, THE STATE OF NEW YORK WITHOUT REGARD TO ITS CHOICE OF LAW PROVISIONS.

SECTION 17. Consent to Jurisdiction; Waiver of Immunity . Any legal suit, action or proceeding arising out of or based upon this Agreement or the transactions contemplated hereby (“Related Proceedings”) shall be instituted in (i) the federal courts of the United States of America located in the City and County of New York, Borough of Manhattan or (ii) the courts of the State of New York located

in the City and County of New York, Borough of Manhattan (collectively, the “Specified Courts”), and each party irrevocably submits to the exclusive jurisdiction (except for proceedings instituted in regard to the enforcement of a judgment of any such court (a “Relat ed Judgment”), as to which such jurisdiction is non-exclusive) of such courts in any such suit, action or proceeding. Service of any process, summons, notice or document by mail to such party’s address set forth above shall be effective service of process for any suit, action or other proceeding brought in any such court. The parties irrevocably and unconditionally waive any objection to the laying of venue of any suit, action or other proceeding in the Specified Courts and irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such suit, action or other proceeding brought in any such court has been brought in an inconvenient forum.

SECTION 18. TIME . TIME SHALL BE OF THE ESSENCE OF THIS AGREEMENT. EXCEPT AS OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO NEW YORK CITY TIME.

SECTION 19. Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement.

SECTION 20. Effect of Headings . The Section headings herein are for convenience only and shall not affect the construction hereof.

SECTION 21. Xtract Research LLC. The Company hereby agrees that the Initial Purchasers may provide copies of the Preliminary Offering Memorandum and the Final Offering Memorandum relating to the offering of the Securities and any other agreements or documents relating thereto, including, without limitation, any trust indentures, to Xtract Research LLC (“Xtract”) following the completion of the offering for inclusion in an online research service sponsored by Xtract, access to which is restricted to “qualified institutional buyers” as defined in Rule 144A under the 1933 Act.

If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agre ement among the Initial Purchasers and the Company in accordance with its terms.

Very truly yours,
CYPRESS SEMICONDUCTOR CORPORATION

By		/s/ Thad Trent
Title:		Chief Financial Officer, Executive Vice President, Finance and Administration, and Assistant Secretary

CONFIRMED AND ACCEPTED, as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED



By		/s/ Chet Bozdog
		Authorized Signatory

For itself and as Representative of the other Initial Purchasers named in Schedule A hereto.

SCHEDULE A

The initial offering price of the Securities shall be 100% of the principal amount thereof, plus accrued interest, if any, from the date of issuance.

The purchase price to be paid by the Initial Purchasers for the Securities shall be 97.25% of the principal amount thereof.

The interest rate on the Securities shall be 4.50% per annum.

Name of Initial Purchaser		Principal Amount of Securities
Merrill Lynch, Pierce, Fenner & Smith Incorporated	$	187,500,000
Barclays Capital Inc.		25,000,000
Credit Suisse Securities (USA) LLC		25,000,000
BMO Capital Markets Corp.		12,500,000
Total	$	250,000,000

Sch A-1

SCHEDULE B

Final Term Sheet

PRICING TERM SHEET	STRICTLY CONFIDENTIAL

DATED JUNE 20, 2016

CYPRESS SEMICONDUCTOR CORPORATION

$250,000,000

4.50 % CONVERTIBLE SENIOR NOTES DUE 2022

The information in this pricing term sheet supplements Cypress Semiconductor Corporation’s preliminary offering memorandum, dated June 20, 2016 (the “Preliminary Offering Memorandum”), and supersedes the information in the Preliminary Offering Memorandum to the extent inconsistent with the information in the Preliminary Offering Memorandum. In all other respects, this term sheet is qualified in its entirety by reference to the Preliminary Offering Memorandum, including all documents incorporated by reference therein. Terms used herein but not defined herein shall have the respective meanings as set forth in the Preliminary Offering Memorandum. All references to dollar amounts are references to U.S. dollars.

Issuer:		Cypress Semiconductor Corporation, a Delaware corporation.
Ticker/Exchange for Issuer’s Common Stock:		“CY”/The NASDAQ Global Select Market.
Notes:		4.50% Convertible Senior Notes due 2022.
Principal Amount:		$250,000,000 aggregate principal amount ( plus up to an additional $37,500,000 principal amount if the initial purchasers exercise their over-allotment option to purchase additional Notes in full).
Minimum Denominations:		$1,000 and multiples of $1,000 in excess thereof.
Maturity:		January 15, 2022, unless earlier repurchased or converted.
Interest Rate:		4.50% per year.
Interest Payment Dates:		Interest will accrue from June 23, 2016 and will be payable semiannually in arrears on January 15 and July 15 of each year, beginning on January 15, 2017.
Interest Record Dates:		January 1 and July 1 of each year, immediately preceding any January 15 or July 15 interest payment date, as the case may be.

Sch B-1

Offering Price:		100% plus accrued interest, if any, from the Settlement Date.
Trade Date:		June 21, 2016 .
Settlement Date:		June 23, 2016 .
Shortened Settlement:		Issuer expects that delivery of the Notes will be made against payment therefor on or about the second business day following the date of pricing with respect to the Notes (this settlement cycle being referred to as “T+2”). Under Rule 15c6-1 of the Securities Exchange Act of 1934, as amended, trades in the secondary market generally are required to settle in three business days, unless the parties to any such trade expressly agree otherwise.
Last Reported Sale Price of Issuer’s Common Stock on June 20, 2016:		$10.18 per share.
Initial Conversion Rate:		74.1372 shares of common stock per $1,000 principal amount of Notes.
Initial Conversion Price:		Approximately $13.49 per share of common stock.
Conversion Premium:		Approximately 32.50% above the Last Reported Sale Price of Issuer’s Common Stock on June 20, 2016 .
Joint Book-Running Managers:		Merrill Lynch, Pierce, Fenner & Smith Incorporated Barclays Capital Inc. Credit Suisse Securities (USA) LLC
Co-Manager:		BMO Capital Markets Corp.
CUSIP Number (144A):		232806 AL3
ISIN (144A):		US232806AL34
Use of Proceeds:		Issuer estimates that the net proceeds from the offering, after deducting estimated offering fees and expenses, will be approximately $242.1 million. Issuer expects to use the proceeds from the offering and the New Term Loan as follows: (1) to pay the cost of the capped call transactions described in the Preliminary Offering Memorandum with one or more of the initial purchasers or their affiliates or other financial institutions, (2) to finance the IoT Acquisition, (3) to repay approximately $107.0 million of revolving loans under Issuer’s existing credit facility and (4) to pay fees and expenses related to the foregoing. In the event the acquisition is not consummated, Issuer intends to use the remaining proceeds from the offering for general corporate purposes, which may include the repayment of revolving loans under its existing credit facility.

Sch B-2

If the over-allotment option granted to the initial purchasers is exercised with respect to additional Notes, Issuer may use a portion of such net proceeds to enter into additional capped call transactions relating to the Notes. Issuer expects to use the remaining net proceeds for general corporate purposes, which may include the repayment of revolving loans under its existing credit facility.

