CONVERSION AGREEMENT
This
Conversion Agreement (this “Agreement”)
is
made and entered into effective as of September 25 2008 by and
between TOWER
SEMICONDUCTOR LTD. (the “Company”
or
“Tower”),
a
company organized under the laws of the State of Israel and ISRAEL CORPORATION
LTD., a corporation organized under the laws of the State of Israel (
“TIC”).
WHEREAS,
Tower is an independent manufacturer of wafers whose Ordinary Shares are traded
on the Nasdaq Stock Market (“NASDAQ”)
under
the symbol TSEM and whose Ordinary Shares and certain other securities are
traded on the Tel-Aviv Stock Exchange (“TASE”)
under
the symbol TSEM;
WHEREAS,
Bank Leumi Le-Israel B.M. and Bank Hapoalim B.M. (collectively, the
“Banks”)
and
Tower are parties to a Facility Agreement dated January 18, 2001, as
amended and restated on August 24, 2006 and as further amended by Amendment
No.
1 thereto dated September 10, 2007 (the “Facility
Agreement”);
WHEREAS,
TIC and Tower are parties to an Equipment Loan Facility dated September 10,
2007
(the “Equipment
Facility”);
WHEREAS,
TIC holds convertible debentures series B of the Company convertible into an
amount of 18,181,823 Company ordinary shares (the “CD
B’s”);
and
WHEREAS,
at the request of Tower, the Banks and Tower have entered into an Amending
Agreement dated September 25, 2008 (the “Amending
Agreement”);
WHEREAS,
in connection with this Agreement and the Amending Agreement, Tower and TIC
have
entered on the date hereof into (i) an Amended and Restated Registration Rights
Agreement (the “Amended
and Restated Registration Rights Agreement”),
and
(ii) a Securities Purchase Agreement (the “Securities
Purchase Agreement”)
;
and
NOW,
THEREFORE, in consideration of the mutual covenants and agreements contained
herein and for other good and valuable consideration the receipt and adequacy
of
which are hereby acknowledged, the parties agree as follows:
1. Preamble.
1.1. Preamble.
The
preamble to this Agreement constitutes an integral part thereof.
2. Conversion
of Equipment Facility, CD B’s and Issue of Capital Note on the Amendment Closing
Date.
The
Company hereby:
2.1. issues
to
TIC, and TIC hereby receives from the Company, in conversion of
US $30,000,000 (thirty million US dollars) owed pursuant to the
Equipment Facility, a convertible capital note in the principal amount of
US $30,000,000 (thirty million US dollars) in the form attached as
Exhibit 1
hereto.
For the avoidance of doubt (i) as of the date of the effectiveness of the
Amending Agreement (the “Amendment
Closing Date”),
the
principal amount under the Equipment Facility outstanding and owed by Tower
to
TIC shall be zero, (ii) there shall be no further amounts (principal or
interest) payable by the Company under the Equipment Facility and the Equipment
Facility shall be terminated as at the Amendment Closing Date, and (iii) the
amount of Company ordinary shares into which the capital note TIC receives
pursuant to this Section 2.1 is calculated on the basis of $1.42 per share,
representing two times the average closing price of the ordinary shares of
the
Company on the NASDAQ for the last ten trading days prior to August 7,
2008;
2.2. issues
to
TIC, and TIC hereby receives from the Company, in exchange for delivery to
the
Company of US $20,000,000 (twenty million US dollars) of CD B’s
(comprising (i) such part of the principal of the CD B’s that together with the
accrued interest thereon as of the date of the Amendment Closing Date aggregates
$20 million and (ii) such accrued interest) an executed convertible capital
note
(and together with the capital note given to TIC pursuant to Section 2.1 above,
the “Capital
Notes”)
in the
principal amount of US $20,000,000 (twenty million US dollars) in the form
attached as Exhibit 2
hereto.
For the avoidance of doubt (i) following the Amendment Closing Date, TIC will
remain the holder of $2,817,609 of convertible debentures series B of the
Company convertible into an amount of 2,561,467 Company ordinary shares, such
remaining CD B’s will bear interest of 5% to be accrued from the Amendment
Closing Date payable in accordance with the CD B’s terms, and TIC will no longer
hold or have the rights and obligations of a holder of the CD B’s delivered to
the Company pursuant to this Section 2.2, (ii) there shall be no further amounts
(principal or interest) payable by the Company under CD B’s save for unconverted
remaining principal of $2,817,609 and interest thereon incurred after the
Amendment Closing Date, and (iii) the amount of Company ordinary shares into
which the capital note TIC receives pursuant to this Section 2.2 is calculated
on the basis of $1.42 per share, representing two times the average closing
price of the ordinary shares of the Company on the NASDAQ for the last ten
trading days prior to August 7, 2008;
2.3. furnishes
to TIC a copy of the approval of the TASE for listing the 35,211,271
(thirty-five, two hundred and eleven thousand, two hundred and seventy-one)
shares issuable upon conversion of said Capital Notes; and
2.4. confirms
that the Company has recorded such issuance of the Capital Notes in the name
of
TIC on the records of the Company.
