* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
EXHIBIT 10.19
SHARE PURCHASE AGREEMENT
BETWEEN
QUICKLOGIC CORPORATION AND
TOWER SEMICONDUCTOR LTD.
AGREEMENT (this "Agreement"), dated as of December 11, 2000, by and
between QuickLogic Corporation ("QuickLogic") and Tower Semiconductor Ltd. (the
"Company").
RECITALS
WHEREAS on July 4, 2000, SanDisk Corporation ("SanDisk") and the Company
entered into a Share Purchase Agreement in the form attached as Attachment 1
hereto (as amended by that certain Side Letter Agreement dated August 29, 2000
also attached in Attachment 1 hereto, the "SPA") and an Additional Purchase
Obligation Agreement in the form attached as Attachment 2 hereto (the "APOA"),
and agreed to enter into an Escrow Agreement (the "Escrow Agreement") and a
Registration Rights Agreement (the "Registration Rights Agreement") in
substantially the same form as Exhibits C and E to the SPA, all upon the terms
and conditions detailed therein (collectively, the "SD Transaction Agreements");
and
WHEREAS QuickLogic desires to purchase and the Company desires to issue
and sell to QuickLogic Ordinary Shares of the Company (the "Shares") pursuant to
substantially the same terms and conditions as set forth in the SD Transaction
Agreements except as expressly set forth herein.
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, it is agreed as follows:
1. Capitalized terms used and not defined herein shall have the meanings set
forth in the SD Transaction Agreements.
2. There is hereby incorporated into this Agreement all of the terms and
conditions of the SD Transaction Agreements (other than the Escrow
Agreement), as if each is set forth in full herein, but such incorporation
herein by reference is subject to the following:
(a) Each reference in such SD Transaction Agreements to SanDisk
Corporation, "Buyer", "S" and "Holder" will refer to QuickLogic and not to
SanDisk Corporation except as expressly set forth below.
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
(b) Effectiveness of same shall be upon the date hereof (and references
therein to the "date hereof" shall mean the date of this Agreement),
notwithstanding anything to the contrary set forth therein.
(c) The definition of "Shares" in the Recitals of the SPA shall reflect
that 288,850 Shares are being initially purchased by QuickLogic.
(d) The term "Buyer" referenced in Section 1 of the SPA under the
definition of "Steering Committee", in the first sentence of Section 5.6.3 of
the SPA, and in Sections 5.6.4 and 7.17, the last sentence of Section 7.2.2,
and in Sections 11.2, 11.3 and 11.4 of the SPA shall mean and refer to
SanDisk or any of its permitted assignees, and shall not mean or refer to
QuickLogic or provide rights to QuickLogic.
(e) The "purchase price" for the Shares to be purchased by QuickLogic
as referenced in Section 2.2 of the SPA shall be $23.08 per share
representing an aggregate purchase price of $6,666,666. All references to the
Escrow Agreement in the SPA and all references to interest on escrowed funds
in the SPA are deemed deleted; the Purchase Price payable under Sections
2.1/2.2 will be paid in immediately available funds at the Closing.
(f) QuickLogic will have no obligation to enter into or deliver at the
Closing the Shareholders Agreement referred to in Section 2.4 of the SPA. The
following parenthetical in Section 2.4 of the SPA shall be deleted: "subject, in
relation to the issuance of the Shares and the Additional Purchase Obligation
Shares, to Company shareholder approval pursuant to a general meeting of the
Company."
(g) From the date of this Agreement and until the end of three years
from the initial sale of Shares to QuickLogic as contemplated hereunder (the
"Restricted Period") neither QuickLogic nor any of its Permitted Transferees
shall sell, assign, transfer, pledge, hypothecate, or otherwise encumber or
dispose of in any way (hereinafter referred to as "Transfer"), all or any part
of or any interest in the Equity Securities now or hereafter owned or held by
QuickLogic or such Permitted Transferees except to a Permitted Transferee. For
the purposes hereof, a "Permitted Transferee" is any entity at least the
majority of the voting rights in which is held by the transferring shareholder,
provided that (i) such entity is or becomes a party to this Agreement and agrees
in writing to be bound by all of the provisions of this Agreement, and (ii) such
transferring shareholder shall not be relieved of its obligations hereunder.
(h) QuickLogic acknowledges the supplemental disclosures attached hereto
as Attachment 4, which are responsive to, and qualify, the representations and
warranties set forth in Section 3 of the SPA.
(i) The reference to the Non-Disclosure Agreement in Section 5.1 of the
SPA will instead refer to that certain Nondisclosure Agreement dated as of
August 1, 2000.
(j) Section 5.7 of the SPA is hereby deleted.
(k) Section 5.11 of the SPA is hereby deleted.
(l) Satisfaction of the condition to Closing set forth in Section 7.3
shall be determined exclusively by SanDisk or its permitted assignees.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-2-
(m) "Indemnifying party" in the second line from the bottom of Section
10.6.1 of the SPA shall be replaced by "indemnified party".
(n) All but the first sentence of Section 11.5 of the SPA is deleted.
Section 11.7 of the SPA is deleted.
(o) In the first sentence of Section 12.1 of the SPA, the cap on
reimbursement of Buyer legal fees is limited to US$10,000.
(p) The first parenthetical of Section 12.8 of the SPA is replaced with
the following: "(including any term sheet between Buyer and the Company and all
drafts hereof and thereof)".
(q) The amount of "Shares" referenced in the Recitals of the APOA shall
be adjusted to reflect the transactions contemplated hereby and described
herein. References in the Recitals of the APOA to the Share Purchase Agreement
and in the APOA generally shall refer to this Agreement (or the SPA as the
context may require) and to the Foundry Agreement shall refer to the Foundry
Agreement attached hereto as Attachment 3.
(r) The amount of "A Additional Purchase Obligations" referenced in
Section 2.1.1 of the APOA and which are to be issued and delivered to
QuickLogic as provided therein shall be 611,150 Ordinary Shares. Each Series
A Additional Purchase Obligation referenced in Section 2.2 of the APOA shall
contain Additional Purchase Obligations to purchase up to an aggregate of
122,230 Ordinary Shares of the Company. The "Exercise Price" for the
Additional Purchase Obligations to be purchased by QuickLogic pursuant to the
APOA shall be $30 per additional purchase obligation.
(s) Sections 2.1.2, 2.1.3 and 3.2.2 of the APOA and all references to
the "B Additional Purchase Obligations" in the APOA shall be deleted and shall
not be applicable to QuickLogic.
(t) The following sentence shall be appended to Section 5.1.5 of the
APOA: "QuickLogic shall have no obligation to exercise the Series A-5 Additional
Purchase Obligation unless and until, in addition to the requirements set forth
above in this Section 5.1.5, QuickLogic receives written notice from the Company
signed by the two Co-CEOs or the CEO, as the case may be, and the Chairman of
the Board of the Company certifying that Fab 2 has produced and is able to
produce wafers pursuant to the 0.18 micron CMOS process described in Section 7of
the Share Purchase Agreement Between QuickLogic Corp. and Tower Semiconductor
Ltd. dated as of December 11, 2000."
3. It is the intent of the parties that the Registration Rights Agreement
will be amended in its entirety in order to provide registration and other
rights set forth therein as to which SanDisk, QuickLogic and other purchasers of
Ordinary Shares in the Company will share, under a single agreement, on a pari
passu basis, superseding Section 2.5.1.5 of the SPA. QuickLogic agrees to
cooperate in executing such an amendment.
4. The addresses for notices to be sent to QuickLogic pursuant to Sections
12.4 of the SPA and 8.4 of the APOA, shall be as follows:
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-3-
QuickLogic Corporation
Attn: President and CEO
Tel:
Fax:
5. Concurrent with the execution of this Agreement, the parties shall execute
and enter into the Foundry Agreement in the form of Attachment 3 hereto. All
references in the SPA to the Foundry Agreement will mean and refer to the
Foundry Agreement in the form of Attachment 3 hereto.
6. Concurrent with the execution of this Agreement, QuickLogic shall execute
the OCS Undertaking attached hereto.
7. The Company hereby agrees to commence, jointly with QuickLogic, the
development of QuickLogic amorphous silicon antifuse technology in its pilot
line no later than September 30, 2001, and expects to complete the development
and provide in its pilot line no later than December 31, 2001, the technological
capabilities, processes, and means to fulfill QuickLogic's anticipated prototype
manufacturing requirements contemplated by this Agreement and the Foundry
Agreement. Further, in Fab 2, the Company will offer to QuickLogic a version of
the 0.18 micron CMOS process that is as fast as the competing * process offered
by *. This equivalence shall be demonstrated by SPICE modeling the speed of "*
input nand, a * input nor, and an inverter at typical Vdd" according to the
following constraints:
(a) * nominal * SPICE models shall be used.
(b) The Company shall supply nominal, theoretically-based SPICE models
for the objective process to be used in this comparison.
In addition, this version of the 0.18 micron process shall be delivered in
accordance with the following milestones:
(a) The theoretically derived SPICE models (equivalent functionality to
the Company's standard 0.18 um process) available no later than ten (10) weeks
after the Closing of Escrow (as defined in the SPA).
(b) Equivalent (theoretically modified) library support available within
eight (8) weeks of the library availability for the standard 0.18 um process
(availability includes all phases of library access).
The Company and QuickLogic shall cooperate in having Toshiba establish this
version of the 0.18 micron process at its facilities, or have Toshiba
manufacture for the Company fast corner lots that would yield similar
characteristics. Based on that the Company expects to be able to supply silicon
based characterized libraries nine (9) months from the Closing of Escrow.
8. To the extent the terms of this Agreement conflict with or contradict the
terms of the Foundry Agreement or any of the SD Transaction Documents
incorporated herein by reference, the terms of this Agreement shall govern.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-4-
9. Neither party may assign any of its rights under this Agreement, the
Foundry Agreement or any of the SD Transaction Agreements without the prior
written consent of the other party, which consent shall not be unreasonably
withheld; provided, however that QuickLogic may assign any of its rights under
this Agreement to any wholly owned Subsidiary of QuickLogic. Subject to the
preceding sentence, this Agreement will apply to, be binding in all respects
upon, and inure to the benefit of the successors and permitted assigns of the
parties. Nothing expressed or referred to in this Agreement will be construed to
give any Person other than the parties to this Agreement any legal or equitable
right, remedy, or claim under or with respect to this Agreement or any provision
of this Agreement. This Agreement and all of its provisions and conditions are
for the sole and exclusive benefit of the parties to this Agreement and their
successors and assigns.
10. This Agreement may be executed in one or more counterparts.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
Tower Semiconductor Ltd.
By: _________________________________
Name:
Title:
QuickLogic Corporation
By: _________________________________
Name: E. ▇▇▇▇▇▇ ▇▇▇▇
Title: President and CEO
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-5-
SHARE PURCHASE AGREEMENT
This Share Purchase Agreement ("Agreement") is made as of July 4, 2000, by
SanDisk Corporation, a Delaware corporation ("Buyer"), and Tower Semiconductor
Ltd., an Israeli corporation (the "Company").
RECITALS
The Company desires to sell, and Buyer desires to purchase, an interest in
the Company through the acquisition of 866,551 ordinary shares, par value
NIS1.00 each (the "Shares") of the Company and through the issuance and delivery
of Additional Purchase Obligations for the purchase by Buyer of additional
Ordinary Shares of the Company, on the terms and subject to the conditions set
forth in this Agreement and in the Additional Purchase Obligation Agreement in
the form of Exhibit B hereto.
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. DEFINITIONS.
For purposes of this Agreement, the following terms have the
meanings specified or referred to in this Section 1:
"Additional Financings" - as defined in Section 3.5.
"Additional Financing Plan" - a detailed written plan, approved by
the Board and detailing, among other things, the significant financial terms and
timetable under which the Company will obtain the financings listed in Section
7.6 hereto, all as set forth in Section 10 to the Business Plan.
"Ancillary Agreements" - as defined in Section 3.2.4.
"Applicable Contract" - any Contract (a) under which the Company or
any Subsidiary has or may acquire any rights, (b) under which the Company or any
Subsidiary has or may become subject to any obligation or liability, or (c) by
which the Company or any Subsidiary or any of the assets owned or used by them
is or may become bound.
"Assets" - as defined in Section 3.6.
"Balance Sheet" - as defined in Section 3.4.2.
"Business Plan" - means the Business Plan, dated July 4, 2000, of
the Company with respect to the proposed construction, deployment and operation
by the Company of Fab 2.
"Buyer" - as defined in the first paragraph of this Agreement.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
"Closing" - as defined in Section 2.3.
"Closing Date" - the date and time as of which the Closing actually
takes place.
"Company" - as defined in the first paragraph of this Agreement.
"Consent" - any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Contemplated Transactions" - all of the transactions contemplated
by this Agreement, the Transaction Documents and the Ancillary Agreements.
"Contract" - any agreement, contract, obligation, promise, or
undertaking whether oral or written that is legally binding.
"Damages" - as defined in Section 10.2.
"Encumbrance" - any charge, claim, community property interest,
condition, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income, or exercise of any other attribute of
ownership.
"Escrow Agreement" - as defined in Section 2.4.
"Escrow Agent" - as defined in the Escrow Agreement.
"Exchange Act" means the U.S. Securities Exchange Act of 1934, as
amended, and any rules or regulations issued pursuant to that Act or any
successor law.
"Excluded Securities" means Ordinary Shares or options to purchase
Ordinary Shares issued to bona fide employees, directors or consultants of the
Company or any Subsidiary thereof.
"Fab 2" - The Company's new Fab project to be constructed in ▇▇▇▇▇▇
Haemek in Israel, all as further set forth in the Business Plan.
"Facilities" - any real property, leaseholds, or other interests
currently owned or operated by the Company and any buildings, plants,
structures, or equipment currently owned or operated by the Company.
"GAAP" - generally accepted Israel accounting principles, applied on
a basis consistent with the basis on which the Balance Sheet and the other
financial statements referred to in Section 3.4 were prepared.
"Governmental Authorization" - any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-2-
"Governmental Body" - any U.S. or Israeli federal, state, local,
municipal or other government, governmental or quasi-governmental authority of
any nature (including any governmental agency, branch, department, official or
entity and any court or other tribunal), or body exercising or entitled to
exercise any administrative, executive, judicial, legislative, police,
regulatory or taxing authority or power of any nature.
"Intellectual Property Assets" - as defined in Section 3.2.0.
"Interim Balance Sheet" - as defined in Section 3.4.2.
"Investment Center" - the Investment Center of the Ministry of Trade
and Commerce of the Israeli Government.
"Knowledge" or "knowledge" - a person will be deemed to have
"Knowledge" or "knowledge" of a particular fact or other matter if any
individual who is serving as a Named Director or Officer has, or at any time
had, knowledge of such fact or other matter.