Pending these uses, Issuer intends to invest the net proceeds in investment grade, short-term fixed income instruments which include corporate, financial institution, federal agency or U.S. government obligations. Accordingly, Issuer will retain broad discretion over the use of these proceeds.

Adjustment to Shares Delivered upon Conversion upon a Make-whole Fundamental Change:

If a “make-whole fundamental change” (as defined in the Preliminary Offering Memorandum) occurs at any time prior to the maturity date and a holder elects to convert its Notes in connection with such make-whole fundamental change, the conversion rate for any Notes so converted will, under certain circumstances and for a limited period of time, be increased by a number of additional shares of common stock, as described under “Description of Notes—Adjustment to Shares Delivered upon Conversion upon a Make-whole Fundamental Change” in the Preliminary Offering Memorandum.

The following table sets forth the number of additional shares of Issuer’s common stock to be received per each $1,000 principal amount of Notes for each stock price and effective date set forth below:

	Stock Price
Effective Date	$10.18	$11.00	$12.00	$13.00	$13.49	$14.00	$15.00	$16.00	$18.00	$20.00	$25.00	$30.00
June 23, 2016	24.0945	20.0191	16.0592	12.9392	11.6523	10.4543	8.4567	6.8388	4.4417	2.8225	0.6964	0.0163
January 15, 2017	24.0945	20.0191	16.0417	12.8815	11.5819	10.3729	8.3640	6.7444	4.3589	2.7640	0.6964	0.0163
January 15, 2018	24.0945	19.9373	15.7750	12.5277	11.2009	9.9721	7.9453	6.3269	3.9822	2.4490	0.5436	0.0047
January 15, 2019	24.0945	19.4900	15.1550	11.8162	10.4670	9.2279	7.2073	5.6231	3.3889	1.9840	0.3516	-
January 15, 2020	24.0945	18.5918	14.0008	10.5454	9.1779	7.9407	5.9713	4.4788	2.4806	1.3145	0.1316	-
January 15, 2021	24.0945	16.9464	11.8417	8.1885	6.8162	5.6214	3.8393	2.6100	1.1783	0.4880	-	-
January 15, 2022	24.0945	16.7718	9.1960	2.7858	-	-	-	-	-	-	-	-

Sch B-3

The exact stock prices and effective dates may not be set forth in the table above, in which case

If the stock price is between two stock prices in the table or the effective date is between two effective dates in the table, the number of additional shares will be determined by a straight-line interpolation between the number of additional shares set forth for the higher and lower stock prices and the earlier and later effective dates, as applicable, based on a 365-day year.

If the stock price is greater than $30.00 per share (subject to adjustment in the same manner as the stock prices set forth in the column headings of the table above), no additional shares will be added to the conversion rate.

If the stock price is less than $10.18 per share (subject to adjustment in the same manner as the stock prices set forth in the column headings of the table above), no additional shares will be added to the conversion rate.

Notwithstanding the foregoing, in no event will the conversion rate per $1,000 principal amount of Notes exceed 98.2317 shares of common stock, subject to adjustment in the same manner as the conversion rate as set forth under “Description of Notes—Conversion Rights—Conversion Rate Adjustments” in the Preliminary Offering Memorandum.

__________________

This communication is intended for the sole use of the person to whom it is provided by the sender. This material is confidential and is for your information only and is not intended to be used by anyone other than you. This information does not purport to be a complete description of the Notes or the offering thereof. This communication does not constitute an offer to sell or the solicitation of an offer to buy any Notes in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction.

The Notes and any shares of common stock issuable upon conversion of the Notes have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), or any other securities laws, and may not be offered or sold within the United States or any other jurisdiction, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and any other applicable securities laws. The initial purchasers are initially offering the Notes only to qualified institutional buyers as defined in, and in reliance on, Rule 144A under the Securities Act.

The Notes and shares of common stock issuable upon conversion of the Notes are not transferable except in accordance with the restrictions described under “Transfer Restrictions” in the Preliminary Offering Memorandum.

A copy of the Preliminary Offering Memorandum for the offering of the Notes may be obtained by contacting Merrill Lynch, Pierce, Fenner & Smith Incorporated by telephone at 1-800-294-1322.

Any legends, disclaimers or other notices that may appear below are not applicable to this communication and should be disregarded. Such legends, disclaimers or other notices have been automatically generated as a result of this communication having been sent via Bloomberg or another system.

[ Remainder of Page Intentionally Blank ]

Sch B-4

SCHEDULE C

Issuer Written Information

Final Term Sheet in the form set forth on Schedule B

Sch C-1

SCHEDULE D

List of Persons and Entities Subject to Lock-up

T. J. Rodgers

Thad Trent

Dana C. Nazarian

Hassane El-Khoury

W. Steve Albrecht

Eric A. Benhamou

Raymond Bingham

Joe Rauschmayer

O. C. Kwon

Wilbert G.M. Van Den Hoek

Michael S. Wishart

Sch D-1

Exhibit A

FORM OF OPINION OF COMPANY’S COUNSEL

TO BE DELIVERED PURSUANT TO SECTION 5(b)

The Company is a corporation duly incorporated and validly existing under the laws of the State of Delaware and is in good standing under such laws. The Company has requisite corporate power to own or lease its properties and carry on its business, as described in the Final Offering Memorandum. The Company is qualified to do business and is in good standing as a foreign corporation in the State of California.

The execution and delivery of the Operative Documents have been duly authorized by all necessary corporate action on the part of the Company, and the Company has the corporate power to execute and deliver the Operative Documents and to perform its obligations under the terms of the Operative Documents.

The Purchase Agreement has been duly executed and delivered by the Company.

The authorized capital stock of the Company is as set forth in the Final Offering Memorandum under the caption “Description of Capital Stock.”

The Securities being issued on the date hereof are in the form contemplated in the Indenture and have been duly authorized by all necessary corporate action of the Company and have been duly executed by the Company and when authenticated by the Trustee in accordance with the terms of the Indenture (which authentication we have not determined by inspection of the Securities) and issued and delivered to the Initial Purchasers against payment of the purchase price therefor specified in the Purchase Agreement, the Securities will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms.

The Indenture has been duly authorized by all necessary corporate action on the part of the Company and the Indenture has been duly executed and delivered by the Company and the Indenture constitutes a valid and binding instrument, enforceable against the Company in accordance with its terms.

The shares of Common Stock initially issuable upon conversion of the Securities (assuming full physical settlement of the Securities and including shares of Common Stock issuable with respect to any Make-Whole Fundamental Change (as defined in the Indenture)) (the “ Shares ”) have been duly authorized and reserved by all necessary corporate action on the part of the Company and the Shares, if any, when issued upon due conversion of the Securities in accordance with the terms of such Securities and the Indenture would, if issued today, be validly issued, fully paid and nonassessable and free of preemptive rights arising under the Certificate of Incorporation or Bylaws or the DGCL.