3. Representations
and Warranties of the Company.
The
Company hereby represents and warrants to TIC on the Amendment Closing Date
as
follows:
3.1. Organization.
The
Company is duly organized and validly existing under the laws of its
jurisdiction of incorporation and has full corporate power and authority to
own,
lease and operate its properties and assets and to conduct its business as
now
being conducted and to perform all its obligations under this
Agreement.
3.2. Share
Capital.
All
issued and outstanding share capital of the Company has been duly authorized
and
is validly issued. The shares to be issued upon conversion of any Capital Note
issued pursuant to this Agreement (the “Conversion
Shares”)
are
duly authorized and reserved for issuance by the Company and, when issued in
accordance with the terms of such Capital Note will be validly issued, fully
paid, nonassessable and not subject to any pledge, lien or restriction on
transfer, except for restrictions on transfer imposed by applicable securities
laws. The entering into and performance of this Agreement and the issuance
of
any shares, or Capital Notes hereunder do not, and the issuance of any
Conversion Shares will not, conflict with the Memorandum of Association or
the
Articles of Association of the Company nor with any outstanding convertible
security, warrant, option, call, preemptive right or commitment of any type
relating to the Company's capital stock (collectively, “Equity
Rights”).
The
entering into and performance of this Agreement, the issuance of any shares
or
Capital Notes hereunder and the issuance of the Conversion Shares do not
require, or give any holder of Equity Rights the right to have made, any
adjustments to be made in the conversion or exercise price, the number of shares
issuable upon conversion or exercise or any other provision of the aforegoing
Equity Rights.
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3.3. Authorization;
Approvals.
All
corporate action on the part of the Company necessary for the execution,
delivery and performance of this Agreement and the issuance of any shares,
Capital Notes, and Conversion Shares has been taken. Except as set forth in
Schedule 3.3 hereto, save for any consents, approvals, authorisations or
exemptions already obtained, and filings already made, no consent, approval
or
authorization of, exemption by, or filing with, any governmental or regulatory
authority, including any approval of, or filings with, the Israeli Securities
Authority (the “ISA”),
the
TASE or any third party is required in connection with the execution, delivery
and performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby, including the issuance by
way
of private placement pursuant to this Agreement of any Capital Notes, or shares.
This Agreement and all Capital Notes issued hereunder on the date which this
representation is given have been executed and delivered by the Company, and
each constitutes the valid and legally binding obligations of the Company,
legally enforceable against the Company in accordance with its terms, subject
to
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other laws relating to creditor’s rights generally and general
principles of equity.
3.4. Cross-Default.
No
Default or Event of Default exists under the Facility Agreement.
3.5. No
Conflicts.
Neither
the execution and delivery of this Agreement by Tower, nor the compliance with
the terms and provisions of this Agreement on the part of Tower, including
the
issuance of shares, Capital Notes, or Conversion Shares, will: (i) violate
any
statute or regulation of any governmental authority, domestic or foreign,
affecting Tower; (ii) require the issuance of any authorization, license,
consent or approval of any governmental agency, or any other person which has
not been obtained, save as set forth in Schedule 3.5 hereto; or (iii) conflict
with or result in a breach of any of the terms, conditions or provisions of
any
judgment, order, injunction, decree, loan agreement or other material agreement
or instrument to which Tower is a party, or by which Tower is bound, or
constitute a default thereunder, the effect of which might have a material
adverse effect on Tower.
3.6. No
Litigation.
There
are no actions, suits, proceedings, or injunctive orders, pending or threatened
against or affecting Tower relating to the subject matter of this Agreement.
3.7. No
Brokers.
Tower
has not engaged any broker or finder in connection with the transactions
contemplated by this Agreement, and no broker or other person is entitled to
any
commission or finder’s fee in connection with such transactions.
3.8. The
Company acknowledges that TIC is acquiring the Capital Notes on the Amendment
Closing Date in full reliance upon the representations and warranties made
by
the Company in this Agreement.
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4. Representations
and Warranties of TIC.