"Legal Requirement" - any U.S. or Israeli federal, state, local,
municipal, or administrative or other order, constitution, law, ordinance,
principle of common law, regulation, statute, or treaty.
"Named Officers and Directors" - as defined in Section 3.3.2.
"OCS" - as defined in Section 3.2.1.
"Order" - any award, decision, injunction, judgment, order, ruling,
subpoena or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"Ordinary Course of Business" - an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
Such action is consistent with the past practices of such Person and
is taken in the ordinary course of the normal day-to-day operations
of such Person; and
Such action is similar in nature and magnitude to actions
customarily taken in the ordinary course of the normal day-to-day
operations of other Persons that are in the same line of business as
such Person.
"Ordinary Shares" - the ordinary shares of the Company, par value
NIS1.00 per share.
"Organizational Documents" - (a) the memorandum of association,
articles of association, certificate of incorporation and/or the bylaws of a
corporation; (b) the partnership agreement and any statement of partnership of a
general partnership; (c) the limited partnership agreement and the certificate
of limited partnership of a limited partnership; (d) any charter or
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-3-
similar document adopted or filed in connection with the creation, formation, or
organization of a Person; and (e) any amendment to any of the foregoing.
"Person" - any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"Proceeding" - any action, arbitration, audit, hearing,
investigation, litigation, or suit (whether civil, criminal, administrative,
investigative, or informal) commenced, brought, conducted, or heard by or
before, or otherwise involving, any Governmental Body or arbitrator.
"Representative" - with respect to a particular Person, any
director, officer, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors.
"Schedule" - means a schedule comprising part of the disclosure
schedule delivered by the Company to Buyer concurrently with the execution and
delivery of this Agreement.
"Securities Act" - the U.S. Securities Act of 1933 as amended, and
regulations and rules issued pursuant to that Act or any successor law.
"Shares" - as defined in the Recitals of this Agreement.
"Steering Committee" - a committee to be formed immediately upon the
signing of this Agreement and dissolved upon the Closing and comprised of three
members including one representative of each of the Buyer, TIC and the Company,
none of whom needs to be a member of the Board. The Steering Committee shall
oversee the development, assessment and implementation, and, if applicable, any
modification of the Business Plan as specified in Sections 5.6.5 of this
Agreement. The Steering Committee shall not be deemed to be a committee of the
Board and its members shall not have a fiduciary duty to the Company. The
Steering Committee shall consider, in making decisions pursuant to Sections
5.6.5 and 7.3 hereunder, (a) the construction schedule of Fab 2 as set forth in
the Business Plan and any changes thereto, (b) the Additional Financing Plan as
set forth in the Business Plan and any failure to comply with the schedule for
such financings or changes to the Additional Financing Plan, (c) any significant
increase in the cost of Fab 2 beyond that set forth in the Business Plan and (d)
the production capacity schedule of Fab 2 as set forth in the Business Plan and
any changes thereto.
"Subsidiary" - any corporation or other Person of which securities
or other interests having the power to elect a majority of that corporation's or
other Person's board of directors or similar governing body, or otherwise having
the power to direct the business and policies of that corporation or other
Person (other than securities or other interests having such power only upon the
happening of a contingency that has not occurred) are held by the Company or one
or more of its Subsidiaries.
"Tax Return" - any return (including any information return),
report, statement, schedule, notice, form, or other document or information
filed with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination,
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-4-
assessment, collection, or payment of any Tax or in connection with the
administration, implementation, or enforcement of or compliance with any Legal
Requirement relating to any Tax.
"TIC" - The Israel Corporation Ltd.
"Threatened" - a claim, Proceeding, dispute, action, or other matter
will be deemed to have been "Threatened" if either (a) any demand or statement
has been made in writing or any notice has been given in writing or any other
event has occurred or any other circumstance exists, that actually leads any
Named Officer and Director to believe that such a claim, will be filed or
otherwise pursued in the future or (b) any demand or statement has been made
orally or any notice has been given orally to the effect that such a claim,
proceeding, dispute, action or other matter will be asserted, commenced, taken
or otherwise pursued in the future.
"Transaction Documents" - collectively, the Foundry Agreement, the
Additional Purchase Obligation Agreement, the Escrow Agreement (all as defined
in Section 2.4), the Shareholders Agreement and the Registration Rights
Agreement (as defined in Section 2.5.1.5).
"Wafer Partner" - a wafer manufacturer that either invests in the
equity of the Company and enters into an agreement with the Company providing
for a wafer order right or that enters into a wafer manufacturing agreement with
the Company on a "take or pay" basis or on a "pre-payment" basis, in each case
in accordance with the provisions of Sections 7.6(ii) and 7.7 hereof.
"Additional Purchase Obligations" - Conditional obligations to
purchase Ordinary Shares of the Company issued under the Additional Purchase
Obligation Agreement.
Additional Defined Terms
6K Reports Section 3.4.1 Material Adverse Effect Section 3.1.1
Additional Incentive Plans Section 1.14 Offered Securities Section 11.8.1
Additional Purchase Obligation Agreement Section 2.4 Patents Section 3.20.1
Additional Purchase Obligation Shares Section 2.4 Project Committee Section 11.4
Additional Wafer Partner Financing Date Section 7.6 Pro Rata Share Section 11.8.1
Annual Report Section 3.4.1 Purchase Price Section 2.2
Articles Section 2.5.1.2 Registration Right Agreement Section 2.5.1.5
Board Section 2.4 Rights in Mask Works Section 3.10.1
Copyrights Section 3.20.1 SEC Section 3.4.1
Debt Financing Term Sheet Section 5.6.4 Shareholders Agreement Section 2.5.1.5
Environmental Study Section 3.5.1 SEC Documents Section 3.4.1
Executed Transaction Documents Section 3.2.1 Steering Committee Section 5.10
Grants Section 3.2.1 Taxes
Indemnified Persons Section 10.2 Toshiba Agreement Section 3.2.3
Foundry Agreement Section 2.4 Wafer Commitments Section 7.7
Marks Section 3.20.1 Wafer Partner Differential Section 7.6
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-5-
2. SALE AND TRANSFER OF SHARES; PURCHASE PRICE; CLOSINGS.
2.1 DELIVERY. Subject to the terms and conditions of this
Agreement, at the Closing, the Company shall issue to the Buyer the Shares,
validly authorized, duly issued, fully paid and nonassessable entitled to all
rights and privileges assigned to such Shares in this Agreement and in the
Articles and free of any Encumbrances (other than arising solely by or through
actions of Buyer), in consideration for the release of the Purchase Price (as
defined below) from the Escrow Agent to the Company.
2.2 PURCHASE PRICE. The per share purchase price will be
$23.08 (all references herein to "$" are to United States dollars) representing
an aggregate purchase price (the "Purchase Price") for the Shares of
$20,000,000. Within 14 days of the execution of this Agreement, the Purchase
Price will be deposited in escrow pursuant to the terms and conditions of the
Escrow Agreement with an escrow agent to be appointed by the parties. At the
Closing, subject to the fulfillment or waiver of all closing conditions hereto,
the Purchase Price will be released from escrow to the Company all in accordance
with the terms and conditions of this Agreement and the Escrow Agreement and all
interest accrued with respect to the Purchase Price during the escrow period
will be released to the Company.
2.3 CLOSING. The closing provided for in this Agreement (the
"Closing") will take place at the offices of Meitar, Liquornik, Geva & Co. at 16
Abba _______ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇, Israel at 10:00 a.m. (local time) on
the date that is seven days following satisfaction of all the conditions
specified in Sections 7 and 8, unless the parties otherwise agree, provided that
the Closing may not, in any event, take place after January 31, 2001, unless the
parties otherwise agree. In the event that the Closing fails to take place by
January 31, 2001, or such later date as the parties may agree, or otherwise
terminates pursuant to section 9.1, then all interest accrued with respect to
the Purchase Price and the Purchase Price shall be retained by Buyer.
2.4 OTHER AGREEMENTS: COMPANY'S RESOLUTIONS. Concurrently
with the execution of this Agreement, (a) the parties hereto are executing and
entering into the Foundry Agreement in the form of Exhibit A hereto (the
"Foundry Agreement") and the Additional Purchase Obligation Agreement in the
form of Exhibit B hereto (the "Additional Purchase Obligation Agreement"), each
of which shall provide that they shall only be effective upon the Closing, (b)
the Company is delivering to the Buyer certified resolutions of the Company's
board of directors (the "Board") authorizing and approving the execution,
delivery and performance of the Transaction Documents and the consummation of
the Contemplated Transactions, including without limitation, the issuance of the
Shares to the Buyer and all shares issuable upon exercise of the Additional
Purchase Obligations under the Additional Purchase Obligation Agreement (the
"Additional Purchase Obligation Shares") (subject, in relation to the issuance
of the Shares and the Additional Purchase Obligation Shares, to Company
shareholder approval pursuant to a general meeting of the Company) and (c) the
Company is delivering to the Buyer a certificate dated the date hereof signed by
the co-Chief Executive Officer of the Company identified in Schedule 7.15 to the
effect set forth in Section 7.15. The parties shall enter into the Escrow
Agreement in the form of Exhibit C hereto (the "Escrow Agreement") within 14
days of the date hereof. Buyer and TIC will execute and enter into the
Shareholders Agreement in the form of Exhibit D hereto (the "Shareholders
Agreement") within 14 days of the date hereof.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-6-
2.5 CLOSING OBLIGATIONS. At the Closing:
2.5.1 The Company will deliver to Buyer:
2.5.1.1 Certified copies of resolutions of the
Company's shareholders relating to, among other things, an increase in the
Company's registered share capital and the issuance of the Shares and the
Additional Purchase Obligation Shares, and the Board authorizing and approving
the Ancillary Agreements and the transactions contemplated therein;
2.5.1.2 Certified copies of the Company's
Articles of Association (the "Articles") as amended through the Closing Date;
2.5.1.3 A certified duly executed by two
executive officers of the Company in the form set forth in Schedule 2.5.1.3,
dated as of the date of the Closing;
2.5.1.4 The opinion of ▇▇▇▇▇ ▇▇▇▇▇ & Co.,
counsel to the Company, in the form reasonably satisfactory to Buyer and its
counsel to be attached hereto as Schedule 2.5.1.4, dated as of the Closing;
2.5.1.5 Executed copies of the Registration
Rights Agreement substantially in the form of Exhibit E hereto (the
"Registration Rights Agreement"), which shall provide an equal number of Demand
Rights (as defined in such agreement) to Buyer and TIC;
2.5.1.6 Validly executed certificates
representing the Shares, issued in the name of the Buyer and a certificate of
the secretary of the Company confirming that the Shares were registered in the
share register of the Company in the name of Buyer,
2.5.1.7 Copies of documents evidencing all
Consents and approvals required under Section 7.3 hereof;
2.5.1.8 Copies of all the Ancillary Agreements
duly executed and delivered and in accordance with Section 7 hereof;
2.5.1.9 The written consent of the OCS and the
Investment Center to the execution of this Agreement and the issuance of the
Shares to the Buyer.
2.5.1.10 The certificate required to be
delivered under Section 7.15 hereof.
2.5.2 Buyer will deliver to the Company:
2.5.2.1 A copy of a letter from Buyer to the
Escrow Agent irrevocably authorizing the release of the Purchase Price to the
account of the Company pursuant to the terms of the Escrow Agreement;
2.5.2.2 A certificate duly executed by two
executive officers of Buyer in the form set forth in Schedule 2.5.2.2, dated as
of the date of the Closing;
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-7-
2.5.2.3 Executed copies of the Shareholders
Agreement and the Registration Rights Agreement.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to Buyer as of the
date hereof and as of the Closing and as otherwise provided in the Additional
Purchase Obligation Agreement as follows:
3.1 ORGANIZATION AND GOOD STANDING.
3.1.1 The Company and each Subsidiary is a corporation
duly organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation, with full corporate power and authority to
conduct its business as it is now being conducted and as currently approved by
the Board to be conducted in the future and to own or use its properties and
assets. The company has all requisite corporate power to perform all its
obligations under Applicable Contracts including, but not limited to, the
Ancillary Agreements, subject, with respect to the issuance of the Shares and
the Additional Purchase Obligation Shares, to receipt of the shareholder
resolutions referred to in Section 2.5.1.1. The Company and each Subsidiary is
duly qualified to do business as a foreign corporation and is in good standing
under the laws of each state or other jurisdiction in which either the ownership
or use of the properties owned or used by it, or the nature of the activities
conducted by it or proposed to be conducted by it, requires such qualification,
unless such non-qualifications would not have a material adverse affect on the
business, financial conditions, assets, operations and prospects of the Company
and its Subsidiaries taken as a whole (a "Material Adverse Effect"). Schedule
3.1 contains a complete and accurate list for the Company and each Subsidiary of
its name, its jurisdiction of incorporation, other jurisdictions in which it is
authorized to do business, and its capitalization, including (i) in connection
with each Subsidiary, the identity of each Shareholder and the number of shares
held by each shareholder, and (ii) in connection with the Company, the identity
of each shareholder who to the knowledge of the Company holds more than 5% of
the issued and outstanding share capital of the Company and the number of shares
of the Company held by each such shareholders. Also enclosed in Schedule 3.1 is
a copy of the list of shareholders maintained by the Company's transfer agent as
of a date within 5 days prior to the date hereof.
3.1.2 The Company has delivered to Buyer copies of (i)
the Organizational Documents of the Company and each Subsidiary, as currently in
effect, and (ii) minutes of all meetings of the directors and shareholders of
the Company and each Subsidiary held since January 1, 1995 and all resolutions
passed by the directors or shareholders since January 1, 1995.
3.2 AUTHORITY; NO CONFLICT; CONSENTS AND APPROVALS.
3.2.1 Each of this Agreement, the Additional Purchase
Obligation Agreement, the Additional Purchase Obligations, the Escrow Agreement
and the Foundry Agreement (the "Executed Transaction Documents") has been duly
authorized, executed and delivered by the Company (subject, with respect to the
increase in the Company's registered share capital and issuance of the Shares
and the Additional Purchase Obligation Shares, to receipt of shareholder
approval by Closing) and, assuming the due execution and delivery hereof and
thereof
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-8-
by Buyer, constitutes the legal, valid, and binding obligation for the Company,
enforceable against the Company in accordance with its terms. Upon the execution
and delivery by the Company of the Transaction Documents and the other Ancillary
Agreements (where applicable), and assuming the due execution and delivery
thereof by the other parties thereto, the Transaction Documents and the other
Ancillary Agreements (where applicable) will constitute the legal, valid, and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms. The Company has the absolute and
unrestricted right, power, authority, and capacity to execute and deliver this
Agreement and the Transaction Documents and the other Ancillary Agreements
(where applicable) and to perform its obligations under this Agreement, the
Transaction Documents and the other Ancillary Agreements (where applicable)
(subject, with respect to the issuance of the Shares and the Additional Purchase
Obligation Shares, to receipt of Company shareholder approval by Closing) and
has taken all corporate action necessary to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder and
thereunder.