The statements set forth in the General Disclosure Package and the Fin al Offering Memorandum under the caption “Description of Notes” insofar as such statements purport to constitute a summary of the terms of the Indenture and the Securities, fairly summarize such terms in all material respects.

A-1

The statements set forth i n the General Disclosure Package and the Final Offering Memorandum under the caption “Certain U.S. Federal Income Tax Considerations,” insofar as they purport to summarize the United States federal tax laws referred to therein or legal conclusions with res pect thereto, are fair summaries in all material respects.

10.

The statements set forth in the General Disclosure Package and Final Offering Memorandum under the caption “Description of Capital Stock,” insofar as such statements constitute summaries of legal matters or documents, fairly summarize the matters and documents referred to therein in all material respects.

11.

The Company is not, and immediately after giving effect to the offering and sale of the Securities and the application of the proceeds thereof as described in the General Disclosure Package and the Final Offering Memorandum, will not be required to be registered as an “investment company,” as such term is defined in the Investment Company Act.

12.

None of the issuance and sale of the Securities being delivered on the date hereof, the execution, delivery and performance by the Company of its obligations under the Operative Documents or the consummation of the transactions contemplated thereby will (i) violate the Certificate of Incorporation or Bylaws, (ii) conflict with, result in a breach or violation by the Company of any of the terms or provisions of, or constitute a default by the Company under any Reviewed Agreement, (iii) result in a violation of any Reviewed Judgment, or (iv) contravene any applicable law.

13.

No consent, approval, authorization, order, registration or qualification of or with any U.S. federal, New York, California or Delaware (solely with respect to the DGCL) governmental agency or body or court is required for the execution and delivery of the Purchase Agreement, the offer, sale or issuance by the Company of the Securities or the consummation by the Company of the transactions contemplated by the Purchase Agreement or the Indenture, except such as may be required under state securities or Blue Sky laws.

14.

Assuming the accuracy of the Initial Purchasers’ representations contained in the Purchase Agreement and the accuracy of the Company’s representations contained in the Purchase Agreement, no registration of the Securities or the Shares is required under the Securities Act for the sale of the Securities by the Company to the Initial Purchasers pursuant to the Purchase Agreement and the Indenture or for the initial resale of the Securities by the Initial Purchasers in the manner contemplated by the Purchase Agreement, the General Disclosure Package and the Final Offering Memorandum, and it is not necessary to qualify the Indenture under the Trust Indenture Act (it being understood that, in each case, no opinion is expressed as to any subsequent resale of the Securities or the consequences thereof).

A-2

Exhibit B

FORM OF LOCK-UP TO BE DELIVERED PURSUANT TO SECTION 5(h)

June 20, 2016

Merrill Lynch, Pierce, Fenner & Smith

Incorporated,

as Representative of the several

Initial Purchasers to be named in the

within‑mentioned Purchase Agreement

One Bryant Park

New York, New York 10036

Re: Proposed Offering by Cypress Semiconductor Corporation

Dear Sirs:

The undersigned, a stockholder and an officer and/or director of Cypress Semiconductor Corporation, a Delaware corporation (the “Company”), understands that Merrill Lynch, Pierce, Fenner & Smith Incorporated (“Merrill Lynch”) proposes to enter into a Purchase Agreement (the “Purchase Agreement”) with the Company providing for the offering of $250,000,000 aggregate principal amount of the Company’s 4.50% Convertible Senior Notes due 2022 (the “Securities”). In recognition of the benefit that such an offering will confer upon the undersigned as a stockholder and an officer and/or director of the Company, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned agrees with each initial purchaser to be named in the Purchase Agreement that, during the period beginning on the date hereof and ending on the date that is 90 days from the date of the Purchase Agreement (the “Lock-Up Period”), the undersigned will not, without the prior written consent of Merrill Lynch, (i) directly or indirectly, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of any shares of the Company’s common stock, par value $.01 per share (the “Common Stock”), or any securities convertible into or exercisable or exchangeable for Common Stock, whether now owned or hereafter acquired by the undersigned or with respect to which the undersigned has or hereafter acquires the power of disposition (collectively, the “Lock-Up Securities”), or exercise any right with respect to the registration of any of the Lock-Up Securities, or file or cause to be filed any registration statement in connection therewith, under the Securities Act of 1933, as amended, or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Lock-Up Securities, whether any such swap or transaction is to be settled by delivery of Common Stock or other securities, in cash or otherwise.

Notwithstanding the foregoing, and subject to the conditions below, the undersigned may transfer the Lock-Up Securities without the prior written consent of Merrill Lynch, provided that (1) in the case of subclauses (i), (ii), (iii), (iv) and (v) below, Merrill Lynch receives a signed lock-up agreement for the balance of the Lock-Up Period from each donee, trustee, distributee, or transferee, as the case may be, (2) in the case of subclauses (i), (ii), (iii), (iv) and (v) below, any such transfer shall not involve a disposition for value, (3) in the case of subclauses (i), (ii), (iii), (iv) and (v) below, such transfers are not required to be reported with the Securities and Exchange Commission on Form 4 in accordance with Section 16 of

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the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and (4) the undersigned does not otherwise voluntarily effect any public fi ling or report regarding such transfers:

(i)

as a bona fide gift or gifts;

(ii)

if the undersigned is a corporation, partnership, limited liability company, or other business entity, (A) to another corporation, partnership, limited liability company, trust or other business entity that is a direct or indirect affiliate (as defined in Rule 405 promulgated under the Securities Act of 1933, as amended) of the undersigned or (B) as a distribution of shares of Common Stock or any security convertible into or exercisable for Common Stock to limited partners, limited liability company members or stockholders of the undersigned;

(iii)

to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned (for purposes of this lock-up agreement, “immediate family” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin);

(iv)

by will or intestacy;

(v)

if the undersigned is a trust, to its beneficiaries;

(vi)

to the Company, as forfeitures to satisfy any income, employment or social tax withholding and remittance obligations of the undersigned or the employer of the undersigned in connection with the vesting of restricted stock units held by the undersigned and outstanding as of the date hereof or as of the date of the Purchase Agreement; provided, that any shares of Common Stock received shall be subject to the restrictions set forth herein; and provided further, if the undersigned is required to file a report under the Exchange Act, the undersigned shall include a statement in such report to the effect that the filing relates to the forfeiture of Common Stock for tax purposes ;

(vii)

if (A) the undersigned is an employee of the Company as of the date of transfer and (B) the Company does not elect to settle income tax withholding and remittance obligations of the undersigned (or the employer of the undersigned) in connection with the vesting of restricted stock units held by the undersigned by withholding shares of Common Stock as forfeitures pursuant to subclause (vi) above, then the undersigned may transfer up to that number of shares of the Common Stock underlying restricted stock units held by the undersigned that are vested and settled and necessary to satisfy income tax withholding and remittance obligations in connection with the vesting of restricted stock units outstanding as of the date hereof or as of the date of the Purchase Agreement (for avoidance of doubt, this right to transfer shares of Common Stock will apply on a particular date only with respect to Common Stock underlying restricted stock units held by the undersigned that are vested and settled on or before such date);