TIC
hereby represents and warrants to the Company that it:
4.1. is
acquiring the securities issued and to be issued to TIC pursuant to this
Agreement for investment and not with a view to distribution without
registration under the U.S. Securities Act of 1933 (the “Securities
Act”);
4.2. has
requisite knowledge and experience in financial and business matters to be
capable of evaluating the merits and risks of an investment in the Company
and
is an accredited investor as defined in Rule 501(a) under the Securities
Act;
4.3. understands
that none of the Capital Notes issued and to be issued under this Agreement
have
been, or will be, registered under the Securities Act, or the laws of any
jurisdiction;
4.4. agrees
that none of the securities issued and to be issued to TIC pursuant to this
Agreement may be sold, offered for sale, transferred, pledged, hypothecated
or
otherwise disposed of except by registration under the Securities Act or
otherwise in compliance with the Securities Act, the Israeli Securities Law
or
any applicable securities laws of any jurisdiction (including pursuant to an
exemption therefrom); and
4.5. acknowledges
that the securities, upon issuance, will, unless in the reasonable opinion
of
counsel for the Company such legend is not required in order to ensure
compliance under the Securities Act, bear the following legend:
THESE
SECURITIES [(INCLUDING THE SECURITIES ISSUABLE PURSUANT HERETO)]1 HAVE
NOT
BEEN REGISTERED OR QUALIFIED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED,
OR ANY U.S. STATE OR OTHER JURISDICTION’S SECURITIES LAWS. THESE SECURITIES
(INCLUDING THE SECURITIES ISSUABLE PURSUANT HERETO) MAY NOT BE SOLD, OFFERED
FOR
SALE OR PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED, (THE “ACT”) WITH RESPECT TO ANY SUCH SECURITIES OR AN OPINION OF
COUNSEL (REASONABLY SATISFACTORY TO THE COMPANY) THAT SUCH REGISTRATION IS
NOT
REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF THE ACT OR ON THE TEL-AVIV
STOCK
EXCHANGE IN COMPLIANCE WITH REGULATION S UNDER THE ACT.
For
the
avoidance of doubt, nothing in this Section 4 shall derogate from the
Company’s obligations under the Registration Rights Agreement.
5. Undertakings
by the Company.
5.1. The
Company shall fulfil all of its obligations under this Agreement, the Amended
and Restated Registration Rights Agreement, the Capital Notes and the Securities
Purchase Agreement, including the Capital Notes issued pursuant hereto and
the
under any registration rights agreement .
1
Following the effective date of any registration statement covering the
Conversion Shares or any of them, if applicable, bracketed language to be
removed from future Capital Notes relating to such Conversion Shares and, at
the
request of the holder, a substitute Capital Note or Notes omitting the bracketed
language will promptly be delivered to the holder.
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5.2. In
the
event that the adjustment provisions of any Capital Notes issued pursuant hereto
result in additional Conversion Shares to be issued upon conversion of the
Capital Notes, the Company shall promptly furnish TIC with a copy of the
approval of the TASE for listing such additional Conversion Shares (if the
Company’s shares are then traded on the TASE).
5.3. To
the
extent that ordinary shares (or other shares of capital stock substituted
therefor) of the Company are listed on one or more securities exchanges,
including the NASDAQ and the TASE, the Company shall maintain, at its expense,
the listing of the shares of the Company issued pursuant to this Agreement
(including upon conversion of Capital Notes issued pursuant to this Agreement)
on such exchanges or, in the event such shares of the Company are listed on
only
one securities exchange, such exchange. Nothing in this Section 5.4 shall
constitute an obligation of the Company to list or maintain the listing of
its
ordinary shares (or other shares of capital stock substituted therefor) on
any
securities exchanges, including the NASDAQ and the TASE.
5.4. The
Company undertakes not to issue Shares or Securities (as defined in the
Securities Law, 1968) of the Company, save on market terms and
conditions.
6. Conditions
Precedent.
This
Agreement and the issuance and allotment of the shares of the Company, or the
issuance of Capital Notes, pursuant to and in accordance with this Agreement,
to
TIC or its nominee (which shall be a Subsidiary of TIC) shall be subject to
closing of the Amending Agreement and the satisfaction or waiver of all the
conditions precedent thereto. For the purposes of this Agreement, “Subsidiary”
of any person means any company which directly or indirectly is controlled
by
such person; “control”
shall in
this Section 6 bear the meaning assigned to such term in Section 1 of the
Securities Law, 1968.
7. Miscellaneous.
7.1. Governing
Law; Jurisdiction.
This
Agreement shall be governed by and shall be construed in accordance with Israeli
law and the courts of Tel-Aviv-Jaffa shall have exclusive jurisdiction to hear
any matters, provided that TIC and any other Subsidiary of TIC party to this
Agreement shall be entitled to xxx Tower in any jurisdiction in which it has
an
office or holds assets.
7.2. Successors
and Assigns; Assignment.
Except
as otherwise expressly limited herein, the provisions hereof shall inure to
the
benefit of, and be binding upon, the successors and permitted assigns of the
parties hereto. This Agreement may not be assigned by any party without the
prior written consent of the other party hereto, provided that TIC may assign
this Agreement, in whole or in part, to any Subsidiary of TIC or add a
Subsidiary of TIC as an additional party hereto, Nothing in this Agreement
shall
be deemed to restrict the (a) transferability of the shares, and Capital Notes
to be issued pursuant to this Agreement or the Conversion Shares, in each case,
in whole or in part at any time and from time to time, except for restrictions
on transfer imposed by applicable securities laws or (b) the assignability
of
the registration rights in accordance with the Registration Rights Agreement
.