3.2.2 Except as set forth in Schedule 3.2, neither the
execution and delivery of this Agreement, any of the Transaction Documents or
any of the other Ancillary documents nor the consummation or performance of any
of the foregoing is or will, directly or indirectly (with or without notice or
lapse of time):
3.2.2.1 contravene, conflict with, or result in
a violation of (A) any provision of the Organizational Documents of the Company
or any Subsidiary, or (B) any resolution adopted by the board of directors or
the shareholders of the Company or any Subsidiary; or
3.2.2.2 contravene, conflict with, or result in
a violation of, or give any Governmental Body or other Person the right to
challenge or to exercise any remedy or obtain any relief under, any Legal
Requirement or any Order to which the Company or any Subsidiary, or any of the
assets owned or used by the Company or any Subsidiary, may be subject, the
breach of or default under which could have a Material Adverse Effect or could
materially adversely affect the consummation of the Contemplated Transactions;
or
3.2.2.3 contravene, conflict with, or result in
a violation of any of the terms of requirements of, or give any Governmental
Body the right to revoke, withdraw, suspend, cancel, terminate or modify any
Governmental Authorization that is held by the Company or any Subsidiary or that
otherwise relates to the business of, or any of the assets owned or used by, the
Company or any Subsidiary, the effect of which would have a Material Adverse
Effect or materially adversely affect the consummation of the Contemplated
Transactions; or
3.2.2.4 contravene, conflict with, or result in
a violation or breach of any provision of, or give any Person the right to
declare a default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any Applicable Contract, the
effect of which could have a Material Adverse Effect or materially adversely
affect the consummation of the Contemplated Transactions; or
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-9-
3.2.2.5 result in the imposition or creation of
any Encumbrance upon or with respect to any of the Asset owned or used by the
Company or any Subsidiary, the effect of which could have a Material Adverse
Effect or materially adversely affect the consummation of the Contemplated
Transactions.
3.2.3 Except as set forth in Schedule 3.2.3, no notice
to, filing with or Consent from any Person or Governmental Body is or will be
required to be made or obtained in connection with the execution and delivery of
(i) this Agreement, (ii) the Transaction Documents, (iii) the Technology License
Agreement, effective April 7, 2000 between the Company and Toshiba Corporation
(the "Toshiba Agreement") and (iv) the Additional Incentive Plans (as defined in
Section 7.14) or the consummation or performance of any of the transactions
contemplated hereby or thereby.
3.2.4 To the best knowledge of the Company and based
on the Company's investigation as of the date hereof, except as set forth in
Section 5.2 to the Business Plan and Schedule 3.2.3 no notice to, filing with or
Consent from any Person or Governmental Body is or will be required to be made
or obtained in connection with (a) the construction, deployment and operation of
Fab 2 in accordance with the Business Plan, (b) the implementation of the
Additional Financing Plan (as defined), provided that the representation made in
this clause (b) is given to the actual Knowledge of the Company on the date
hereof in respect of equity financings to be provided by Wafer Partners, and (c)
the execution, delivery and performance of the agreements entered into or to be
entered into by the Company in connection therewith (such agreements, together
with the agreements referred to in clauses (i)-(iv) of Section 3.2.3, the
"Ancillary Agreements"), other than, in respect of each of the foregoing
clauses, notices, filings or Consents, the failure of which to be made or
obtained would not, individually or in the aggregate have a material adverse
affect on the construction and operation of Fab 2.
3.3 CAPITALIZATIONS; ISSUANCE OF SHARES; OFFICERS AND
DIRECTORS.
3.3.1 The authorized share capital of the Company,
immediately prior to the Closing, including the proposed increase in share
capital referred to in Section 2.4, will consist of 70,000,000 Ordinary Shares,
of which 12,207,007 shares are issued and outstanding and 1,784,804 are reserved
for issuance of outstanding options to employees, officers and directors and
1,615,500 are reserved for future grants of options to employees, officers and
directors. All of the outstanding Ordinary Shares have been duly authorized and
validly issued and are fully paid and nonassessable. Schedule 3.3 sets forth the
list of the Company's shareholders of record as maintained by the transfer agent
and a list of all the options outstanding, the vesting schedules of such options
and the exercise prices thereof. Except as set forth in Schedule 3.3, there are
no Contracts relating to the issuance, or to the Knowledge of the Company, sale,
transfer, or Encumbrance (other than arising solely by or through actions of
Buyer) of any equity securities or securities convertible or exchangeable into
equity securities or securities convertible or exchangeable into equity
securities of the Company. When the Shares shall have been issued and delivered
to Buyer as part of the Closing, such Shares will: (i) have been duly authorized
for issuance by the Company's Board, (ii) upon delivery of the consideration
therefor in accordance with the terms of this Agreement and the Escrow
Agreement, be duly and validly issued, fully paid and nonassessable and (iii) be
free and clear of any Encumbrances, and not the subject of any preemptive or
other participation rights.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-10-
3.3.2 The Company's and its Subsidiaries current
officers and directors are those persons whose names are set forth in Schedule
3.3.2 (the "Named Officers and Directors").
3.3.3 Neither the Company nor any Subsidiary has any
agreement, obligation or commitment with respect to the election of any Person
to the Company's Board and/or any Subsidiary's board of directors and to the
actual knowledge of the Company, there is no voting agreement or other
arrangement among the Company's shareholders or the Subsidiaries' shareholders,
and there are no agreements or arrangements between any Person which affects or
relates to the voting or giving written consents with respect to the Company's
or any Subsidiaries' securities including with respect to the nomination of a
director and/or officer of the Company and/or the Subsidiary.
3.3.4 There are no agreements, commitments and
understandings, whether written or oral, with respect to any compensation to be
provided by the Company and/or the Subsidiary to any of the Named Officers and
Directors, and, to the best knowledge of the Company, to be provided by any
third party to any of the Named Officers and Directors, except as set forth in
Schedule 3.3.4.
3.3.5 Except as set forth in Schedule 3.3.5(a) and in
the Registration Rights Agreement to be entered into hereunder, the Company is
not under any obligation to register for trading on any securities exchange any
of its currently outstanding securities or any of its securities which may
hereafter be issued. Since its incorporation there has been no declaration or
payment by the Company of dividends, or any distribution by the Company of any
assets of any kind to any of its shareholders in redemption of or as the
purchase price for any of the Company's securities except as set forth in
Schedule 3.3.5(b).
3.4 SEC DOCUMENTS; FINANCIAL STATEMENTS.
3.4.1 The Company has furnished to Buyer copies of the
Company's Annual Report on Form 20-F for the year ended December 31, 1999 (the
"Annual Report") as filed with the U.S. Securities and Exchange Commission
("SEC") on March 20, 2000. The Company represents and warrants to Buyer that:
(i) the Annual Report has been duly filed with the SEC, and when filed was in
compliance in all material respects with the requirements of the Exchange Act
and the rules and regulations of the SEC applicable to such Annual Report; and
(ii) the Annual Report was complete and correct in all material respects as of
its date and, as of its date, did not contain any untrue statement of material
fact or omit to state a material fact required to be stated therein or necessary
in order to make the statements made therein, in light of the circumstances
under which they were made, not misleading. The Company has provided the Buyer
with a copy of each document submitted to the SEC on Form 6-K since January 1,
1999 (the "6K Reports" and together with the Annual Report, the "SEC
Documents"). The Company represents and warrants to Buyer that: (i) the 6K
Reports have been duly submitted to the SEC, and when submitted were in
compliance in all material respects with the requirements of the Exchange Act
and the rules and such regulations of the SEC applicable to such 6K Reports; and
(ii) the 6K Reports were complete and correct in all material respects as of
their respective dates and, as of such dates, did not contain any untrue
statement of material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-11-
they were made, not misleading. The Company represents that it has filed all the
reports that the Company was required to file with the SEC since January 1,
1998, according to the requirements of the Exchange Act.
3.4.2 The Company has delivered to Buyer: (a) audited
consolidated balance sheets of the Company as at December 31 in each of the
years 1998 through 1999 (the December 31, 1999 balance sheet being hereinafter
referred to as the "Balance Sheet") and the related audited consolidated
statements of income, changes in shareholders' equity, and cash flow for each of
the fiscal years then ended, together with the report thereon of ▇▇▇▇▇▇▇▇▇
Almagor, independent certified public accountants, and (b) an unaudited
consolidated balance sheet of the Company as at March 31, 2000 (the "Interim
Balance Sheet") and the related unaudited consolidated statements of income,
changes in shareholders' equity, and cash flow for the three months then ended,
including in each case the notes thereto. Such financial statements and notes
fairly present the financial condition and the results of operations, changes in
shareholders' equity, and cash flow of the Company as at the respective dates of
and for the periods referred to in such financial statements, all in accordance
with GAAP, subject, in case of interim financial statements, to normal recurring
year-end adjustments (the effect of which will not, individually or in the
aggregate, be materially adverse); the financial statements referred to in this
Section 3.4.2 reflect the consistent application of such accounting principles
throughout the periods involved.
3.5 BUSINESS PLAN; ADDITIONAL FINANCING PLAN.
True and correct copies of the Business Plan and of the
Environmental Study submitted to the District Zoning Authority (the
"Environmental Study") are attached hereto as Schedule 3.5. The Company has
conducted reasonable research and surveys in preparing the Business Plan and the
Environmental Study and consulted with reputable experts in the field as is
reasonably appropriate in these circumstances. The Company believes that the
opinions, assumptions and timetables contained in the Business Plan (including
both the alternate case assumptions and the base assumptions, as defined
therein, and without giving effect to any risk factors included therein) and in
the Environmental Study are reasonable. The financial, business and other
projections set out in the Business Plan (including both the alternate case
assumptions and the base assumptions, as defined therein, and without giving
effect to any risk factors included therein) have been reasonably prepared with
due diligence, care and consideration. To the Company's knowledge, each of the
Business Plan and the Environmental Study is complete and correct in all
material respects and does not contain any untrue statement of material fact. To
the best of the Company's knowledge, after conducting reasonable research and
surveys as is reasonably appropriate in these circumstances and after consulting
with reputable experts in the field, the financings contemplated in Section 7.6
hereto (the "Additional Financings") together with the Purchase Price and the
proceeds to be paid to the Company upon exercise of the Additional Purchase
Obligations, will be sufficient to complete the construction, deployment and
operation of Fab 2 in accordance with the Business Plan according to the base
scenario under which management of the Company currently contemplates
implementing the Business Plan. There are no other facts or matters of which the
Company is aware which could render any such opinions, assumptions, timetables
or projections materially misleading; provided, however, that no assurance can
be or is given that any of the forecast projections will be attained or that the
assumptions contained therein will not change.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-12-
3.6 TITLE TO PROPERTIES; ENCUMBRANCES. Except as set forth
in Schedule 3.6, the Company and its Subsidiaries have good and marketable
title, free and clear of all Encumbrances (other than Encumbrances for current
Taxes not yet due and minor Encumbrances, if any, which in the aggregate do not
materially detract from the value of the Assets (as hereinafter defined) or
materially impair the conduct of business of the Company as currently conducted
and as currently approved by the Board to be conducted in the future), to all of
the assets, real property, interests in real property, rights, franchises,
patents, trademarks, copyrights, mask works, trademarks, trade names, licenses
and properties tangible or intangible, real or personal, wherever located which
are used in the conduct of the business conducted and as currently approved by
the Board to be conducted in the future by the Company (the "Assets"), other
than property that is leased or licensed. Except as set forth in Schedule 3.6,
the Company has valid and enforceable leases or licenses, as the case may be,
with respect to the Assets consisting of property that is leased or licensed,
under which there exists no default, event of default or event which, with
notice or lapse of time or both, would constitute a default, except for such
defaults which could not have a Material Adverse Effect. Except as set forth on
Schedule 3.6, with respect to real property owned or leased by the Company or
any Subsidiary, there are not any rights of way, building use restrictions
exceptions, variances, reservations, or limitations of any nature which
materially impair or could reasonably be expected to materially impair the
business of the Company as conducted and as currently approved by the Board to
be conducted in the future, other than such which would not have a Material
Adverse Effect. All buildings, plants, and structures owned or leased by the
Company or any Subsidiary do not encroach upon the property of, or otherwise
conflict with the property rights of, any other Person in a material manner.
3.7 CONDITION AND SUFFICIENCY OF ASSETS. The buildings,
plants, structures, and equipment of the Company and its Subsidiaries are
structurally sound, are in good operating condition and repair, and are adequate
for the uses to which they are being put, and none of such buildings, plants,
structures, or equipment is in need of maintenance or repairs except for
ordinary, routine maintenance and repairs that are not material in nature or
cost. Except as set forth in Schedule 3.7, the building, plants, structures and
equipment of the Company and its Subsidiaries are sufficient for the continued
conduct of the Company's businesses after the Closing in substantially the same
manner as conducted prior to the Closing.
3.8 CUSTOMERS AND SUPPLIERS. Since January 1, 2000, there
has not been any adverse change in the business relationship of the Company with
any material customer or material supplier of the Company.
3.9 INVENTORY. Inventories of raw materials, work in
progress and finished goods of the Company and its Subsidiaries are in good
condition and of a quality useable and saleable in the Ordinary Course of
Business or have had appropriate financial reserves established.
3.10 NO UNDISCLOSED LIABILITIES. Except as set forth in
Schedule 3.10, neither the Company nor any Subsidiary has any liabilities or
obligations of any nature (whether absolute, accrued, contingent, or otherwise)
except for liabilities or obligations reflected or reserved against in the
Balance Sheet or the Interim Balance Sheet and current liabilities incurred in
the Ordinary Course of Business since the respective dates thereof.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-13-
3.11 TAXES.
3.11.1 The Company and each Subsidiary has filed or
caused to be filed (on a timely basis since January 1, 1994) all Tax Returns
that are or were required to be filed by or with respect to it, pursuant to
applicable Legal Requirements. The Company and each Subsidiary has paid, or made
provision for the payment of, all Taxes that have or may have become due
pursuant to those Tax Returns or otherwise, or pursuant to any assessment
received by the Company, except such Taxes, if any, as are listed in Schedule
3.11 and are being contested in good faith and as to which adequate reserves
(determined in accordance with GAAP) have been provided in the Balance Sheet and
the Interim Balance Sheet.
3.11.2 Except as set forth in Schedule 3.11.2, the
relevant state tax authorities have audited all such Tax Returns or such Tax
Returns are closed by the applicable statute of limitations for all taxable
years through December 31, 1999. All deficiencies proposed as a result of such
audits have been paid, reserved against, settled, or, as described in Schedule
3.11, are being contested in good faith by appropriate proceedings. Except as
described in Schedule 3.11, neither the Company nor any Subsidiary has given or
been requested to give waivers or extensions (or is or would be subject to a
waiver or extension given by any other Person) of any statute of limitations
relating to the payment of Taxes of the Company or for which the Company may be
liable.