(viii)

to the Company, in connection with the receipt of shares of Common Stock upon the “net” or “cashless” exercise of options to purchase shares of Common Stock for purposes of exercising such options, including the payment of taxes due as a result of such exercise, with respect to stock options outstanding as of the date hereof or as of the date of the Purchase Agreement; provided, that any shares of Common Stock received shall be subject to the restrictions set forth herein; and provided further, if the undersigned is required to file a report under the Exchange Act, the undersigned shall include a statement in such report to the effect that the filing relates to the exercise of options ;

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(ix)

if for the payment of the exercise price for the exercise of options to purchase shares of Common Stock with respect to stock options outstanding as of the date hereof or as of the date of the Purchase Agreement, including the payment of taxes due as a result of such exercise; provided, if the undersigned is required to file a report under the Exchange Act, the undersigned shall include a statement in such report to the ef fect that the filing relates to the exercise of options and the sale of such shares to cover the payment of taxes in connection with such exercise;

(x)

to the Company, in connection with the repurchase of shares of Common Stock issued pursuant to an employee benefit plan disclosed or incorporated by reference in the final Offering Memorandum relating to the Purchase Agreement or pursuant to the agreements pursuant to which such shares were issued; provided, that if the undersigned is required to file a report under the Exchange Act, the undersigned shall include a statement in such report to the effect that the filing relates to a repurchase by the Company pursuant to an employee benefit plan ;

(xi)

pursuant to a bona fide third-party tender offer, merger, consolidation or other similar transaction made to all holders of the Company’s capital stock involving a purchase of beneficial ownership of more than 50% of the total voting power of the capital stock of the Company, provided that in the event that such tender offer, merger, consolidation or other such transaction is not completed, the Lock-Up Securities shall remain subject to the provisions of this lock-up agreement;

(xii)

by operation of law, such as pursuant to a qualified domestic order or in connection with a divorce settlement; or

(xiii)

pursuant to a written plan of which you are aware to which the undersigned is a party meeting the requirements of Rule 10b5-1 under the Exchange Act (a “10b5-1 Plan”) entered into prior to the date of this lock-up agreement relating to the sale of the Lock-Up Securities.

Furthermore, the undersigned may sell shares of Common Stock of the Company purchased by the undersigned on the open market following the offering if and only if (i) such sales are not required to be reported in any public report or filing with the Securities and Exchange Commission, or otherwise and (ii) the undersigned does not otherwise voluntarily effect any public filing or report regarding such sales.

In addition, the undersigned may (i) enter into, modify or amend a 10b5-1 Plan after the date of this lock-up agreement relating to the sale of the Lock-Up Securities, if then permitted by the Company and in accordance with the Company’s internal policies, provided that the securities subject to such plan may not be sold until after the expiration of the Lock-Up Period and no public announcement or filing under the Exchange Act regarding the establishment, modification or amendment of such plan shall be required or voluntarily made by or on behalf of the undersigned, or (ii) terminate a 10b5-1 Plan to which the undersigned is a party entered into prior to the date of this lock-up agreement relating to the sale of the Lock-Up Securities, in accordance with the Company’s internal policies and the requirements of the 10b5-1 Plan, provided that no public announcement or filing under the Exchange Act regarding such termination shall be required of or voluntarily made by or on behalf of the undersigned.

The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of the Lock-Up Securities except in compliance with the foregoing restrictions.

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Notwithstanding anything to the contrary contained herein, this lock-up agree ment will automatically terminate and the undersigned will be released from all of his, her or its obligations hereunder upon the earliest to occur, if any, of (i) the Company advising Merrill Lynch, Pierce, Fenner & Smith Incorporated in writing prior to entry into the Purchase Agreement that it does not intend to proceed with the offering of the Securities, (ii) the Purchase Agreement (other than the provisions thereof which survive termination) terminates or is terminated prior to payment for and deliver y of the Securities to be sold thereunder, or (iii) August 31, 2016, in the event that the Purchase Agreement has not been executed by such date .

[Signature page follows]

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Very truly yours,

Signature:

Print Name:

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Exhibit 10.3

EMPLOYMENT AGREEMENT AND RELEASE

This Employment Agreement and Release (“Agreement”) is made by and between T.J. Rodgers (“Executive”) and Cypress Semiconductor Corporation (the “Company”) (collectively referred to as the “Parties” or individually referred to as a “Party”).

RECITALS

WHEREAS, Executive was employed by the Company as its President and Chief Executive Officer through and including April 28, 2016;

WHEREAS, the Company and Executive have entered into certain stock option agreements granting Executive the option to purchase shares of the Company’s common stock subject to the terms and conditions of the Company’s stock option plans in place at the time of the grants and the stock option agreements (collectively the “Option Agreements”);

WHEREAS, the Company and Executive have entered into Performance Accelerated Restricted Stock Program Grant Agreements, dated March 3, 2015 and April 1, 2016, granting Executive performance-based restricted stock units (“PSUs”) and service-based restricted stock units (“RSUs”) subject to the terms and conditions of the Company’s 2013 Stock Plan and the Performance Accelerated Restricted Stock Program Grant Agreements (together with the Option Agreements, the “Stock Agreements”);

WHEREAS, Executive voluntarily resigned from his positions as President and Chief Executive Officer of the Company, effective as of April 28, 2016 (the “Resignation Date”);

WHEREAS, the Parties mutually desire that Executive continue providing services to the Company as an employee in the role of Technical Advisor;

WHEREAS, the Parties wish to resolve any and all disputes, claims, complaints, grievances, charges, actions, petitions, and demands that the Executive may have against the Company and any of the Releasees as defined below, including, but not limited to, any and all claims arising out of or in any way related to Executive’s resignation as President and Chief Executive Officer, as well as his employment with or separation from the Company;

NOW, THEREFORE, in consideration of the mutual promises made herein, the Company and Executive hereby agree as follows:

COVENANTS

1. Consideration .

a. Resignation as Executive . Executive acknowledges his voluntary resignation from his positions as President and Chief Executive Officer with the Company, effective as of April 28, 2016. To the extent he has not already done so, Executive agrees to execute

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any necessary forms or other documents required to effect such resignation from his positions as President and Chief Executive Officer, including any positions with subsidiaries including director positions with the exception of Deca Technologies.

b. Continued Employment as Technical Advisor . Following the Resignation Date, the Company agrees to continue to employ Executive as a Technical Advisor on an at-will basis. As an at-will employee, either Executive or the Company may terminate his employment at any time, for any reason, and with or without notice. Executive shall be paid, consistent with Company payroll practices for employees, an annual salary of $300,000 per year. Said salary will be evaluated on an annual basis in a manner consistent with the salary evaluation practices for a position of this level. In addition, Executive will be eligible for a target bonus equivalent to 80% of his annual compensation. In connection with said bonus eligibility, the Compensation Committee will in good faith establish Executive’s goals and objectives within thirty (30) days of the Effective Date of this Agreement, and similarly determine whether the Company will grant Executive any performance-based restricted stock units (“PSUs”) and service-based restricted stock units (“RSUs”) in connection with his providing services as a Technical Advisor. In addition, as an employee Executive will continue to receive the same medical benefits coverage he received as of the Resignation Date. In addition, the Company shall continue to provide Executive with administrative support while employed consistent with past practices .