7.3. Expenses.
The
Company shall bear the expenses and costs of all the parties to the transactions
contemplated hereby (except for the fees and expenses of counsel to TIC which
shall be borne by TIC).
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7.4. Entire
Agreement; Amendment and Waiver.
This
Agreement constitutes the full and entire understanding and agreement between
the parties with regard to the subject matter hereof. Any term of this Agreement
may be amended and the observance of any term hereof may be waived (either
prospectively or retroactively and either generally or in a particular instance)
only with the written consent of the parties to this Agreement.
7.5. Notices,
etc.
All
notices and other communications required or permitted hereunder to be given
to
a party to this Agreement shall be in writing and shall be faxed or mailed
by
registered or certified mail, postage prepaid, or otherwise delivered by hand
or
by messenger, addressed to such party's address as set forth below:
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If
to Israel Corporation:
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Israel
Corporation Ltd.
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23
Arania St.
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Millennium
Tower
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Facsimile:
00-000-0000
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Attention: Avisar
Paz, CFO
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with
a copy to:
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Gornitzky
&Co.
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00
Xxxxxxxxxx Xxxx.
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Xxx-Xxxx,
00000
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Facsimile:
00-000-0000
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Attention: Xxx
Xxxxxx, Adv.
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If
to the Company:
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Tower
Semiconductor Ltd.
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Ramat
Gavriel Industrial Area
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X.X.
Xxx 000
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Xxxxxx
Xxxxxx
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Xxxxxx
00000
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Fax.
000-0-0000000
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Attn:
Xxxx Xxxxxxx, Acting CFO
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with
a copy to
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(which
shall not
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constitute
notice):
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Xxxxx
Xxxxx & Xx.
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0
Xxxxxxx Xxxxxx
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00xx
Xxxxx
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Xxx-Xxxx,
Xxxxxx, 00000
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Fax:
000-0-0000000
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Attn:
Xxxxx Xxxxxxxx, Adv.
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or
such
other address with respect to a party as such party shall notify each other
party in writing as above provided. Any notice sent in accordance with this
Section 7.5 shall be effective (i) if mailed, five (5) business days after
mailing, (ii) if sent by messenger, upon delivery, and (iii) if sent via
facsimile, one (1) business day following transmission and electronic
confirmation of receipt.
7.6. Delays
or Omissions.
No
delay or omission to exercise any right, power, or remedy accruing to any party
upon any breach or default under this Agreement, shall be deemed a waiver of
any
other breach or default theretofore or thereafter occurring. Any waiver, permit,
consent, or approval of any kind or character on the part of any party of any
breach or default under this Agreement, or any waiver on the part of any party
of any provisions or conditions of this Agreement, must be in writing and shall
be effective only to the extent specifically set forth in such writing. Unless
provided otherwise herein, all remedies, either under this Agreement or by
law
or otherwise afforded to any of the parties, shall be cumulative and not
alternative.
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7.7. Severability.
If any
provision of this Agreement is held by a court of competent jurisdiction to
be
unenforceable under applicable law, then such provision shall be excluded from
this Agreement and the remainder of this Agreement shall be interpreted as
if
such provision were so excluded and shall be enforceable in accordance with
its
terms; provided, however, that in such event this Agreement shall be interpreted
so as to give effect, to the greatest extent consistent with and permitted
by
applicable law, to the meaning and intention of the excluded provision as
determined by such court of competent jurisdiction.
7.8. Counterparts.
This
Agreement may be executed in any number of counterparts (including facsimile
counterparts), each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
7.9. Headings.
The
headings of the sections and paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute part of this Agreement
or
to affect the construction hereof.
7.10. Further
Assurances.
Each of
the parties hereto shall perform such further acts and execute such further
documents as may reasonably be necessary to carry out and give full effect
to
the provisions of this Agreement and the intentions of the parties as reflected
thereby.
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[Signature
Page to Israel Corporation Ltd. Conversion Agreement]
IN
WITNESS WHEREOF, each of the parties has signed this Agreement as of the date
first hereinabove set forth.
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TOWER
SEMICONDUCTOR LTD.
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ISRAEL
CORPORATION LTD
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/s/
Xxxx Xxxxxxx & /s/ Xxxxx Xxxxx
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/s/Avisar
Paz & Nir Gilad
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Name:
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Xxxx
Xxxxxxx & Xxxxx Xxxxx
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By:
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Avisar
Paz & Nir Gilad
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Title:
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Acting
VP/CFO & Treasurer
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Title:
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CFO
& CEO
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