3.11.3 All Taxes that the Company and any Subsidiary is
or was required by Legal Requirements to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the proper
Governmental Body or other Person.
3.11.4 All Tax Returns filed by (or that include on a
consolidated basis) the Company and any Subsidiary are true, correct, and
complete in all material respects. There is no tax sharing agreement that will
require any payment by the Company after the date of this Agreement.
3.12 NO MATERIAL ADVERSE CHANGE. Except as set forth in
Schedule 3.12, since the date of the Balance Sheet, there has not been any
material adverse change in the business, operations, properties, assets or
condition of the Company (financial or other), including in the prospects of the
construction, deployment and operation of Fab 2 in accordance with the Business
Plan, and no event or development has occurred or circumstance exists that may
result in such a material adverse change.
3.13 EMPLOYEE BENEFITS; LABOR.
3.13.1 Except as set forth in Schedule 3.13.1, neither
the Company nor any Subsidiary is a member of any employers union or a party to
any collective bargaining contract, collective labor agreement or other contract
or arrangement with a labor union, trade union or other organization or body
involving any of its employees, or is otherwise required (under any legal
requirement, including under any profit sharing, bonus, deferred compensation,
savings, insurance, pension, retirement, or other employee benefit plan for or
with any employees of the Company or any of its Subsidiaries, except for the
respective personal employment agreements) to provide benefits or working
conditions beyond the minimum benefits and working conditions required by
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-14-
law. Neither the Company nor any Subsidiary has recognized or received a demand
for recognition from any collective bargaining representative with respect to
any of its employees. Except as set forth in Schedule 3.13.1, neither the
Company nor any Subsidiary are subject to, and no employee of the Company or any
Subsidiary benefits from, any extension order (IZAVEI HARCHAVA) or any
arrangement or custom with respect to employment or termination thereof. All of
the Company's and the Subsidiaries' employees are "at will" employees and
neither the Company nor any Subsidiary has any obligation to employee any
employee for a specified period.
3.13.2 Except as set forth in Schedule 3.13.2, there
are no claims or complaints that are pending or that have been threatened
against the Company or any Subsidiary by any person who is or has been an
employee or director of the Company or any Subsidiary, that may, individually or
in the aggregate, have a Material Adverse Effect.
3.13.3 Since January 1, 1995, (i) there has been no
labor strike, slowdown or stoppage pending or threatened against or affecting
the Company or any Subsidiary and (ii) there has been no material dispute
between the Company or any Subsidiary and any group of its employees which
was not resolved.
3.13.4 Except as set forth in Schedule 3.13.4, the
Company's and its Subsidiaries' obligations to provide severance pay to its
employees are fully funded or have been properly provided for in the Financial
Statements in accordance with GAAP including by contribution to appropriate
insurance funds. All other liabilities of the Company or any Subsidiary
(absolute or contingent) relating to their employees were properly accrued in
the Financial Statements in accordance with GAAP.
3.13.5 All amounts that the Company or any Subsidiary
is legally or contractually required either (i) to deduct from its employees'
salaries or to transfer to such employees' pension or provident, life insurance
manager insurance, incapacity insurance, continuing education fund or other
similar fund or (ii) to withhold from their employees' salaries and pay to any
Governmental Entity as required by Israeli Legal Requirements relating to any
tax or any other compulsory payment have, in each case, been duly deducted,
transferred, withheld and paid.
3.13.6 The Company and each Subsidiary is in compliance
in all material respects with all applicable Legal Requirements and contracts
relating to employment, employment practices, wages, bonuses and other
compensation matters and terms and conditions of employment.
3.13.7 Schedule 3.13.7 sets forth true and complete
details of payment by the Company or any of its Subsidiaries since January 1,
2000 of any bonuses, salaries or other compensation to any shareholder or Named
Director or Officer (except in the Ordinary Course of Business) or entry into
any employment, severance, or similar Contract with any Named Director or
Officer.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL
AUTHORIZATIONS.
3.14.1 Except as set forth in Schedule 3.14 (i) the
Company and its Subsidiaries are, and at all times since January 1, 1997 have
been, in full compliance with each
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-15-
Legal Requirement that is or was applicable to them or to the conduct or
operation of their business or the ownership or use of any of their assets,
except for such non-compliance which would not have a Material Adverse Effect
and (ii) neither the Company nor any of its Subsidiaries have received, at any
time since January 1, 1997, any notice or other communication (whether oral or
written) from any Governmental Body or any other Person regarding any actual,
alleged, possible, or potential violation of, or failure to comply with, any
Legal Requirement except for such notices and communications which could not
have a Material Adverse Effect.
3.14.2 The Company and each Subsidiary has all
Governmental Authorizations necessary to permit the Company and its Subsidiaries
to lawfully conduct and operate their business as currently conducted and as
approved by the Board to be conducted in the future, except for such
authorizations, the failure to possess which would not have a Material Adverse
Effect. The Company and its Subsidiaries are and have been in full compliance
with all of the terms and requirements of each Governmental Authorization that
is held by the Company and its Subsidiaries or that otherwise relates to the
business of the Company and its Subsidiaries as presently conducted and as
approved by the Board to be conducted in the future, or to any of the assets
owned or used by the Company and its Subsidiaries, except for such
non-compliance which would not have a Material Adverse Effect. Each Governmental
Authorization referred to in the foregoing sentence is valid and in full force
and effect. No event has occurred or circumstance exists that may constitute or
result directly or indirectly in a violation of or a failure to comply with any
term or requirement of any such Governmental Authorization or result directly or
indirectly in the revocation, withdrawal, suspension, non-renewal, cancellation,
or termination of, or any modification to, any such Governmental Authorization
and no notice has been received by the Company or any Subsidiary with respect to
the foregoing, other than those events, circumstances or notices which would not
have a Material Adverse Effect. To the best knowledge of the Company, the
Company and its Subsidiaries can obtain all such renewals and Governmental
Authorizations on a timely basis as needed for their respective operations and
business, other than those the failure of which to be obtained could not have a
Material Adverse Effect.
3.15 LEGAL PROCEEDINGS; ORDERS. Except as set forth in
Schedule 3.15, there is no pending Proceeding (i) that has been commenced by or
against the Company or that otherwise relates to or may affect the business of,
or any of the assets owned or used by, the Company or any Subsidiary in a
material manner, or (ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions.
3.15.1 In addition, (A) no such Proceeding has been
Threatened, and (B) no event has occurred or circumstance exists that may give
rise to or serve as a basis for the commencement of any such Proceeding.
3.15.2 Except as set forth in Schedule 3.15, (i) there
is no Order to which the Company or any of its Subsidiaries, or any of the
assets owned or used by the Company or any of its Subsidiaries, is subject and
(ii) the Company or any of its Subsidiaries are not subject to any Order that
relates to its business as presently conducted or as approved by the Board to be
conducted, or any of the assets owned or used by, the Company or any of its
Subsidiaries.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-16-
3.15.3 Except as set forth in Schedule 3.15, the
Company and all its Subsidiaries are, and at all times have been, in full
compliance with all of the terms and requirements of each Order to which it, or
any of the assets owned or used by it, is or has been subject other than any
non-compliance which would not have a Material Adverse Effect.
3.16 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set
forth in Schedule 3.16, since the date of the Balance Sheet, the Company and all
its Subsidiaries have conducted their businesses only in the Ordinary Course of
Business and there has not been any:
3.16.1 entry into, termination of, or receipt of notice
of termination of (i) any license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or (ii) any
Contract or transaction involving a total remaining commitment by or to the
Company or any of its Subsidiaries of at least $2,000,000; or
3.16.2 sale (other than sales of inventory in the
Ordinary Course of Business), lease, or other disposition of any asset or
property of the Company or any of its Subsidiaries for at least $2,000,000 or
mortgage, pledge, or imposition of any lien or other encumbrance on any material
asset or property of the Company or any of its Subsidiaries, including the sale,
lease, or other disposition of any of the Intellectual Property Assets except in
the Ordinary Course of Business; or
3.16.3 cancellation or waiver of any claims or rights
with a value to the Company or any of its Subsidiaries in excess of $2,000,000;
or
3.16.4 material change in the accounting methods used
by the Company or any of its Subsidiaries; or
3.16.5 agreement, whether oral or written, by the
Company or any of its Subsidiaries to do any of the foregoing.
3.17 CONTRACTS; NO DEFAULTS.
3.17.1 Except as set forth in Schedule 3.17.1 and
except for agreements, instruments, arrangements and contracts which are
exhibits to the SEC Documents, as of the date of this Agreement, there is no
Applicable Contract that:
3.17.1.1 involves performance of services or
delivery of goods or materials by or to the Company or any of its Subsidiaries
of an amount or value in excess of $1,000,000; or
3.17.1.2 was not entered into in the Ordinary
Course of Business and that involves expenditures or receipts of the Company or
any of its Subsidiaries in excess of $2,000,000; or
3.17.1.3 affects the ownership of, leasing of,
title to, use of, or any leasehold or other interest in, any real or personal
property (except personal property leases and
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-17-
installment and conditional sales agreements having a value per item or
aggregate payments of less than $500,000 and with terms of less than one year);
or
3.17.1.4 relates to patents, trademarks,
copyrights, or other intellectual property, except for standard agreements with
current or former employees, consultants, or contractors regarding the
appropriation or the non-disclosure of any of the Intellectual Property Assets;
or
3.17.1.5 constitutes a collective bargaining
agreement or other commitment to or with any labor union or other employee
representative of a group of employees; or
3.17.1.6 involves a sharing of profits, losses,
costs, or liabilities by the Company or any of its Subsidiaries with any other
Person; or
3.17.1.7 contains covenants that in any way
purport to restrict the business activity of the Company or any of its
Subsidiaries or limit the freedom of the Company or any of its Subsidiaries to
engage in any line of business or to compete with any Person; or
3.17.1.8 provides for payments to or by any
Person based on sales, purchases, or profits, other than direct payments for
goods; or
3.17.1.9 constitutes a currently effective and
outstanding power of attorney; or
3.17.1.10 was entered into other than in the
Ordinary Course of Business and that contains or provides for an express
undertaking by the Company or any of its Subsidiaries to be responsible for
consequential damages; or
3.17.1.11 is for capital expenditures of the
Company or any of its Subsidiaries in excess of $1,000,000; or
3.17.1.12 represents a written warranty,
guaranty, and/or other similar undertaking with respect to contractual
performance extended by the Company or any of its Subsidiaries other than in the
Ordinary Course of Business.
3.17.2 Each Contract identified in Schedule 3.17.1 is
in full force and effect in all respects and is valid and enforceable in
accordance with its terms. No event has occurred or circumstance exists that
(with or without notice or lapse of time) may materially contravene, conflict
with, or result in a material violation or breach of, or give the Company or any
other Person the right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or to cancel, terminate, or modify,
any Contract listed on Schedule 3.17.1.
3.17.3 Except as set forth in Schedule 3.17.3, there
are no renegotiations of any material amounts paid or payable to the Company or
any of its Subsidiaries under current or completed Contracts listed on Schedule
3.17.1 with any Person and no such Person has made written demand for such
renegotiations.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-18-
3.18 INSURANCE. The properties, assets, employees, business
and operations of the Company and its Subsidiaries are insured by policies which
are in full force and effect against such risks, casualties and contingencies
and of such types and amounts as are reasonable and customary for the size and
scope of the Company's and its Subsidiaries business as now conducted and as
approved to be conducted by the Board in the future. All premiums due and
payable for insurance policies held by the Company have been duly paid; and,
except as listed in Schedule 3.18, such policies or extensions, renewals or
replacements thereof (on comparable terms to the extent available) in such
amounts will be outstanding and in full force and effect without interruption
until the Closing Date. The Company or any of its Subsidiaries have not received
any notice from any insurer, agent or broker with respect to any pending or
threatened terminations or increases in premiums other than increases
contemplated by existing policies, and the consummation of the transactions
contemplated by this Agreement and the Transaction Documents will not result in
the termination of any such policy, or cause a material increase in any premiums
thereunder, pursuant to the express terms of such policy.
3.19 ENVIRONMENTAL MATTERS. Except for (i) matters disclosed
in the SEC Documents or (ii) matters disclosed in Schedule 3.19:
3.19.1 The Company and its Subsidiaries are in material
compliance with all applicable Environmental Laws and Environmental Permits.
Neither the Company or any of its Subsidiaries has received any written
communication from a Governmental Body or Person that alleges that the Company
is not in compliance with or has liability under any applicable Environmental
Law, nor does the Company or any of its Subsidiaries have a basis to expect any
such actual or Threatened communication. On the date of this Agreement, there
are no circumstances or conditions that may prevent or interfere with compliance
in the future with Environmental Laws and Environmental Permits in effect as of
the date of this Agreement. The Company and its Subsidiaries have all
Environmental Permits required under applicable Environmental Laws to operate
the business of the Company as presently conducted and as approved by the Board
to be conducted in the future, except as would not have Material Adverse Effect.
3.19.2 There is no Environmental Claim pending or, to
the best of the Company's knowledge, Threatened against the Company or its
Subsidiaries or against any Person whose liability for such an Environmental
Claim the Company or its Subsidiaries have or may have retained or assumed
whether contractually or by operation of law.
3.19.3 To the best of the Company's knowledge, there
are no Materials of Environmental Concern present in or at the facilities of the
Company or any of its Subsidiaries or at any geologically or hydrological
adjoining property, including any Materials of Environmental Concern contained
in barrels, above or underground storage tanks, landfills, land deposits, dumps,
equipment (whether moveable or fixed) or other containers, either temporary or
permanent, and deposited or located in land, water, sumps, or any other part of
the facilities of the Company or any of its Subsidiaries or such adjoining
property, or incorporated into any structure therein or thereon.
3.19.4 The Company has delivered to Buyer true and
complete copies and results of any reports, studies, analyses, tests, or
monitoring possessed or initiated by the Company pertaining to Materials of
Environmental Concern in, on, or under the facilities of the Company or
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-19-
any of its Subsidiaries, or concerning compliance by the Company, or any other
Person for whose conduct it is or may be held responsible, with Environmental
Laws.
3.19.5 As used herein, the following terms shall have
the meaning set forth below:
"Environmental Claim" means any claim, action,
cause of action, administrative proceeding, investigation or notice by any
Person alleging potential liability (including, without limitation, potential
liability for investigative costs, cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries, or penalties)
arising out of, based on or resulting from (a) the presence, or release into the
environment, of any Materials of Environmental Concern at any location, whether
or not owned by the Company or its Subsidiaries or (b) circumstances or
conditions forming the basis of any violation, or alleged violation, of any
Environmental Law.