c. Stock Vesting Acceleration . As further consideration for Executive’s execution of this Agreement and his fulfillment of all of its terms and conditions, upon the Effective Date the Company agrees t o immediately accelerate the vesting (both time and performance based) of one hundred percent (100%) of Executive’s unvested PSUs and RSUs. The Parties agree and acknowledge that as of the Effective Date, Executive has vested in a total of 192,000 RSUs and 300,000 PSUs. Accordingly, except as set forth in this Agreement, all other provisions of the Stock Agreements and Option Agreements (including, but not limited to, the exercise of vested stock options) shall remain in full force and effect and Executive’s vested options and any issued Company common stock thereunder shall continue to be governed by the terms and conditions of the Stock Agreements .

d. Severance Payment . Within thirty (30) days following the Effective Date of this Agreement , the Company will make a lump sum payment to Executive in the total amount of Four Million, Five Hundred Thousand Dollars ($4,500,000), less applicable withholdings, which is the equivalent to (i) three (3) years of Executive’s base salary as of the Resignation Date, and (ii) three (3) times the amount of Executive’s annual bonus opportunity as of the Resignation Date. Executive understands and agrees that the Company will issue to him a Form W-2 in connection with said severance payment.

e. Supplemental Release Consideration . Subject to Executive executing and not revoking the Supplemental Release attached hereto as Exhibit A (the “Supplemental Release”), the Company agrees to reimburse Executive for all payments of premiums Executive makes for coverage under the Company’s group health insurance plans pursuant to COBRA (as

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defined below) for a period of up to twenty-four (24) months after the end of his employment as Technical Advisor, provided Executive timely elects and pays for continuation coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and any state law equivalent (“COBRA”), within the time period prescribed by COBRA (the “COBRA Reimbursements”); provided, however, that if the Company determines in its sole discretion that it cannot provide the COBRA Reimbursements without potentially violating applicable laws (including, without limitation, Section 2716 of the Public Health Service Act and the Employee Retirement Income Security Act of 1974, as amended), then in lieu thereof, the Company will provide to Executive a taxable lump sum payment in an amount equal to the monthly COBRA premium that Executive would be required to pay to continue coverage under the Company’s the group health insurance plans in effect on the date of termination of Executive’s employment (which amount will be based on the premium for the first month of COBRA coverage) for a period of twenty ‑four (24) months, which payment will be made regardless of whether Executive elects COBRA continuation coverage (the “Taxable COBRA Payment”) (either the Taxable COBRA Payment or the COBRA Reimbursement, as applicable, referred to herein after as the “Supplemental Release Consideration”) .

f. Supplemental Release Agreement . In exchange for the Supplemental Release Consideration, Executive agrees to execute, within twenty-one (21) days after termination of his employment as a Technical Advisor for the Company, a Supplemental Release Agreement attached hereto as Exhibit A , which agreement will serve to cover the time period from the Effective Date of this Agreement through the Supplemental Release Effective Date; provided, however, the Parties agree to modify the Supplemental Release to comply with any new laws that become applicable prior to the termination of Executive’s employment with the Company as a Technical Advisor. Executive understands and agrees that he will only be entitled to such Supplemental Release Consideration in Section 1.e. above if he executes the Supplemental Release Agreement within the time allotted in this Section 1.f. and does not revoke that agreement.

g. No Further Severance . Except as explicitly set forth in this Agreement, Executive acknowledges and agrees that he is not entitled to receive any severance compensation or benefits from the Company. Executive hereby waives his right to receive any such severance not explicitly set forth in this Agreement and acknowledges that without this Agreement, he is not otherwise entitled to the consideration listed in this Section 1.

h. Cooperation . Executive agrees to provide reasonable cooperation and assistance to the Company in connection with any claims asserted against the Company by any third parties, both during the term of his employment with the Company and after separation.

2. Resignation from the Board . Executive agrees that upon the appointment of a new President and Chief Executive Officer he will immediately resign his position as a director of the Company, which resignation shall be accepted or declined by the Board in its sole discretion.

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3. Benefits . Executive’s health insurance benefits shall cease on the last day of the month in which his employment as Technical Advisor ends, subject to Executive’s right to continue his health insurance under COBRA. Executive’s participation in all benefits and incidents of employment, including, but not limited to, vesting in stock options, and the accrual of bonuses, vacation, and paid time off, will cease as of the end of his employment as a Technical Advisor for the Company.

4. Payment of Salary and Receipt of All Benefits . Executive acknowledges and represents that, other than the consideration set forth in this Agreement, the Company has paid or provided all salary, wages, bonuses, accrued vacation/paid time off, reimbursable expenses, stock, stock options, vesting, and any and all other benefits and compensation due to Executive as of the Effective Date of this Agreement.

5. Release of Claims . Executive agrees that the foregoing consideration represents settlement in full of all outstanding obligations owed to Executive by the Company and its current and former officers, directors, employees, agents, investors, attorneys, shareholders, administrators, affiliates, benefit plans, plan administrators, insurers, trustees, divisions, and subsidiaries, and predecessor and successor corporations and assigns (collectively, the “Releasees”). Executive, on his own behalf and on behalf of his respective heirs, family members, executors, agents, and assigns, hereby and forever releases the Releasees from, and agrees not to sue concerning, or in any manner to institute, prosecute, or pursue, any claim, complaint, charge, duty, obligation, demand, or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that Executive may possess against any of the Releasees arising from any omissions, acts, facts, or damages that have occurred up until and including the Effective Date of this Agreement, including, without limitation:

a. any and all claims relating to or arising from Executive ’s resignation as President and Chief Executive Officer, his employment relationship with the Company and the termination of that relationship, as applicable;

b. any and all claims relating to, or arising from, Executive’s right to purchase, or actual purchase of shares of stock of the Company, including, without limitation, any claims for fraud, misrepresentation, breach of fiduciary duty, breach of duty under applicable state corporate law, and securities fraud under any state or federal law;

c. any and all claims for wrongful discharge of employment; termination in violation of public policy; discrimination; harassment; retaliation; breach of contract, both express and implied; breach of covenant of good faith and fair dealing, both express and implied; promissory estoppel; negligent or intentional infliction of emotional distress; fraud; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; unfair business practices; defamation; libel; slander; negligence; personal injury; assault; battery; invasion of privacy; false imprisonment; conversion; and disability benefits;

d. any and all claims for violation of any federal, state, or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991;

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the Rehabilitation Act of 1973; the Americans with Disabilities Act of 1990; the Equal Pay Act; the Fair Labor Standards Act; the Fair Credit Reporting Act; the Age Discrimination in Employment Act of 1967; the Older Workers Benefit Protection Act; the Employee Retirement Income Security Act of 1974; the Worker Adjustment and Retraining Notification Act; the Family and Medical Leave Act; the Sarbanes-Oxley Act of 2002; the Immigration Control and Reform Act; the California Family Rights Act; the California Labor Code; the California Workers’ Compensation Act; and the California Fair Employment and Housing Act;

e. any and all claims for violation of the federal or any state constitution;

f. any and all claims arising out of any other laws and regulations relating to employment or employment discrimination;

g. any claim for any loss, cost, damage, or expense arising out of any dispute over the nonwithholding or other tax treatment of any of the proceeds received by Executive as a result of this Agreement; and

h. any and all claims for attorneys’ fees and costs.

