June 17, 2015
Jimmy S.M. Lee
Scott D. Howarth
President and Chief Executive Officer
Integrated Silicon Solution, Inc.
1623 Buckeye Drive
Milpitas, California 95035
Messrs. Lee and Howarth,
On behalf of Cypress Semiconductor Corporation ("Cypress"), I hereby attach the revised draft Agreement and Plan of Merger between Integrated Silicon Solution, Inc. ("ISSI") and Cypress (the "Revised Definitive Merger Agreement"), which fully responds to the presentation you filed on June 12, 2015 titled "Uphill Investment Co. Merger Proposal, Special Meeting of Stockholders" (the "Presentation").
In the Presentation, you expressed several concerns regarding the Definitive Merger Agreement that Cypress transmitted to ISSI on June 9, 2015 (the "Prior Cypress Proposal"), which was the basis for your continued recommendation that ISSI stockholders approve the amended Agreement and Plan of Merger (the "Uphill Agreement") with Uphill Investment Co. ("Uphill"). We believe that the Revised Definitive Merger Agreement transmitted herewith resolves all such concerns as described below:
Our revised offer of $21.25 per share is clearly superior to the price offered by Uphill. Furthermore, we have introduced a ticking fee (as fully described in the Revised Definitive Merger Agreement), which will add an incremental $0.10 per share for each additional quarter required to obtain regulatory approval for a transaction with Cypress. This ticking fee will accrue daily starting on October 1, 2015 (the day after you expect the Uphill transaction to close) and will be payable by Cypress to ISSI stockholders at transaction close. The Uphill Agreement provides no such ticking fee.
Reverse Termination Fee
The Uphill Agreement allows ISSI to collect a reverse termination fee in certain scenarios where Uphill fails to obtain debt financing in order to close their proposed transaction, while the Prior Cypress Proposal did not offer such a reverse termination fee. Despite the fact that the Prior Cypress Proposal had no financing risk whatsoever, you pointed out the absence of such a reverse termination fee. While we think such a reverse termination fee is entirely unnecessary in our fully financed transaction, we have now included a reverse termination fee in the Revised Definitive Merger Agreement.
Timing of Closing
The Presentation stated that the Uphill Agreement is "expected to close in third quarter calendar 2015 (with specific timing subject to CFIUS and Taiwan approvals)," while the Prior Cypress Proposal is "expected to close 6-9 months following signing a merger agreement." As a result, you state that the "expected real value of the Cypress proposal is less than its stated price." We strongly disagree with your view on the timing regarding the Prior Cypress Proposal as compared to the Uphill Agreement. We are confident that Cypress will obtain regulatory approval in a timely manner and that the Uphill Agreement presents no timing advantage. Nevertheless, the Revised Definitive Merger Agreement now incorporates the ticking fee described above. This ticking fee addresses the economic impact of any additional time required to obtain regulatory approval for a transaction with Cypress, which we do not expect will be required, and demonstrates our commitment to closing a transaction expeditiously.
Given our revised offer of $21.25 per share, the $0.10 per share per quarter ticking fee and the other additional concessions provided in the Revised Definitive Merger Agreement, we have clearly addressed all outstanding issues and concerns relative to the Uphill Agreement. Compared to the Uphill Agreement, Cypress's offer is now superior with respect to both price and terms. Therefore, we believe you should immediately recognize our offer as a Superior Proposal (as defined in the Uphill Agreement) and move expeditiously to execute the Revised Definitive Merger Agreement in accordance with the terms of the Uphill Agreement. Cypress also expects Institutional Shareholder Services (ISS) to withdraw its recommendation that ISSI stockholders vote in favor of the Uphill Agreement.
The Revised Definitive Merger Agreement has been approved by Cypress's Board of Directors and Cypress stands ready, willing and able to execute the Revised Definitive Merger Agreement once you have terminated the Uphill Agreement. Notwithstanding anything to the contrary contained herein, nothing in this letter constitutes a binding obligation of Cypress to proceed with or consummate a transaction. Any transaction between Cypress and ISSI will be subject to the execution by both ISSI and Cypress of the Revised Definitive Merger Agreement and other related agreements.
As done previously, we are simultaneously releasing this letter to the public as we believe that it is in the best interest of ISSI and its stockholders to have full information regarding our commitment to expeditiously enter into this Revised Definitive Merger Agreement. The Revised Definitive Merger Agreement will be filed with the SEC on a form 8-K on June 18.
We continue to look forward to working with you toward completion of a successful transaction.
President and Chief Executive Officer
This press release contains certain "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts included or incorporated herein may constitute forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding the Company's offer to acquire ISSI, the Company's ability to complete the transaction with ISSI, and the Company's assessment of antitrust risks, including the timing aspects of such risks, associated with the proposed transaction with ISSI. Statements including words such as "believes," "expects," "will," "look forward" or similar expressions are forward-looking statements. Because these statements reflect the Company's current views, expectations and beliefs concerning future events, these forward-looking statements involve risks and uncertainties that may affect the Company's business or future financial results. These risks include, among others, risks associated with the economy; conditions in the overall semiconductor market; acceptance and demand for the Company's products; technological and development risks; legal and regulatory matters and other competitive factors. Risks and uncertainties related to the proposed acquisition of ISSI include, among others, the ultimate outcome of any possible transaction between the Company and ISSI, including the possibilities that the Company will not pursue a transaction with ISSI and that ISSI will reject a transaction with the Company; the risk that if ISSI's board of directors agrees to negotiate a definitive acquisition agreement with the Company and the Company and ISSI enter into a definitive agreement with respect to the proposed transaction, that ISSI's stockholders do not approve the proposed transaction; potential adverse reactions or changes to business relationships resulting from the announcement or completion of the proposed transaction; uncertainties as to the timing of the proposed transaction; competitive responses to the proposed transaction; the risk that regulatory or other approvals required for the proposed transaction are not obtained or are obtained subject to conditions that are not anticipated; the risk that other conditions to the closing of the proposed transaction are not satisfied; costs and difficulties related to the closing of the proposed transaction and the integration of ISSI's businesses and operations with Cypress's businesses and operations; the inability to obtain or delays in obtaining anticipated cost savings and synergies from the proposed transaction; unexpected costs, charges or expenses resulting from the proposed transaction; litigation relating to the proposed transaction; the inability to retain key personnel, customers and suppliers; and any changes in general economic and/or industry specific conditions. Additional factors that could cause future results or events to differ from those the Company expects are those risks discussed under Item 1A., "Risk Factors," in Cypress's Annual Report on Form 10-K for the fiscal year ended December 28, 2014, Cypress's Quarterly Report on Form 10-Q for the quarter ended March 29, 2015, and other reports filed by Cypress with the Securities and Exchange Commission. Please read the "Risk Factors" and other cautionary statements contained in these filings. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, the occurrence of certain events or otherwise. As a result of these risks and others, actual results could vary significantly from those anticipated in this press release, and Cypress' financial condition and results of operations could be materially adversely affected.