"Environmental Laws" means all U.S. and Israeli
laws, regulations, ordinances, codes, rules, orders, decrees, directives and
standards relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, ground water, land
surface, subsurface strata), including, without limitation, laws, regulations,
ordinances, codes, rules, orders, decrees, directives and standards relating to
the manufacture, processing, distribution, use, treatment, storage, transport,
planning and building or handling of Materials of Environmental Concern.
"Environmental Permits" means permits, licenses,
authorizations and registrations required pursuant to the Environmental Laws.
"Materials of Environmental Concern" means any
hazardous chemicals, pollutants, contaminants, hazardous wastes, toxic
substances, hazardous substances, as defined under applicable Environmental Laws
or any other substance defined or regulated pursuant to Environmental Laws,
including, without limitation, fluoride, asbestos, PCBs, petroleum or
petroleum-derived substances.
"Release" means any spilling, leaking, pumping,
pouring, emitting, discharging, injecting, escaping, leaching, dumping or
disposing into the environment, including, without limitation, the abandonment
or discarding of barrels, containers and other closed receptacles containing
Materials of Environmental Concern.
3.20 INTELLECTUAL PROPERTY.
3.20.1 INTELLECTUAL PROPERTY ASSETS. The term
"Intellectual Property Assets" means all such rights set forth in Sections
3.20.1.1-3.20.1.4 and all know-how, trade secrets, confidential information,
customer lists, software, technical information, data, process technology,
plans, drawings, and blue prints (collectively, "Trade Secrets"); owned, used or
licensed by the Company or its Subsidiaries as licensee or licensor which are,
in each case, used in or are necessary for the conduct of the Company's and its
Subsidiaries' respective businesses as now conducted and as approved by the
Board to be conducted, including, without limitation, the operation of Fab-2 in
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-20-
accordance with the Business Plan. Schedule 3.20.1 sets forth a list of the
Intellectual Property Rights, other than Trade Secrets and unregistered
Copyrights:
3.20.1.1 trading names, registered and
unregistered trademarks, service marks, and applications (collectively,
"Marks");
3.20.1.2 all patents, patent applications, and
inventions and discoveries that may be patentable (collectively, "Patents"); and
3.20.1.3 all copyrights in both published works
and unpublished works (collectively, "Copyrights").
3.20.2 AGREEMENTS. Schedule 3.20.2 contains a complete
and accurate list and summary description, including any royalties paid or
received by the Company or its Subsidiaries, of all Contracts relating to the
Intellectual Property Assets to which the Company or its Subsidiaries is a party
or by which the Company or its Subsidiaries are bound, except for any license
implied by the sale of a product and perpetual, paid-up licenses for commonly
available software programs with a value of less than $5,000,000 under which the
Company or any of its Subsidiaries is the licensee. There are no outstanding or
Threatened disputes or disagreements with respect to any such agreement.
3.20.3 KNOW-HOW NECESSARY FOR THE BUSINESS.
3.20.3.1 To the Company's best Knowledge, the
Intellectual Property Assets are all those necessary for the operation of the
Company's and its Subsidiaries' business as it is currently conducted and as is
approved by the Board to be conducted, including, without limitation, in
connection with the operation of Fab-2 in accordance with the Business Plan,
except as would not have a Material Adverse Effect. Except as set forth in
Schedule 3.20.3, the Company is the owner of all right, title, and interest in
and to each of the Intellectual Property Assets, to the Company's best
Knowledge, free and clear of all, Encumbrances, equities, and other adverse
claims, and has the right to use without payment to a third party all of the
Intellectual Property Assets, except as would not have a Material Adverse
Effect.
3.20.3.2 Except as set forth in Schedule
3.20.3.2, all former and current employees of the Company and all other Persons
having access to any Intellectual Property Asset have executed written Contracts
with the Company and its Subsidiaries respectively, that assign to the Company
and its Subsidiaries, respectively, all rights to Intellectual Property Asset
including any inventions, improvements, discoveries, or information relating to
the business of the Company. To the Company's Knowledge, no employee of the
Company and its Subsidiaries has entered into any Contract which requires the
employee to transfer, assign or disclose information concerning his work for the
Company and its Subsidiaries to anyone other than the Company and its
Subsidiaries.
3.20.4 PATENTS; TRADEMARKS; COPYRIGHTS; MASK WORKS.
3.20.4.1 Schedule 3.20.1. contains a complete
and accurate list and summary description of all Patents, Trademarks and
registered Copyrights. The Company owns
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-21-
all right, title, and interest in and to each of the Patents, Trademarks and
Copyrights, free and clear of all liens, security interests, charges,
encumbrances, entities, and other adverse claims.
3.20.4.2 Except as set forth in Schedule
3.20.4.2, all of the (i) issued Patents, (ii) Marks that have been registered
with any trademark office and (iii) registered Copyrights are (with respect to
issued Patents relating to wafer fabrication technology, to the best Knowledge
of the Company) currently in compliance with formal legal requirements, are
valid and enforceable, and are not subject to any maintenance fees or taxes.
3.20.4.3 No Patent has been or is now involved
in any interference, reissue, reexamination, or opposition proceeding. To the
best of the Company's knowledge, there is no potentially interfering patent or
patent application or trademark or trademark application of any third party. No
▇▇▇▇ has been or is now involved in any opposition, invalidation, or
cancellation and no such action is Threatened with the respect to any of the
Marks.
3.20.4.4 No Patent, ▇▇▇▇ or Copyright is (with
respect to issued Patents relating to wafer fabrication technology, to the best
knowledge of the Company) infringed or, to the best of the Company's knowledge,
has been challenged or threatened in any way. To the best knowledge of the
Company, none of the products manufactured and sold, nor any process or know-how
used, by the Company infringes or is alleged to infringe any patent or other
proprietary right of any other Person; to the best knowledge of the Company,
none of the Marks used by the Company or any of its Subsidiaries infringes or is
alleged to infringe any trade name, trademark, or service ▇▇▇▇ of any third
party; and to the best knowledge of the Company, none of the subject matter of
any of the Copyrights infringes or is alleged to infringe any copyright of any
third party or is a derivative work based on the work of a third party.
3.20.5 TRADE SECRETS.
3.20.5.1 With respect to each Trade Secret, the
documentation relating to such Trade Secret is current, accurate, and sufficient
in detail and content to identify and explain it and to allow its full and
proper use without reliance on the knowledge or memory of any individual.
3.20.5.2 The Company and its Subsidiaries have
taken all reasonable precautions to protect the secrecy, confidentiality, and
value of its Trade Secrets to the extent that the maintenance of any such Trade
Secret as a legally protectible trade secret under applicable law is material to
the Company.
3.20.5.3 The Company and its Subsidiaries have
good title and an absolute (but not necessarily exclusive) right to use the
Trade Secrets to the extent that the maintenance of any such Trade Secret as a
legally protectible trade secret under applicable law is material to the
Company. The Trade Secrets, the maintenance of any of which as a legally
protectible trade secret under applicable law are material to the Company, are
not part of the public knowledge or literature, and, to the Company's Knowledge,
have not been used, divulged, or appropriated either for the benefit of any
Person or to the detriment of the Company or its Subsidiaries. No Trade Secret,
the maintenance of which as a legally protectible trade secret under
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-22-
applicable law is material to the Company, is subject to any adverse claim or
has been challenged or threatened in any way.
3.21 GRANTS, INCENTIVES AND SUBSIDIES. Schedule 3.21 provides
a correct and complete list of the aggregate amount of pending and outstanding
grants from each Governmental Body of the State of Israel, or from any other
Governmental Body, to the Company or any Subsidiary, net of royalties paid, and
any tax incentive or subsidy granted to the Company or any Subsidiary, including
the material terms and benefit periods thereof (collectively, "Grants")
including, without limitation, (i) Approved Enterprise Status from the Israeli
Investment Center, and (ii) Grants from the Office of the Chief Scientist of the
Israel Ministry of Industry and Trade ("OCS"). The Company has made available to
Buyer, prior to the date hereof, correct and complete copies of all letters of
approval, and supplements thereto, granted to the Company or any Subsidiary
relating to Approved Enterprise Status from the Investment Center and Grants
under from the OCS. Except for undertakings set forth in such letters of
approval and undertakings under applicable laws and regulations, there are no
material undertakings of the Company or any Subsidiary given in connection with
the Grants. The Company and each of Subsidiary are in compliance, in all
material respects, with the terms and conditions of such Grants and, except as
disclosed in Schedule 3.21, have duly fulfilled, in all material respects, all
the undertakings relating thereto. The Company's application to the Israeli
Investment Center with respect to Fab-2 was submitted on May 17, 2000 and was
previously provided to Buyer (the "Investment Center Application"). To the
extent that there are changes to the assumptions contained in the Investment
Center Application as submitted, they are reflected in the Business Plan. The
Investment Center Application complies as to form with all Legal Requirements.
3.22 DISCLOSURE.
3.22.1 No representation or warranty of the Company in
this Agreement and no statement in the Schedules omits to state a material fact
necessary to make the statements herein or therein, in light of the
circumstances in which they were made, not misleading.
3.22.2 No notice given pursuant to Section 5.5 will
contain any untrue statement or omit to state a material fact necessary to make
the statements therein or in this Agreement, in light of the circumstances in
which they were made, not misleading.
3.23 RELATIONSHIPS WITH RELATED PERSONS. Except as described
on Schedule 3.23 or in the SEC Documents, and except for any employment and
consulting contracts listed on Schedule 3.23, there are no loans, guarantees,
contracts, transactions, understandings or other arrangements of any nature
outstanding between or among the Company or any of its Subsidiaries, on the one
hand, and any shareholder, or any current or former director, officer or
controlling person of the Company or any of their respective Affiliates, on the
other hand. Except as set forth on Schedule 3.23 or in the SEC Documents, since
the date of the Annual Report, no event has occurred that would be required to
be reported by the Company pursuant to Item 13 of Form 20-F promulgated by the
SEC under the Exchange Act.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-23-
3.24 BROKERS OR FINDERS. The Company and its agents have
incurred no obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
the Contemplated Transactions.
4. REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to the Company as of the date
hereof and as of the Closing and except as otherwise provided in the Additional
Purchase Obligation Agreement as follows:
4.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware with full corporate power and authority to conduct its
business as it is now being conducted and as currently proposed to be conducted,
to own or use the properties and assets that it purports to own or use, and to
perform all its obligations under the Transaction Documents.
4.2 AUTHORITY; NO CONFLICT.
4.2.1 This Agreement constitutes the legal, valid, and
binding obligation of Buyer, enforceable against Buyer in accordance with its
terms. Upon the execution and delivery by Buyer of the Transaction Documents,
and assuming the due execution and delivery thereof by the other parties
thereto, the Transaction Documents will constitute the legal, valid, and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms. Buyer has the absolute and unrestricted right, power, and
authority to execute and deliver this Agreement and the Transaction Documents
and to perform its obligations under this Agreement and the Transaction
Documents.
4.2.2 Except as set forth in Schedule 4.2, neither the
execution and delivery of this Agreement by Buyer nor the consummation or
performance of any of the Contemplated Transactions by Buyer will give any
Person the right to prevent, delay, or otherwise interfere with any of the
Contemplated Transactions pursuant to:
4.2.2.1 any provision of Buyer's Organizational
Documents;
4.2.2.2 any resolution adopted by the board of
directors or the stockholders of Buyer;
4.2.2.3 any Legal Requirement or Order in which
Buyer may be subject; or
4.2.2.4 any Contract to which Buyer is a party
or by which Buyer may be bound.
Except as set forth in Schedule 4.2, Buyer is not and will not be required to
obtain any Consent from any Person in connection with the execution and delivery
of this Agreement or the consummation or performance of any of the Contemplated
Transactions.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-24-
4.3 INVESTMENT INTENT; NO REGISTRATION.
4.3.1 Buyer is acquiring the Shares for its own
account and not with a view to their distribution within the meaning of Section
2(11) of the Securities Act. Buyer 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 under
Regulation D as promulgated by the United States Securities and Exchange
Commission; and
4.3.2 Buyer understands that none of the Shares have
been registered under the Securities Act, the Israeli Securities Law or the laws
of any jurisdiction, and agrees that the Shares may not be sold, offered for
sale, transferred, pledged, hypothecated or otherwise disposed of except in
compliance with the Securities Act, Israeli Securities Law or any applicable
securities laws of any jurisdiction and the terms of this Agreement. Buyer also
acknowledges that the Shares, upon issuance, will bear the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE OR OTHER
JURISDICTION'S SECURITIES LAWS. THESE SECURITIES MAY NOT BE SOLD,
OFFERED FOR SALE OR PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES UNDER THE ACT OR AN OPINION OF COUNSEL (SATISFACTORY IN FORM
AND SUBSTANCE TO THE COMPANY) THAT SUCH REGISTRATION IS NOT REQUIRED OR
UNLESS SOLD PURSUANT TO RULE 144 OF THE ACT.
4.4 CERTAIN PROCEEDINGS. There is no pending Proceeding that
has been commenced against Buyer and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's knowledge, no such Proceeding has been
Threatened.
4.5 DUE DILIGENCE. Subject to compliance by the Company with
Section 3.22 and provision to the Buyer of all materials and information
requested in its due diligence review of the Company and assuming that all
information and material provided to the Buyer in its due diligence review was
true and accurate and did not include any material misstatement or omit to
include any information requested by Buyer, (a) the Buyer has had an opportunity
to ask questions and receive answers concerning the legal, financial and
technical condition of the Company and has had full access to such information
concerning the Company as the Buyer has requested and (b) the Buyer hereby
represents and warrants that the legal, technical and financial due diligence of
Buyer has been completed and that the results of the Buyer's business,
technical, legal and financial review of the books, records, agreements and
other legal documents and business organization of the Company are satisfactory
to the Buyer. Notwithstanding the foregoing representations and warranties of
the Buyer, nothing in this Section 4.5 shall derogate from the representations
and warranties of the Company in Section 3 above.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-25-
4.6 BROKERS OR FINDERS. Buyer and its officers and agents
have incurred no obligation or liability, contingent or otherwise, for brokerage
or finders' fees or agents' commissions or other similar payment in connection
with the Contemplated Transactions.
5. COVENANTS OF THE COMPANY PRIOR TO CLOSING.
5.1 ACCESS AND INVESTIGATION. Between the date of this
Agreement and the Closing Date, the Company will, and will cause its
Representatives to, (i) afford Buyer and its Representatives (collectively,
"Buyer's Advisors") full and free access to the Company's personnel, properties,
contracts, books and records, and other documents and data, (ii) furnish Buyer
and Buyer's Advisors with copies of all such contracts, books and records, and
other existing documents and data as Buyer may reasonably request, and (iii)
furnish Buyer and Buyer's Advisors with such additional financial, operating,
technical and other data and information as Buyer may reasonably request. All
information so provided to Buyer and its representatives will be subject to the
Non-Disclosure Agreement dated April 4, 2000 between the parties (except for
Section 6 thereof which shall expire upon signing of this Agreement).