Executive agrees that the release set forth in this section shall be and remain in effect in all respects as a complete general release as to the matters released. Notwithstanding the foregoing, Executive acknowledges that any and all disputed wage claims that are released herein shall be subject to binding arbitration in accordance with Section 13, except as required by applicable law. Executive represents that he has made no assignment or transfer of any right, claim, complaint, charge, duty, obligation, demand, cause of action, or other matter waived or released by this Section.

6. Acknowledgment of Waiver of Claims under ADEA . Executive acknowledges that he is waiving and releasing any rights he may have under the Age Discrimination in Employment Act of 1967 ("ADEA"), and that this waiver and release is knowing and voluntary. Executive agrees that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the Effective Date of this Agreement. Executive acknowledges that the consideration given for this waiver and release is in addition to anything of value to which Executive was already entitled. Executive further acknowledges that he has been advised by this writing that: (a) he should consult with an attorney prior to executing this Agreement; (b) he has twenty-one (21) days within which to consider this Agreement; (c) he has seven (7) days following his execution of this Agreement to revoke this Agreement; (d) this Agreement shall not be effective until after the revocation period has expired; and (e) nothing in this Agreement prevents or precludes Executive from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties, or costs for doing so, unless specifically authorized by federal law. In the event Executive signs this Agreement and returns it to the Company in less than the 21-day period identified above, Executive hereby acknowledges that he has freely and voluntarily chosen to waive the time period allotted for considering this Agreement. Executive acknowledges and understands that revocation must be accomplished by a written notification to the person executing this

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Agreement on the Company’s behalf that is received prior to the Effective Date. The parties agree that changes, whether material or immaterial, do not restart the running of the 21-day period.

7. California Civil Code Section 1542 . Executive acknowledges that he has been advised to consult with legal counsel and is familiar with the provisions of California Civil Code Section 1542, a statute that otherwise prohibits the release of unknown claims, which provides as follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR .

Executive , being aware of said code section, agrees to expressly waive any rights he may have thereunder, as well as under any other statute or common law principles of similar effect.

8. Excluded Claims : Notwithstanding the foregoing, the following are not included the Released Claims (the “Excluded Claims”): (1) any rights or claims for indemnification Executive may have pursuant to any fully executed employment or indemnification agreement with the Company; the charter, bylaws or operating agreements of the Company; and Board action; and D&O or other similar insurance policy; or applicable law: (ii) any rights or claims as a shareholder of the Company accruing after Executive no longer holds an officer or director position with the Company; (iii) any rights or claims which are not waivable as a matter of law; and (iv) any claims for breach of this Agreement.

9. No Pending or Future Lawsuits . Executive represents that he has no lawsuits, claims, or actions pending in his name, or on behalf of any other person or entity, against the Company or any of the other Releasees. Executive also represents that he does not intend to bring any claims on his own behalf or on behalf of any other person or entity against the Company or any of the other Releasees. In addition, the Company represents that it is not aware of any facts that could form the basis to assert any claims against Executive and does not intend to bring any claims on its own behalf or on behalf of any other person or entity against Executive.

10. Trade Secrets and Confidential Information/Company Property . Executive agrees at all times hereafter to hold in the strictest confidence, and not to use or disclose to any person or entity, any Confidential Information of the Company, including the terms of this Agreement. Executive understands that “Confidential Information” means any Company proprietary information, technical data, trade secrets or know-how, including, but not limited to, research, product plans, products, services, customer lists and customers (including, but not limited to, customers of the Company on whom Executive has called or with whom he became acquainted during the term of his employment), markets, software, developments, inventions, processes, formulas, technology, designs, drawings, engineering, hardware configuration information, marketing, finances, or other business information disclosed to Employee by the Company either directly or indirectly, in writing, orally, or by drawings or observation of parts or equipment.

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11. Protected Activity Not Prohibited . Executive understands that nothing in this Agreement shall in any way limit or prohibit Executive from engaging for a lawful purpose in any Protected Activity. For purposes of this Agreement, “Protected Activity” shall mean filing a charge or complaint, or otherwise communicating, cooperating, or participating with, any state, federal, or other governmental agency, including the Securities and Exchange Commission, the Equal Employment Opportunity Commission, and the National Labor Relations Board. Notwithstanding any restrictions set forth in this Agreement, Executive understands that he is not required to obtain authorization from the Company prior to disclosing information to, or communicating with, such agencies, nor is Executive obligated to advise the Company as to any such disclosures or communications. Notwithstanding, in making any such disclosures or communications, Executive agrees to take all reasonable precautions to prevent any unauthorized use or disclosure of any information that may constitute Company confidential information as defined in this agreement to any parties other than the relevant government agencies. Executive further understands that “Protected Activity” does not include the disclosure of any Company attorney-client privileged communications, and that any such disclosure without the Company’s written consent shall constitute a material breach of this Agreement.

12. No Admission of Liability . Executive understands and acknowledges that this Agreement constitutes a compromise and settlement of any and all actual or potential disputed claims by Executive. No action taken by the Company hereto, either previously or in connection with this Agreement, shall be deemed or construed to be (a) an admission of the truth or falsity of any actual or potential claims or (b) an acknowledgment or admission by the Company of any fault or liability whatsoever to Executive or to any third party.

13. Costs . The Parties shall each bear their own costs, attorneys’ fees, and other fees incurred in connection with the preparation of this Agreement.

14. ARBITRATION . THE PARTIES AGREE THAT ANY AND ALL DISPUTES ARISING OUT OF THE TERMS OF THIS AGREEMENT, THEIR INTERPRETATION, AND ANY OF THE MATTERS HEREIN RELEASED, SHALL BE SUBJECT TO ARBITRATION IN SANTA CLARA COUNTY, BEFORE JUDICIAL ARBITRATION & MEDIATION SERVICES (“JAMS”), PURSUANT TO ITS EMPLOYMENT ARBITRATION RULES & PROCEDURES (“JAMS RULES”). THE ARBITRATOR MAY GRANT INJUNCTIONS AND OTHER RELIEF IN SUCH DISPUTES. THE ARBITRATOR SHALL ADMINISTER AND CONDUCT ANY ARBITRATION IN ACCORDANCE WITH CALIFORNIA LAW, INCLUDING THE CALIFORNIA CODE OF CIVIL PROCEDURE, AND THE ARBITRATOR SHALL APPLY SUBSTANTIVE AND PROCEDURAL CALIFORNIA LAW TO ANY DISPUTE OR CLAIM, WITHOUT REFERENCE TO ANY CONFLICT-OF-LAW PROVISIONS OF ANY JURISDICTION. TO THE EXTENT THAT THE JAMS RULES CONFLICT WITH CALIFORNIA LAW, CALIFORNIA LAW SHALL TAKE PRECEDENCE. THE DECISION OF THE ARBITRATOR SHALL BE FINAL, CONCLUSIVE, AND BINDING ON THE PARTIES TO THE ARBITRATION. THE PARTIES AGREE THAT THE PREVAILING PARTY IN ANY ARBITRATION SHALL BE ENTITLED TO INJUNCTIVE RELIEF IN ANY COURT OF COMPETENT JURISDICTION TO ENFORCE THE ARBITRATION AWARD. THE PARTIES TO THE ARBITRATION SHALL EACH PAY AN EQUAL SHARE OF THE COSTS AND EXPENSES OF SUCH ARBITRATION, AND EACH PARTY SHALL

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SEPARATELY PAY FOR ITS RESPECTIVE COUNSEL FEES AND EXPENSES; PROVIDED, HOWEVER, THAT THE ARBITRATOR SHALL AWARD ATTORNEYS’ FEES AND COSTS TO THE PREVAILING PARTY, EXCEPT AS PROHIBITED BY LAW. THE PARTIES HEREBY AGREE TO WAIVE THEIR RIGHT TO HAVE ANY DISPUTE BETWEEN THEM RESOLVED IN A COURT OF LAW BY A JUDGE OR JURY. NOTWITHSTANDING THE FOREGOING, THIS SECTION WILL NOT PREVENT EITHER PARTY FROM SEEKING INJUNCTIVE RELIEF (OR ANY OTHER PROVISIONAL REMEDY) FROM ANY COURT HAVING JURISDICTION OVER THE PARTIES AND THE SUBJECT MATTER OF THEIR DISPUTE RELATING TO THIS AGREEMENT AND THE AGREEMENTS INCORPORATED HEREIN BY REFERENCE . SHOULD ANY PART OF THE ARBITRATION AGREEMENT CONTAINED IN THIS PARAGRAPH CONFLICT WITH ANY OTHER ARBITRATION AGREEMENT BETWEEN THE PARTIES, THE PARTIES AGREE THAT THIS ARBITRATION AGREEMENT SHALL GOVERN.

15. Tax Consequences . The Company makes no representations or warranties with respect to the tax consequences of the payments and any other consideration provided to Executive or made on his behalf under the terms of this Agreement. Executive agrees and understands that he is responsible for payment, if any, of local, state, and/or federal taxes on the payments and any other consideration provided hereunder by the Company and any penalties or assessments thereon. Executive further agrees to indemnify and hold the Company harmless from any claims, demands, deficiencies, penalties, interest, assessments, executions, judgments, or recoveries by any government agency against the Company for any amounts claimed due on account of (a) Executive’s failure to pay or delayed payment of federal or state taxes, or (b) damages sustained by the Company by reason of any such claims, including attorneys’ fees and costs.

16. Section 409A. It is intended that this Agreement comply with, or be exempt from, Code Section 409A and the final regulations and official guidance thereunder (“Section 409A”) and any ambiguities or ambiguous terms herein will be interpreted to so comply or be so exempt from Section 409A. Each payment and benefit to be paid or provided under this Agreement is intended to constitute a series of separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations. Any payments under Sections 1.c and 1.d. of this Agreement will be made no later than March 15, 2017. If not otherwise exempt from Section 409A and to the extent necessary to comply with Section 409A, any COBRA Reimbursements will be subject to the following additional requirements: (a) the amount of expenses eligible for reimbursement during Executive’s taxable year may not affect the expenses eligible for reimbursement in any other taxable year, (b) the reimbursements will be made no later than the last day of Executive’s taxable year immediately following the taxable year in which the expense was incurred, and (c) the right to reimbursement is not subject to liquidation or exchange for another benefit. The Taxable COBRA Payment, if any, will be paid on the sixtieth (60 ^th ) day following Executive’s “separation from service” within the meaning of Section 409A. The Company and Executive will work together in good faith to consider either (i) amendments to this Agreement; or (ii) revisions to this Agreement with respect to the payment of any awards, which are necessary or appropriate to avoid imposition of any additional tax or income recognition prior to the actual payment to Executive under Section 409A. In no event will the Company reimburse Executive for any taxes that may be imposed or costs incurred as a result of Section 409A.

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17. Authority . The Company represents and warrants that the undersigned has the authority to act on behalf of the Company and to bind the Company and all who may claim through it to the terms and conditions of this Agreement. Executive represents and warrants that he has the capacity to act on his own behalf and on behalf of all who might claim through him to bind them to the terms and conditions of this Agreement. Each Party warrants and represents that there are no liens or claims of lien or assignments in law or equity or otherwise of or against any of the claims or causes of action released herein.

18. No Representations . Executive represents that he has had an opportunity to consult with an attorney, and has carefully read and understands the scope and effect of the provisions of this Agreement. Executive has not relied upon any representations or statements made by the Company that are not specifically set forth in this Agreement.

19. Severability . In the event that any provision or any portion of any provision hereof or any surviving agreement made a part hereof becomes or is declared by a court of competent jurisdiction or arbitrator to be illegal, unenforceable, or void, this Agreement shall continue in full force and effect without said provision or portion of provision.

20. Entire Agreement . This Agreement represents the entire agreement and understanding between the Company and Executive concerning the subject matter of this Agreement and Executive’s employment with and separation from the Company and the events leading thereto and associated therewith, and supersedes and replaces any and all prior agreements and understandings concerning the subject matter of this Agreement and Executive’s relationship with the Company, with the exception of the Stock Agreements, as modified herein, the Option Agreements, as modified herein, the PSUs and RSUs, as modified herein, and any Indemnification Agreement referenced herein.

21. No Oral Modification . This Agreement may only be amended in a writing signed by Executive and the Company’s Chief Executive Officer.

22. Governing Law . This Agreement shall be governed by the laws of the State of California, without regard for choice-of-law provisions. Executive consents to personal and exclusive jurisdiction and venue in the State of California.

23. Effective Date . Executive understands that this Agreement shall be null and void if not executed by him within twenty one (21) days. Each Party has seven (7) days after that Party signs this Agreement to revoke it. This Agreement will become effective on the eighth (8th) day after Executive signed this Agreement, so long as it has been signed by the Parties and has not been revoked by either Party before that date (the “Effective Date”).

24. Counterparts . This Agreement may be executed in counterparts and by facsimile, and each counterpart and facsimile shall have the same force and effect as an original and shall constitute an effective, binding agreement on the part of each of the undersigned.