5.2 OPERATION OF THE COMPANY'S BUSINESS. Between the date of
this Agreement and the Closing Date, the Company will:
5.2.1 conduct its business only in the Ordinary Course
of Business; and
5.2.2 use its best efforts to preserve intact the
current business organization of the Company and its Subsidiaries, keep
available the services of the current Named Officers, employees, and agents of
the Company and its Subsidiaries, and maintain the relations and good will with
suppliers, customers, landlords, creditors, employees, agents, and others having
business relationships with the Company and its Subsidiaries; and
5.2.3 otherwise report periodically to Buyer
concerning the status of the business, operations, finances and prospects of the
Company and its Subsidiaries; and
5.2.4 not (i) take or agree or commit to take any
action other than in the Ordinary Course of Business that would make any
representation or warranty of the Company hereunder inaccurate in any respect
at, or as of any time prior to, the Closing Date, provided that no such action
taken in the Ordinary Course of Business that Buyer has not consented to in
writing shall be taken into account in consideration of whether the conditions
set forth in Section 7 below have been complied with or (ii) omit or agree or
commit to omit to take any action within its control necessary to prevent any
such representation or warranty from being inaccurate in any material respect at
any such time.
5.3 NEGATIVE COVENANT. Except as otherwise expressly
permitted by this Agreement or as is consistent with the Ordinary Course of
Business, between the date of this Agreement and the Closing Date, the Company
will not, without the prior written consent of Buyer, take any affirmative
action, or fail to take any reasonable action within their or its control, as a
result of which any of the changes or events listed in Section 3.16 is likely to
occur.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-26-
5.4 CONSENTS; REQUIRED APPROVALS; CONSTRUCTION. The Company
will, as promptly as practicable after the date of this Agreement, take all
action required to obtain as promptly as practicable all necessary Consents and
agreements of, and to give all notices and make all other filings with, any
third parties, including Governmental Bodies, necessary to authorize, approve or
permit the consummation of the transactions contemplated hereby, the
Contemplated Transactions and the transactions contemplated by the Ancillary
Agreements, including, without limitation, all Consents, approvals and waivers
referred to in Section 5.2 to the Business Plan and all Consents, approvals and
waivers referred to in Section 7.3 hereof and the updated Business Plan referred
to in Section 7.17 (which the parties shall endeavor to complete within 60 days
from the date hereof). The Company will periodically update Buyer as to the
matters discussed in the preceding sentence. Between the date of this Agreement
and the Closing Date, the Company will (i) cooperate with Buyer with respect to
all filings that Buyer elects to make or is required by Legal Requirements to
make in connection with the Contemplated Transactions, and (ii) cooperate with
Buyer in obtaining all consents identified in Schedule 4.2. In addition, the
Company will, as promptly as practicable after the date of this Agreement, take
all action required to select contractors and other experts and enter into
agreements with such parties and take other necessary actions in order to
facilitate the implementation of the construction of Fab 2 in accordance with
the time table set forth in the Business Plan.
5.5 NOTIFICATION. Between the date of this Agreement and the
Closing Date, the Company will promptly notify Buyer in writing if the Company
becomes aware of any fact or condition that causes or constitutes a material
breach of any of the Company's representations and warranties as of the date of
this Agreement (except that such representations and warranties specifically
qualified by materiality shall be read for purposes of this Section 5.5 so as
not to require an additional degree of materiality), or if the Company becomes
aware of the occurrence after the date of this Agreement of any fact or
condition that could (except as expressly contemplated by this Agreement) cause
or constitute a breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition (except for such representations and warranties that
are expressly correct as of the date of this Agreement). Should any such fact or
condition require any change in the Schedules if the Schedules were dated the
date of the occurrence or discovery of any such fact or condition, the Company
will promptly deliver to Buyer a supplement to the Schedules specifying such
change. During the same period, the Company will promptly notify Buyer of the
occurrence of any breach of any covenant of the Company in this Section 5 or of
the occurrence of any event and may make the satisfaction of the conditions in
Section 7 below impossible or unlikely.
5.6 FINANCINGS.
5.6.1 Between the date of this Agreement and the
Closing Date, the Company will use its best efforts to achieve each of the
conditions set forth in Section 7.4 and 7.6 in relation to the Additional
Financings.
5.6.2 The Company shall provide to the Investment
Center such other information and data, in addition to the information and data
contained in the Investment Center Application, as reasonably necessary in order
to secure the approval of the grant referred to in Section 7.4.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-27-
5.6.3 The proceeds from each of the equity financing
sources referred to in clauses (ii) and (iii) of Section 7.6 with respect to
Wafer Partners shall be obtained only from parties acceptable to Buyer upon
Buyer's prior approval. In addition, in the event that the underlying agreements
with respect thereto contain any terms or conditions (including, without
limitation, (a) pricing terms and (b) other economic terms taken as a whole)
more favorably (the "Terms of the Other Agreements") than those provided
hereunder and in the Transaction Agreements, the terms and conditions of this
Agreement and the Transaction Agreements, as the case may be, shall be
automatically amended, without further action by the parties hereto and thereto,
to provide such terms and conditions that are at least equally favorable to the
Buyer as the Terms of the Other Agreements. The Company shall not enter into any
agreement with respect to the equity financings referred to in clauses (ii) and
(iii) of Section 7.6 if any of such agreements contain provisions that would
impede the ability of the Company to effect the terms of the preceding sentence.
5.6.4 The proceeds from each of the debt financing
sources referred to in clause (i) of Section 7.6 and the underlying agreements
with respect thereto shall be obtained only on terms and conditions that are
materially consistent with the terms and conditions to be set forth in a term
sheet or similar agreement or document relating to such financing (a "Debt
Financing Term Sheet"). The Company shall consult with Buyer in advance of
execution of any Debt Financing Term Sheet and shall enter into such Debt
Financing Term Sheet only upon the consent of Buyer which shall not be
unreasonably withheld. The terms and conditions of such debt financing shall not
be in conflict with the terms of the Contemplated Transactions and shall be
consistent with the terms and conditions contained in the Additional Financing
Plan and the Business Plan. The Company shall provide to the Buyer the
transaction documents of each debt financing (the "Debt Financing Documents") in
the form presented to the Board for its approval, at least 10 business days
prior to the execution thereof, in order to enable Buyer to review such
documents and confirm that the terms thereof are consistent with the Debt
Financing Term Sheet previously approved by Buyer. The Buyer shall deliver to
the Company its written approval or other response to the Debt Financing
Documents within 5 business days from its receipt of the Debt Financing
Documents; Buyer's failure to provide its written response to the Company within
such period of time shall be deemed Buyer's approval of the Debt Financing
Documents.
5.6.5 Between the date of this Agreement and the
Closing Date, the Company shall not change or modify or agree to change or
modify any of the terms and conditions listed in the Additional Financing Plan,
the Business Plan or the Investment Center Application without the prior written
unanimous approval of all members of the Steering Committee if any such change,
modification or agreement would or would reasonably be expected to (a) change
the construction schedule of Fab 2 as set forth in the Business Plan, (b) change
the Additional Financing Plan as set forth in the Business Plan or result in a
failure to comply with the schedule for the financings described therein, (c)
significantly increase the cost of Fab 2 beyond that set forth in the Business
Plan or (d) change the production capacity schedule of Fab 2 as set forth in the
Business Plan. Any change, modification or agreement to change or modify the
Business Plan, the Additional Financing Plan or the Investment Center
Application which does not require written unanimous approval of all members of
the Steering Committee pursuant to the preceding sentence shall require written
approval of a majority of the members of the Steering Committee.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-28-
5.7 SHAREHOLDERS AGREEMENT. The Company will use its best
efforts to ensure that any entity purchasing equity securities or securities
exchangeable or convertible into equity securities comprising five percent (5%)
or more of the outstanding Ordinary Shares of the Company pursuant to the
Additional Financing Plan (other than investors purchasing any such securities
in connection with a public offering conducted by the Company as part of the
Additional Financing) shall execute the Shareholders Agreement as a counterparty
or a similar agreement whose provisions, among other things, provide for such
entity to take such actions as may be necessary to vote for the election of
Buyer's, TIC's, and any other entity's representative(s) to the Board, in
accordance with the terms of the Shareholders Agreement.
5.8 NO NEGOTIATION. Until the later of (i) such time, if
any, as this Agreement is terminated pursuant to Section 9, and (ii) the Closing
Date, the Company will not, and will cause its Representatives not to, directly
or indirectly solicit, initiate, or encourage any inquiries or proposals from,
discuss or negotiate with, provide any non-public information to, or consider
the merits of any unsolicited inquiries or proposals from, any Person (other
than Buyer) relating to any transaction involving the sale of all or a
substantial portion of the business or assets, or any of the capital stock of
the Company (other than (i) in the Ordinary Course of Business; (ii) in
connection with issuances of stock options or shares upon the exercise thereof
under the Company's employee stock incentive plans and (iii) in connection with
issuances of equity securities in accordance with Section 7.6(ii) and (iii)
below pursuant to the Additional Financing Plan and in accordance therewith), or
any merger, consolidation, business combination, or similar transaction
involving the Company or any of its Subsidiaries pursuant to which the
shareholders of the Company immediately prior to such merger, consolidation,
business combination, or similar transaction do not continue to hold a majority
of the outstanding equity of the continuing or resulting entity.
5.9 BOARD OF DIRECTORS. As long as Buyer has a
representative on the Board, each committee of the Board shall include at least
one representative of Buyer and, so long as TIC has a representative on the
Board, one representative of TIC. The Company will ensure that the time period
between each annual shareholders' meeting shall not exceed 15 months. The Board
shall meet at least once in every three months and notice of each Board meeting
shall be provided in writing in English to all Board members at least 10 days in
advance. All communications to the Directors will be provided in English. The
quorum for each meeting of the Board shall include at least one representative
of Buyer, so long as Buyer has at least two representatives on the Board.
Notwithstanding the preceding sentence, in the event that quorum is not present
at a meeting of the Board solely because a representative of Buyer was not
present and such meeting is adjourned, the failure of a representative of Buyer
to be present at the adjourned meeting shall not constitute lack of quorum. The
Company acknowledges that the representatives of Buyer on the Board may at any
time participate or fail to participate in any Board action concerning this
Agreement if in their view such action is appropriate under applicable law.
5.10 STEERING COMMITTEE. The Steering Committee shall be
established within fifteen days after the date hereof. The Steering Committee
will receive from the Company's management reports on the progress on the Fab 2
project, the Business Plan and the approvals necessary for commencement of
construction and for the operation of Fab 2. The Steering Committee shall meet
at least once in every four weeks.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-29-
5.11 COMPANY SHAREHOLDERS MEETING. As soon as practicable
after the date hereof, the Company shall take all necessary action to call an
extraordinary general meeting of the Company's Shareholders and shall solicit
proxies in order to obtain the approval of the Company's shareholders to the
issuance of the Shares and the Additional Purchase Obligation Shares to Buyer in
accordance with all applicable laws, regulations and rules of any stock exchange
and to an amendment to the Articles which shall provide that the Chairman of the
Board shall be appointed by the Shareholders and to obtain any other shareholder
approval which is necessary in order to execute, and consummate the transactions
contemplated by, this Agreement and the Transaction Documents.
6. COVENANTS OF BUYER PRIOR TO CLOSING DATE.
6.1 APPROVALS OF GOVERNMENTAL BODIES. As promptly as
practicable after the date of this Agreement, Buyer will make all filings
required by Legal Requirements to be made by it to consummate the Contemplated
Transactions. Between the date of this Agreement and the Closing Date, Buyer
will cooperate with the Company with respect to all filings that the Company is
required by Legal Requirements to make in connection with the Contemplated
Transactions, and will cooperate with the Company in obtaining all consents
identified in Section 5.2 to the Business Plan.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS AT CLOSING.
Buyer's obligation to take the actions required to be taken by
Buyer at the Closing is subject to the satisfaction, at or prior to the Closing,
of each of the following conditions (any of which may be waived by Buyer, in
whole or in part, in its sole discretion:
7.1 ACCURACY OF REPRESENTATIONS. All of the Company's
representations and warranties in this Agreement and the Transaction Agreements
(considered collectively, without giving effect to any supplement to the
Schedules), and each of these representations and warranties (considered
individually) must have been accurate in all material respects as of the date of
this Agreement and must be accurate in all material respects as of the Closing
Date as if made on the Closing Date (except to the extent such representations
and warranties are only given as of the date hereof), without giving effect to
any supplement to the Schedules, provided that any inaccuracies in such
representations and warranties will be disregarded if the circumstances giving
rise to all such inaccuracies (considered collectively) do not constitute, and
are not reasonably expected to result in, a Material Adverse Effect (it being
understood that any materiality qualifications contained in such representations
and warranties shall be disregarded for this purpose).
7.2 COMPANY'S PERFORMANCE.
7.2.1 All of the covenants and obligations that the
Company is required to perform or to comply with pursuant to this Agreement at
or prior to the Closing (considered collectively), and each of these covenants
and obligations (considered individually), must have been duly performed and
complied with in all material respects.
7.2.2 Each of the Transaction Documents and the
Ancillary Agreements shall have been duly executed by the Company and shall have
been in full force and effect and no
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-30-
party to such document (other than Buyer) shall be in a breach thereof. The
Shareholders Agreement shall have been executed by Buyer and The Israel
Corporation.
7.2.3 Each document required to be delivered by the
Company pursuant to Section 2.5.1 must have been delivered.
7.3 CONSENTS; APPROVALS; OTHER REQUIREMENTS. (i) Each of the
Consents, approvals or other requirements identified in Section 5.2 of the
Business Plan, shall have been duly obtained or satisfied (in accordance with
the schedule set forth therein), (ii) the Company shall have entered into
construction agreements with respect to the supervising, management and
implementation of the construction of Fab 2 in accordance with the Business Plan
in accordance with the schedule contained therein, and (iii) the Business Plan,
the financial data and project cost included therein, the list of necessary
approvals and Consents included in Section 5.2 of the Business Plan, the
timetable for construction of Fab 2 and the Financial Plan, all as set forth in
the Business Plan attached to this Agreement as amended from time to time with
the unanimous or majority consent, as the case may be, of the Steering Committee
in accordance with Section 5.6.5 hereof, shall continue to be true and correct
in all material respects. The condition included in this Section 7.3 shall be
deemed to be satisfied only if the Steering Committee shall have unanimously
decided, first, that all of the conditions included in clauses (i) - (iii) have
been satisfied and second, to the extent that any of (i) (iii) are not
satisfied, that construction of Fab 2 by the Company in accordance with the
Business Plan should properly commence. The Steering Committee shall consider,
in its decision of whether the conditions set forth in this Section 7.3 have
been met, the factors listed in Section 1 hereto under the definition of
"Steering Committee."