Page 9 of 12

25. Voluntary Execution of Agreement . Executive understands and agrees that he executed this Agreement voluntarily, without any duress or undue influence on the part or behalf of the Company or any third party, with the full intent of releasing all of his claims against the Company and any of the other Releasees. Executive acknowledges that:

( a )

he has read this Agreement;

( b )

he has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of his own choice or has elected not to retain legal counsel;

( c )

he understands the terms and consequences of this Agreement and of the releases it contains; and

( d )

he is fully aware of the legal and binding effect of this Agreement.

[ Signature page follows ]

IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forth below.

	T.J. RODGERS, an individual

Dated: June 3 , 2016		/s/ T.J.Rodgers
		T.J. Rodgers

	CYPRESS SEMICONDUCTOR CORPORATION

Dated: June 3 , 2016	By	/s/ Carmine Renzulli
		Carmine Renzulli
		Executive Vice President

Page 10 of 12

EXHIBIT A

SUPPLEMENTAL RELEASE AGREEMENT

This Supplemental Release Agreement (“Supplemental Release”) is made by and between T.J. Rodgers (“Executive”) and Cypress Semiconductor Corporation (the “Company”) (jointly referred to as the “Parties” and individually referred to as a “Party”).

1. Consideration . In consideration for the Supplemental Release Consideration in Section 1.e. of the Employment Agreement and Release signed between Executive and the Company on ___________, 2016 (the “Employment Agreement”), Executive hereby extends his release and waiver of claims to any claims that may have arisen between the Effective Date (as such term is defined in the Employment Agreement) and the Supplemental Release Effective Date, as defined below.

2. Incorporation of Terms of Release Agreement . The undersigned Parties further acknowledge that all terms of the Employment Agreement, including, but not limited to, Sections 1.g. (No Further Severance), 4 (Payment of Salary and Receipt of All Benefits), 5 (Release of Claims), and 6 (Acknowledgment of Waiver of Claims under ADEA), 7 (California Civil Code Section 1542), and 10 (Trade Secrets and Confidential Information/Company Property), shall apply to this Supplemental Release and are incorporated herein to the extent that they are not inconsistent with the express terms of this Supplemental Release.

3. Supplemental Release Effective Date . Executive understands that this Supplemental Release shall be null and void if not executed by him within twenty one (21) days after the end of his employment as Technical Advisor. This Supplemental Release will become effective on the eighth (8th) day after Executive signs this Supplemental Release (the “Supplemental Release Effective Date”), so long as the Employment Agreement and the Supplemental Release have both been signed by the Parties and neither has been revoked by either Party before that date. The Company will begin providing the Supplemental Release Consideration as soon as applicable in accordance with the terms of that agreement.

4. Voluntary Execution of Agreement . Executive understands and agrees that he executed this Supplemental Release voluntarily, without any duress or undue influence on the part or behalf of the Company or any third party, with the full intent of releasing all of his claims against the Company and any of the other Releasees. Executive acknowledges that:

(a) he has read this Supplemental Release;

(b) he cannot sign the Supplemental Release before the end of the Employment Period, but that he must sign the Supplemental Release no later than twenty one (21) days following the end of the Employment Period;

(c) he has been represented in the preparation, negotiation, and execution of this Supplemental Release by legal counsel of his own choice or has elected not to retain legal counsel;

Page 11 of 12

(d) he understands the terms and consequences of this Supplemental Release and of the releases it contains; and

(e) he is fully aware of the legal and binding effect of this Supplemental Release.

IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forth below.

	T.J. RODGERS, an individual

Dated: , 201_
		T.J. Rodgers

	CYPRESS SEMICONDUCTOR CORPORATION

Dated: , 201_	By
		Carmine Renzulli
		Executive Vice President

Page 12 of 12

SEVERANCE POLICY – EXECUTIVE VICE PRESIDENTS; GENERAL COUNSEL EXHIBIT 10.4

Effective on May 26, 2016 a severance package will be provided if an EVP, or the SVP and General Counsel, is terminated by the company other than for cause. This policy expires 12 months after a new CEO is hired.

Severance Package

•

Lump sum payment equal to fourteen (14) months base annual salary

•

Lump sum payment equal to fourteen (14) months COBRA premiums for Medical, Dental and Vision

•

One-hundred percent (100%) of the unvested portion of any outstanding equity-based awards which would have vested during the 14 month severance period

•

Fourteen (14) months of annual target bonus at 100% for the fiscal year in which the termination occurs

EVP or SVP must sign the Company’s Separation Agreement and General Release of all Claims document to receive a severance package

Exhibit 31.1

CERTIFICATION

PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002

We, Office of the President and Chief Executive Officer, certify that:

1.	We have reviewed this Quarterly Report on Form 10-Q of Cypress Semiconductor Corporation;

2.	Based on our knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on our knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and us are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and us have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:

August 9, 2016

By:

/s/ HASSANE EL-KHOURY

HASSANE EL-KHOURY

Executive Vice President,

Programmable Systems Administration

Dated:

August 9, 2016

By:

/s/ DANA NAZARIAN

DANA NAZARIAN

Executive Vice President,

Memory Products Division

Dated:

August 9, 2016

By:

/s/ JOSEPH RAUSCHMAYER

JOSEPH RAUSCHMAYER

Executive Vice President,

World Wide Manufacturing

Dated:

August 9, 2016

By:

/s/ THAD TRENT

THAD TRENT

Executive Vice President,

Finance and Administration and

Chief Financial Officer

Exhibit 31.2

CERTIFICATION

PURSUANT TO SECTION 302 OF SARBANES-OXLEY ACT OF 2002

I, Thad Trent, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Cypress Semiconductor Corporation;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:

August 9, 2016

By:

/s/ THAD TRENT

Thad Trent

Executive Vice President, Finance and

Administration and Chief Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

We, Office of the President and Chief Executive Office, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of Cypress Semiconductor Corporation for the quarter ended July 3, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Cypress Semiconductor Corporation.

Dated:

August 9, 2016

By:

/s/ HASSANE EL-KHOURY

HASSANE EL-KHOURY

Executive Vice President,

Programmable Systems Administration

Dated:

August 9, 2016

By:

/s/ DANA NAZARIAN

DANA NAZARIAN

Executive Vice President,

Memory Products Division

Dated:

August 9, 2016

By:

/s/ JOSEPH RAUSCHMAYER

JOSEPH RAUSCHMAYER

Executive Vice President,

World Wide Manufacturing

Dated:

August 9, 2016

By:

/s/ THAD TRENT

THAD TRENT

Executive Vice President, Finance and

Administration and Chief Financial Officer

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

I, Thad Trent, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of Cypress Semiconductor Corporation for the quarter ended July 3, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of Cypress Semiconductor Corporation.

Dated:

August 9, 2016

By:

/s/ THAD TRENT

Thad Trent

Executive Vice President, Finance and

Administration and Chief Financial Officer