7.4 INVESTMENT CENTER APPROVAL. The Company shall have
obtained a final Certificate of Approval from the Investment Center which shall
be comprised of the following factors (i) granting an "Approved Enterprise"
status to Fab 2 within the Grant Course under the Law for the Encouragement of
Capital Investments - 1959; (ii) providing for governmental grants of at least
$250,000,000, which shall constitute at least 20% of the entire qualified
project cost for the construction, deployment and operation of Fab 2 in
accordance with the Business Plan as it exists on the date of this Agreement,
provided that in the event that such project cost changes after the date of this
Agreement in accordance with Section 5.6.5, the aggregate of such grants
provided for in the Certificate of Approval shall equal at least 20% of the
changed total project cost; (iii) the maximum required percentage of capital
investments in Fab 2 which is required to be financed by equity will be 30%; and
(iii) providing that the performance term under the Certificate of Approval
shall be at least 5 years from the Closing.
7.5 OCS APPROVAL. The Company has obtained the approval of
the OCS with respect to the consummation of the Contemplated Transactions.
7.6 ADDITIONAL FINANCINGS. The Company shall have (i)
entered into binding definitive agreements in accordance with Section 5.6.4
providing for loans in an aggregate amount of at least $550,000,000 from
reputable financial institutions solely for the purposes of the construction of
Fab 2, as described in Section 10.4 of the Financing Plan, (ii) entered into
binding definitive agreements providing for at least $225,000,000 in wafer
partner pre-payments or equity financing from Wafer Partners (other than Buyer)
obtained in accordance with the terms of
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-31-
Section 5.6.3 and provided to the Company by Wafer Partners pursuant to which
all closing conditions have been satisfied and at least 15% of the equity of
each equity investor has been transferred to or placed in escrow for the benefit
of the Company subject only to the closing of this Agreement and the balance of
such financing shall be forwarded automatically upon the occurrence of specified
milestones relating to the construction and operation of Fab-2, which milestones
are generally similar to the milestones described in the Additional Purchase
Obligation Agreement, (iii) in the event that the Company only satisfies the
condition in the preceding clause (ii) in relation to at least $150,000,000 of
the $225,000,000 referred to above (such difference being the "Wafer Partner
Differential"), entered into binding definitive agreements providing for at
least the Wafer Partner Differential through non-Wafer Partner equity investors;
provided, however, that the Company shall be required no later than October 1,
2001 (the "Additional Wafer Partner Financing Date") to enter into binding
definitive agreements with respect to the Wafer Partner Differential from
additional Wafer Partners as a condition to the exercise of Additional Purchase
Obligations not exercised prior to such time pursuant to the Additional Purchase
Obligation Agreement on the Additional Wafer Partner Financing Date, pursuant to
which agreement(s) all closing conditions have been satisfied and at least 15%
of the equity of each equity investor has been transferred to or placed in
escrow for the benefit of the Company and the balance of such financing shall be
forwarded automatically upon the occurrence of specified milestones relating to
the construction and operation of Fab-2, which milestones are generally similar
to the milestones described in the Additional Purchase Obligation Agreement and
(iv) provided to Buyer a commitment in writing to provide $100,000,000 from the
Company's own cash resources, including, but not limited to, proceeds from the
exercise of employee stock options, existing cash reserves, proceeds from sales
of private equity securities, royalties and sales; in the event that the Company
shall close on the basis of section (iii) above, at such time as the Wafer
Partner Differential shall have been raised by the Additional Wafer Partner
Financing Date, the Company's commitment to provide $100,000,000 under this
clause (iv) shall be reduced by the Wafer Partner Differential.
7.7 WAFER PARTNERS. The Company shall have entered into
binding agreements, either on a "take or pay" basis or a "pre-payment" basis or,
if the other party to any such agreement is making an equity investment pursuant
to Section 7.6(ii), providing a wafer order right, for a term of at least 3
years ("Wafer Commitments") providing for the sale of a minimum capacity in Fab
2 of at least 12,000 wafers per month if the Closing shall occur under Section
7.6 (ii) above or at least 8,000 wafers per month if the Closing shall occur
under Section 7.6 (iii) above, in which case the Company shall have entered into
Wafer Commitments providing that the aggregate Wafer Commitments shall equal at
least 12,000 wafers per month by the Additional Wafer Partner Financing Date and
such agreements shall be in full force and effect.
7.8 TOSHIBA AGREEMENT. The Toshiba Agreement shall be in
full force and effect and shall not have been breached by any party thereto.
7.9 CERTIFICATES. In addition to the documents the Company
is obligated to deliver to Buyer under Section 2.5 and this Section 7, the
Company shall furnish Buyer with such other documents as Buyer may reasonably
request for the purpose of (i) evidencing the accuracy of any of the Company's
representations and warranties, (iii) evidencing the performance by the Company
of, or the compliance by the Company with, any covenant or obligation required
to be performed or complied with by the Company, (iv) evidencing the
satisfaction of any condition referred to in this
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-32-
Section 7, or (v) otherwise facilitating the consummation or performance of any
of the Contemplated Transactions.
7.10 NO PROCEEDINGS. Since the date of this Agreement, there
must not have been commenced or Threatened by a third party against Buyer or the
Company, or against any Person affiliated with Buyer or the Company, any
Proceeding (a) involving any challenge to, or seeking material damages or other
relief in connection with, any of the Contemplated Transactions, or (b) that may
have the effect of making illegal, materially preventing, delaying, or otherwise
interfering with any of the Contemplated Transactions.
7.11 NO PROHIBITION. Neither the consummation nor the
performance of any of the Contemplated Transactions will, directly or indirectly
(with or without notice or lapse of time), materially contravene, or conflict
with, or result in a material violation of, or cause the Company, Buyer or any
Person affiliated with the Company or Buyer to suffer any material adverse
consequence under, (a) any applicable Legal Requirement or Order, or (b) any
Legal Requirement or Order that has been published, introduced, or otherwise
formally proposed by or before any Governmental Body.
7.12 DIRECTORS. The Board of Directors of the Company shall
have been reformed in accordance with the provisions of Section 2 of the
Shareholders Agreement.
7.13 NO MATERIAL ADVERSE CHANGE. There shall have been no
material adverse change in the business, financial condition, results of
operations, assets, operations or prospects of the Company.
7.14 INCENTIVE PLAN. The Company shall have adopted stock
based incentive plans (the "Additional Incentive Plans") reserving 1,500,000
Ordinary Shares or such other number as may be approved by the Board for the
purpose of the work force and human resources employed in Fab 2, such plans
being satisfactory to Buyer, and the Company shall have submitted to Buyer a
plan satisfactory to Buyer setting forth the Company's efforts to recruit the
required work force and human resources for Fab 2.
7.15 CLOSING DISCLOSURE. There shall be no fact known to the
co-Chief Executive Officer of the Company identified in Schedule 7.15, that has
specific application to the Company or any of its Subsidiaries (other than
general economic or industry conditions) and that materially adversely affects
the assets, business, financial condition, results of operations or prospects of
the Company or any of its Subsidiaries that has not been set forth in this
Agreement or the Schedules or the Business Plan (without giving effect to any
risk factors included therein).
7.16 SHAREHOLDER APPROVAL. Shareholders of the Company shall
have approved the increase in registered share capital, the issuance of the
Shares hereunder, the issuance of the Shares and Additional Purchase Obligations
under the Additional Purchase Obligation Agreement and the reconstitution of the
Board.
7.17 UPDATED BUSINESS PLAN. Without derogating from sections
5.6 and 7.3, Buyer and the Company shall have agreed to updates to the Business
Plan (which thereafter shall be
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-33-
deemed to be the Business Plan for all purposes of this Agreement) which shall,
among other things (a) provide that wafer rights approvals satisfactory to the
Steering Committee in the manner set forth in Section 7.3 shall have been
obtained prior to Closing, (b) indicate that Seller provided the relevant
Governmental Authority with an environmental study which had been prepared in
1995 and updated recently to reflect changes from the date of the original
survey, which survey shall be acceptable to the relevant Governmental Authority
and (c) include wafer costs data as part of the financial plan assumptions as
part of the base case.
8. CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATION AT CLOSING.
The Company's obligation to take the actions required to be
taken by the Company at the Closing is subject to the satisfaction, at or prior
to the Closing, of each of the following conditions (any of which may be waived
by the Company, in whole or in part, in its sole discretion):
8.1 ACCURACY OF REPRESENTATIONS. All of Buyer's
representations and warranties in this Agreement (considered collectively), and
each of these representations and warranties (considered individually), must
have been accurate in all material respects as of the date of this Agreement and
must be accurate in all material respects as of the Closing Date as if made on
the Closing Date.
8.2 BUYER'S PERFORMANCE.
8.2.1 All of the covenants and obligations that Buyer
is required to perform or to comply with pursuant to this Agreement at or prior
to the Closing (considered collectively), and each of these covenants and
obligations (considered individually), must have been performed and complied
with in all material respects.
8.2.2 Each of the Executed Transaction Documents shall
have been duly executed by the Buyer and shall have been in full force and
effect and no party to such document (other than the Company) shall be in a
breach thereof. Buyer must have executed and delivered the each of the documents
required to be delivered by Buyer pursuant to Section 2.5.2.
8.3 ADDITIONAL DOCUMENTS.
8.3.1 In addition to the documents required to be
delivered in accordance with Section 2.5.2 by Buyer, Buyer shall have furnished
such other documents as the Company may reasonably request for the purpose of
(i) evidencing the accuracy of any representation or warranty of Buyer, (ii)
evidencing the performance by Buyer of, or the compliance by Buyer with, any
covenant or obligation required to be performed or complied with by Buyer, (iii)
evidencing the satisfaction of any condition referred to in this Section 8, or
(iv) otherwise facilitating the consummation of any of the Contemplated
Transactions.
8.4 NO INJUNCTION. There must not be in effect any Legal
Requirement or any injunction or other Order that (i) prohibits the issuance and
sale of the Shares the Company to Buyer, and (ii) has been adopted or issued, or
has otherwise become effective, since the date of this Agreement.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-34-
8.5 SHAREHOLDER APPROVAL. Shareholders of the Company shall
have approved the increase in registered share capital, the issuance of the
Shares hereunder, the issuance of the Shares and Additional Purchase Obligations
under the Additional Purchase Obligation Agreement and the reconstitution of the
Board.
9. TERMINATION.
9.1 TERMINATION EVENTS. This Agreement may, by written
notice given prior to or at the Closing, be terminated:
9.1.1 by either Buyer or the Company if a material
breach of any provision of this Agreement has been committed by the other party
and such breach has not been waived;
9.1.2 (i) by Buyer if any of the conditions in Section
7 has not been satisfied in all material respects by January 31, 2001 (unless
extended by Buyer in its discretion), and Buyer has not waived such condition on
or before the Closing Date; or (ii) by the Company, if any of the conditions in
Section 8 has not been satisfied in all material respects by January 31, 2001;
or
9.1.3 by mutual consent of Buyer and the Company.
9.2 EFFECT OF TERMINATION. Each party's right of termination
under Section 9.1 is in addition to any other rights it may have under this
Agreement or otherwise, and the exercise of a right of termination will not be
an election of remedies. If this Agreement is terminated pursuant to Section
9.1, all further obligations of the parties under this Agreement will terminate,
except that the obligations in Sections 12.1 and 12.3 will survive; provided,
however, that if this Agreement is terminated by a party because of the breach
of the Agreement by the other party or because one or more of the conditions to
the terminating party's obligations under this Agreement is not satisfied as a
result of the other party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.
10. INDEMNIFICATION; REMEDIES.
10.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY
KNOWLEDGE. All representations, warranties, covenants, and obligations in this
Agreement and the Additional Purchase Obligation Agreement, the schedules, the
supplements to the schedules, the certificate delivered pursuant to Section
2.5.1.9, and any other certificate or document delivered pursuant to this
Agreement or the Additional Purchase Obligation Agreement will survive the
Closing until the expiration of six full months in which Fab 2 is fully operated
at a capacity of at least 8,000 wafers per month in compliance with the Foundry
Agreement, provided, that in the event that any of the Additional Purchase
Obligations is not exercised, such survival shall only be until the date that is
nine months from the last date on which Buyer could have been required to
mandatorily exercise the Additional Purchase Obligation under the terms and
conditions of the Additional Purchase Obligation Agreement (after giving effect
to all applicable grace periods and extensions under the Additional Purchase
Obligation Agreement). The right to indemnification, payment of Damages or other
remedies based on such representations, warranties, covenants, and obligations
will not be
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-35-
affected by any investigation conducted with respect to, or any knowledge
acquired (or capable of being acquired) at any time, whether before or after the
execution and delivery of this Agreement or the Closing Date, with respect to
the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY THE COMPANY.
The Company will indemnify and hold harmless Buyer and its Representatives,
controlling persons, and affiliates (collectively, the "Buyer Indemnified
Persons") for, and will pay to the Buyer Indemnified Persons the amount of, any
loss, liability, claim, damage, expense (including costs of investigation and
defense and reasonable attorneys' fees) or diminution of value, whether or not
involving a third-party claim (collectively, "Damages"), arising, directly or
indirectly, from or in connection with:
10.2.1 any breach of any representation or warranty
made by the Company in this Agreement or in any other Transaction Document
(without giving effect to any materiality qualification), the Schedules, the
supplements to the Schedules, or any other certificate or document delivered by
the Company pursuant to this Agreement, provided, however, that the
determination of any breach of any representation or warranty made by the
Company with respect to information contained in the Business Plan shall only be
assessed when considering the Business Plan in its entirety and to any changes
or modifications thereto which were made with Buyer's approval, and that the
Company shall not be liable under this clause 10.2.1 for an amount of Damages
exceeding the aggregate proceeds actually provided by the Buyer to the Company
pursuant to this Agreement and the Additional Purchase Obligation Agreement, as
the case may be, at the time the Company becomes required to make payment
pursuant hereto; or
10.2.2 any breach by the Company of any covenant or
obligation of the Company in this Agreement; or
10.2.3 any claim by any Person for brokerage or
finder's fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such Person with the Company (or
any Person acting on its behalf) in connection with any of the Contemplated
Transactions.
10.3 The remedies provided in Section 10.2 will be the
exclusive source of remedies that may be available to Buyer or the other
Indemnified Persons in relation to any financial or pecuniary damages which may
be available, however Buyer shall be free to pursue all other equitable remedies
available under applicable law, including without limitation, any injunctive
relief.
10.4 Notwithstanding anything to the contrary contained in
Section 10.2, the Buyer shall not be entitled to seek indemnification from the
Company under this Agreement with respect to any damages arising out of or
resulting from Section 10.2, until the aggregate amount of such damages exceeds
two hundred and fifty thousand US dollars ($250,000), and where such damages
exceed two hundred and fifty thousand US dollars ($250,000), the Buyer shall be
entitled to indemnification in full (including the amount of the two hundred and
fifty thousand US dollars ($250,000) referred to above).
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-36-
10.5 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer
will indemnify and hold harmless the Company, its Representatives, controlling
persons and affiliates (the "Company Indemnified Persons") and will pay to the
Company Indemnified Persons the amount of any Damages arising, directly or
indirectly, from or in connection with (i) any breach of any representation or
warranty made by Buyer in this Agreement or in any certificate delivered by
Buyer pursuant to this Agreement, (ii) any breach by Buyer of any covenant or
obligation of Buyer in this Agreement, or (iii) any claim by any Person for
brokerage or finder's fees or commissions or similar payments based upon any
agreement or understanding alleged to have been made by such Person with Buyer
(or any Person acting on its behalf) in connection with any of the Contemplated
Transactions.
10.6 PROCEDURE FOR INDEMNIFICATION - THIRD PARTY CLAIMS.
10.6.1 Promptly after receipt by an indemnified party
under Section 10.2 or 10.3 of notice of the commencement of any Proceeding
against it, such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying party of
the commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action is prejudiced by the indemnifying party's
failure to give such notice.
10.6.2 If any Proceeding referred to in Section 10.6.1
is brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such Proceeding, the indemnifying party will,
unless the claim involves Taxes, be entitled to participate in such Proceeding
and, to the extent that it wishes (unless (i) the indemnifying party is also a
party to such Proceeding and the indemnified party determines in good faith that
joint representation would be inappropriate, or (ii) the indemnifying party
fails to provide reasonable assurance to the indemnified party of its financial
capacity to defend such Proceeding and provide indemnification with respect to
such Proceeding), to assume the defense of such Proceeding with counsel
reasonably satisfactory to the indemnified party and, after notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such Proceeding, the indemnifying party will not, as long as it
diligently conducts such defense, be liable to the indemnified party under this
Section 10 for any fees of other counsel or any other expenses with respect to
the defense of such Proceeding, in each case subsequently incurred by the
indemnified party in connection with the defense of such Proceeding, other than
reasonable costs of investigation. If the indemnifying party assumes the defense
of a Proceeding, (i) it will be conclusively established for purposes of this
Agreement that the claims made in that Proceeding are within the scope of and
subject to indemnification; (ii) no compromise or settlement of such claims may
be effected by the indemnifying party without the indemnified party's consent
unless (A) there is no finding or admission of any violation of Legal
Requirements or any violation of the rights of any Person and no effect on any
other claims that may be made against the indemnified party, and (B) the sole
relief provided is monetary damages that are paid in full by the indemnifying
party; and (iii) the indemnified party will have no liability with respect to
any compromise or settlement of such claims effected without its consent. If
notice is given to an indemnifying party of the commencement of any Proceeding
and the indemnifying party does not, within ten days after the indemnified
party's notice is given, give notice to the indemnified party of its election to
assume the defense of such Proceeding, the indemnifying party will be bound
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-37-
by any determination made in such Proceeding or any compromise or settlement
effected by the indemnified party.
10.6.3 Notwithstanding the foregoing, if an indemnified
party determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent.
10.6.4 The Company hereby consents to the non-exclusive
jurisdiction of any court in which a Proceeding is brought against any Buyer
Indemnified Person for purposes of any claim that a Buyer Indemnified Person may
have under this Agreement with respect to such Proceeding or the matters alleged
therein, and agree that process may be served on the Company with respect to
such a claim anywhere in the world.
10.7 PROCEDURE FOR INDEMNIFICATION - OTHER CLAIMS. A claim
for indemnification for any matter not involving a third-party claim may be
asserted by notice to the party from whom indemnification is sought. Any claim
for indemnification which may be brought under this Section 10 may be brought
until 30 days after expiration of the relevant survival period.
11. COVENANTS OF THE COMPANY SUBSEQUENT TO THE CLOSING DATE.
11.1 ADDITIONAL FINANCING. The Company shall comply with all
terms, conditions, covenants and obligations of the Company under the agreements
entered into in connection with the Additional Financings.
11.2 ANCILLARY AGREEMENTS. The Company shall comply with all
terms, conditions, covenants and obligation of the Company under the Ancillary
Agreements. The Company shall not change or modify or agree to change or modify
any of the terms and conditions of this Agreement, the Transaction Documents and
the Toshiba Agreement without the prior written approval of Buyer (other than
the Business Plan pursuant to Section 11.3).
11.3 BUSINESS PLAN. The Company shall use the proceeds of
this Agreement, the Additional Purchase Obligations and the Additional
Financings solely in order to finance the construction, deployment and operation
of Fab 2 in accordance with the Business Plan and the timetable included
therein. The Company shall not change or modify or agree to change or modify the
Business Plan and shall not deviate materially from the Business Plan (whether
or not it is changed) without the prior written approval of Buyer (which shall
not be unreasonably withheld) if any such change, modification or agreement
would or reasonably be expected to (a) materially change the construction
schedule of Fab 2 as set forth in the Business Plan, (b) significantly increase
the cost of Fab 2 beyond that set forth in the Business Plan or (c) materially
change the production capacity schedule of Fab 2 as set forth in the Business
Plan. In addition, the Company shall not change or modify or agree to change or
modify the Business Plan and shall not deviate materially from the Business Plan
(whether or not it is changed) if any such change, modification or agreement
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-38-
would or reasonably be expected to materially change the Additional Financing
Plan as set forth in the Business Plan or result in a material failure to comply
with the schedule for the financings described therein unless such change,
modification or agreement has been approved by the Company's Board, provided,
however that such approval shall not be deemed granted if two or more members of
the Board shall have voted against such change, modification or agreement.
11.4 PROJECT COMMITTEE. As of the Closing and thereafter the
Company shall create a committee of its Board (the "Project Committee") to
oversee and bear managerial responsibility for the Fab 2 Project. The Project
Committee shall consist of four directors, including the Chief Executive Officer
of the Company then serving on the Board, a representative of Buyer on the
Board, so long as the Buyer is entitled to appoint a member of the Board, a
representative of TIC, so long as TIC is entitled to appoint a member to the
Board, and one statutory external director, so long as the Company is required
to appoint such an external director either to such committee or to the Board
pursuant to Applicable Law.
11.5 PROJECT PROGRESS REPORTS; LIAISON OFFICER. The Company
shall, on a monthly basis starting immediately subsequent to the date hereof,
and in any other date requested by Buyer, provide to Buyer with a written report
describing, in reasonable detail, the progress and status of the Fab 2 and the
Additional Financings. The Buyer may appoint a liaison officer with respect to
the Fab 2 project that will be an employee or consultant of the Buyer and will
be permitted to obtain from the Company and its officers, directors consultants
and contractors, ongoing information with respect to the progress of the
project, will have free access to all relevant information and documents and
will be permitted to participate in internal meetings and discussions of the
Company with respect to the progress of the project. The Company will coordinate
with the liaison officer any requests in accordance with the foregoing and shall
fully cooperate with such officer.
11.6 INFORMATION RIGHTS. As long as Buyer, together with its
Affiliates, holds at least 3% of the outstanding share capital of the Company,
the Company shall deliver to Buyer copies of each report filed or furnished by
the Company to the SEC, within no later than five days after such report if
filed or furnished to the SEC.
11.7 PRE-EMPTIVE RIGHTS.
11.7.1 Until the later of such time as (a) the Series
B-1 Additional Purchase Obligation shall have expired in accordance with its
terms and (b) Buyer shall have exercised the Series B-1 Additional Purchase
Obligation and thereafter shall no longer own ten percent of the issued and
outstanding share capital of the Company, if the Company proposes to issue any
of its equity securities or securities convertible into such equity securities
(the "Offered Securities"), other than Excluded Securities, then the Buyer shall
have the right, but not the obligation, to purchase a portion of such Offered
Securities, on the same terms and conditions and for the same consideration as
the Offered Securities which are sold, equal to the percentage of the Company's
issued and outstanding share capital as is owned by the Buyer on the date on
which Buyer responds to the notice to be provided under Section 11.7.2 (the "Pro
Rata Share").
11.7.2 If the Company proposed to issue Offered
Securities, it shall give the Buyer written notice of its intention (the
"Pre-emptive Notice") and shall, in such notice, fully
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-39-
describe the Offered Securities and any other relevant securities and the terms
and conditions and total consideration upon and for which the Company proposes
to issue them. Upon receipt of such notice, the Buyer shall have 15 business
days to decide and notify the Company of its decision to purchase Offered
Securities in an amount not exceeding Buyer's then current Pro Rata Share. If
the Company fails to issue and sell the Offered Securities or any portion of
them within 90 days from the date of the Pre-emptive Notice upon terms and
conditions and for consideration that are no more favorable to the purchasers of
the Offered Securities than specified in the Pre-emptive Notice, the Company
shall not thereafter issue or sell such Offered Securities without again
complying with the provisions of this Section 11.7.2.
12. GENERAL PROVISIONS.
12.1 EXPENSES. Except as otherwise expressly provided in this
Agreement, each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, counsel, and accountants, provided that upon the
Closing the Company shall reimburse Buyer for its reasonable legal expenses in
connection with the negotiation and execution of this Agreement in an amount of
up to $30,000 plus VAT. The Company shall pay all stamp tax duties in connection
with the issuance of the Shares and any shares upon exercise of the Additional
Purchase Obligations and otherwise in connection with this Agreement.
12.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar
publicity with respect to this Agreement or the Contemplated Transactions will
be issued, if at all, by mutual agreement by the parties, except as required by
applicable law or the regulations of the securities exchange upon which the
securities of either party are traded or quoted. The Company and Buyer will
consult with each other concerning the means by which the Company's employees,
customers, and suppliers and others having dealings with the Company will be
informed of the Contemplated Transactions, and Buyer will have the right to be
present for any such communication.
12.3 CONFIDENTIALITY. From the date hereof, Buyer and the
Company will maintain in confidence, and will cause the directors, officers,
employees, agents, and advisors of Buyer and the Company to maintain in
confidence, any written information stamped "confidential" when originally
furnished by another party in connection with this Agreement or the Contemplated
Transactions (including information furnished prior to the date hereof), unless
(a) such information is already known to such party or to others not bound by a
duty of confidentiality or such information becomes publicly available through
no fault of such party, (b) the use of such information is necessary or
appropriate in making any filing or obtaining any consent or approval required
for the consummation of the Contemplated Transactions, or (c) the furnishing or
use of such information is required by Legal Requirements.
If the Contemplated Transactions are not consummated,
each party will return or destroy as much of such written information as the
other party may reasonably request.
12.4 NOTICES. All notices, consents, waivers, and other
communications under this Agreement must be in writing and will be deemed to
have been duly given when (a) delivered by
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-40-
hand (with written confirmation of receipt), (b) sent by telecopier (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if sent
by a recognized overnight delivery service (receipt requested), in each case to
the appropriate addresses and telecopier numbers set forth below (or to such
other addresses and telecopier numbers as a party may designate by notice to the
other parties):
Company:
Attention: Co-Chief Executive ▇▇▇▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile No.: 972-6-654-7788
with a copy to: ▇▇▇▇▇ ▇▇▇▇▇ & Co.
▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Adv.
Facsimile No.: 972-3-608-7714
Buyer:
Attention: President and CEO
SanDisk Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to: SanDisk Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Vice President and General Counsel
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
12.5 JURISDICTION; SERVICE OF PROCESS. Any action or
proceeding seeking to enforce any provision of, or based on any right arising
out of, this Agreement may be brought against any of the parties solely in the
courts of the State of California, and each of the parties consents to the
jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in the preceding sentence may be
served on any party anywhere in the world.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-41-
12.6 FURTHER ASSURANCES. The parties agree (a) to furnish
upon request to each other such further information, (b) to execute and deliver
to each other such other documents, and (c) to do such other acts and things,
all as the other party may reasonably request for the purpose of carrying out
the intent of this Agreement and the documents referred to in this Agreement.
12.7 WAIVER. The rights and remedies of the parties to this
Agreement are cumulative and not alternative. Neither the failure nor any delay
by any party in exercising any right, power, or privilege under this Agreement
or the documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such right,
power, or privilege will preclude any other or further exercise of such right,
power, or privilege or the exercise of any other right, power, or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right arising
out of this Agreement or the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any obligation of such party or of the right of the party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.
12.8 ENTIRE AGREEMENT AND MODIFICATION. This Agreement
supersedes all prior agreements between the parties with respect to its subject
matter (including the term sheet between Buyer and the Company dated March 15,
2000 and all drafts hereof and thereof) and constitutes (along with the
documents referred to in this Agreement) a complete and exclusive statement of
the terms of the agreement between the parties with respect to its subject
matter. This Agreement may not be amended except by a written agreement executed
by the party to be charged with the amendment.
12.9 DISCLOSURE SCHEDULES.
12.9.1 The disclosures in the Schedules, and those in
any supplement thereto, must relate only to the representations and warranties
in the Section of the Agreement to which they expressly relate and not to any
other representation or warranty in this Agreement.
12.9.2 In the event of any inconsistency between the
statements in the body of this Agreement and those in the Schedules (other than
an exception expressly set forth as such in the Schedules with respect to a
specifically identified representation or warranty), the statements in the body
of this Agreement will control.
12.10 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS.
Neither party may assign any of its rights under this Agreement without the
prior consent of the other parties, except that Buyer may assign any of its
rights under this Agreement to any wholly owned Subsidiary of Buyer or to any
Subsidiary which is wholly owned other than a nominal interest, so long as such
ownership shall be maintained. Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy, or claim under or with
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-42-
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
12.11 SEVERABILITY. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any provision
of this Agreement held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or unenforceable.
12.12 SECTION HEADINGS, CONSTRUCTION. The headings of Sections
in this Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Section" or "Sections" refer
to the corresponding Section or Sections of this Agreement. All words used in
this Agreement will be construed to be of such gender or number as the
circumstances require. Unless otherwise expressly provided, the word "including"
does not limit the preceding words or terms.
12.13 TIME OF ESSENCE. With regard to all dates and time
periods set forth or referred to in this Agreement, time is of the essence.
12.14 GOVERNING LAW. This Agreement will be governed by the
laws of the State of California without regard to conflicts of law principles.
12.15 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
-43-
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
SanDisk Corporation: Tower Semiconductor Ltd.:
By:_________________________________ By:____________________________________
________________________________________________________________________________
* An asterisk indicates confidential material has been omitted from this
document filed separately with the Securities and Exchange Commission pursuant
to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
