EXHIBIT 10.1
Date: February 21, 2003
To: Tower Semiconductor Ltd.
P.O. Box 619
Migdal Haemek 23105
Israel
Fax: +972-4-654-7788
Attention: Co-Chief Executive Officer
cc: Yigal Arnon & Co.
One Azrieli Center
Tel-Aviv 67021
Israel
Fax: +972-3-608-7714
Attention: David H. Schapiro, Adv.
Re: AMENDMENT TO PAYMENT SCHEDULE OF SERIES A-5 ADDITIONAL PURCHASE
OBLIGATIONS, WAIVER OF SERIES A-5 CONDITIONS, CONVERSION OF SERIES A-4 WAFER
CREDITS AND OTHER PROVISIONS (THE "AMENDMENT")
Dear Sirs,
With regard to the obligation of each party to this letter (a "Party")
to exercise the Series A-5 Additional Purchase Obligations, as provided for in
its Fab 2 Investment Agreements, as amended through the date hereof, all
capitalized terms not defined herein shall be as defined therein, each Party
hereby agrees that its agreements shall be amended as follows:
1. EXERCISE OF SERIES A-5 ADDITIONAL PURCHASE OBLIGATION.
1.1. FIRST INSTALLMENT. Each Party hereby notifies Tower
Semiconductor Ltd. (the "Company" or "Tower") that in
accordance with the terms set forth hereunder, and subject to
and effective upon Tower obtaining all required approvals as
specified in Section 7 hereof, it shall irrevocably exercise
sixty percent (60%) of the Series A-5 Additional Purchase
Obligation (the "First Installment"), which is the amount
identified as the First Installment with respect to such Party
as set forth in Exhibit A hereto, without regard to whether
the Series A-5 Mandatory Exercise Event occurs or whether any
of the conditions to a Mandatory Exercise are satisfied. The
First Installment shall be paid no later than five (5)
business days following satisfaction of the condition
specified in the first sentence above as evidenced by a
certificate delivered to each of the parties and executed by
Tower's CEO(s) certifying the satisfaction of such condition.
1.2. SECOND INSTALLMENT. Provided the conditions of Section 1.1 are
met, each Party hereby further notifies the Company that in
accordance with the terms set forth hereunder, and subject to
and conditioned upon the completion of the Minimum Financing
(as defined below), it shall irrevocably exercise forty
percent (40%) of the Series A-5 Additional Purchase Obligation
(the "Second Installment"; the First Installment and the
Second Installment shall collectively be referred to as the
"Series A-5 APO Installments"), which is the amount identified
as the Second Installment with respect to such Party as set
forth in Exhibit A hereto, without regard to whether the
Series A-5 Mandatory Exercise Event occurs or whether any of
the conditions to a Mandatory Exercise are satisfied. The term
Minimum Financing shall mean the Raising (as defined below) by
the Company of the dollar amount equal to $22,105,730. The
term Raising shall mean the receipt of proceeds from (i) the
sale, in a public or private offering, of ordinary shares of
the Company or debt convertible into ordinary shares of the
Company; or (ii) any other form of fund raising which
satisfies the requirements for additional financing pursuant
to section 16.27.2 of the Facility Agreement, as amended, to
which the Company is a party. The Second Installment shall be
paid upon satisfaction of the condition specified in the first
sentence above as evidenced by a certificate delivered to each
of the parties and executed by Tower's CEO(s) certifying the
satisfaction of such condition; provided, further, that the
Second Installment shall not be due before the later of (i)
August 1, 2003, and (ii) five (5) business days following the
date upon which the Company has completed the Minimum
Financing. Notwithstanding the preceding sentence, the
obligation to advance the Second Installment shall terminate,
and there shall be no further obligation or liability to pay
the Second Installment, if the Minimum Financing shall not
have been completed by December 31, 2003.
For the avoidance of all doubt and notwithstanding the
provisions set forth in Sections 5 and 6 of the Additional
Purchase Obligation Agreement between SanDisk Corp. and Tower
dated July 4, 2000 or the Additional Purchase Obligation
Agreement between Israel Corporation Technologies (ICTech)
Ltd. and Tower dated December 12, 2000 or the Additional
Purchase Obligation Agreement between The Challenge Fund-Etgar
II, LP and Tower dated February 11, 2001 and as incorporated
by reference in all of the other Fab 2 Investment Agreements,
as applicable to each Party, each Party's undertaking to pay
the First Installment and the Second Installment is, upon
satisfaction of all of the conditions specified in this
Amendment and subject to the last sentence of the first
paragraph of this Section 1.2, completely irrevocable.
2. SHARE ISSUANCES. Immediately following the advancement of the
First Installment, each Party will be issued fully-paid and
non-assessable ordinary shares of Tower equivalent to the
aggregate of the First Installment divided by the average
trading price for the ordinary shares of the Company during
the thirty (30) consecutive trading days preceding the date
that this Amendment is approved by the Board of Directors of
the Company. Immediately following the advancement of the
Second Installment, each Party will be issued fully-paid and
non-assessable ordinary shares of Tower equivalent to the
Second Installment divided by the price per ordinary share of
the Company paid in connection with the Minimum Financing (the
"Minimum Financing Price"); provided, however, that if the
Minimum Financing Price cannot reasonably be calculated from
the documents evidencing the Minimum Financing, then the
Minimum Financing Price shall be
the average trading price for the ordinary shares of the
Company during the thirty (30) consecutive trading days
preceding the date the Second Installment is paid.
3. CONVERSION OF PORTION OF PRE-PAID CREDIT ACCOUNT. Tower hereby
grants to each Party who is either SanDisk Corp. ("SNDK"),
Alliance Semiconductor Corp. ("ALSC"), Macronix International
Co., Ltd. ("MXIC") or QuickLogic Corp. ("QUIK") (SNDK, ALSC,
MXIC and QUIK shall each be referred to as a "Wafer Partner"
and collectively shall be referred as the "Wafer Partners") an
option to convert a number of credits equal to the number of
credits in each of its respective Pre-Paid Wafer Accounts that
were issued in connection with its advancement of the Series
A-4 Additional Purchase Obligation payment in October 2002 and
that are held in its Pre-Paid Wafer Account on December 31,
2005 (the "Series A-4 Credits") into fully-paid and
non-assessable ordinary shares of Tower equivalent to the
amount of the Series A-4 Credits divided by the average
trading price for the ordinary shares of the Company during
the thirty (30) consecutive trading days preceding December
31, 2005 (the "Conversion Price"), provided that such Party
provides Tower advance written notice to convert all or a
portion of the Series A-4 Credits no earlier than December 31,
2005 and by no later than January 31, 2006 (the "Conversion
Notice"). Tower hereby agrees to issue to each Wafer Partner
that provides it with a Conversion Notice the ordinary shares
to be issued in connection with its exercise of the Series A-4
Credits promptly after its receipt of such Conversion Notice.
4. RIGHTS OFFERING. To the extent that any of the Wafer Partners
shall convert their "Series A-4 Credits" into fully-paid and
non-assessable ordinary shares pursuant to paragraph 3, and
provided that such amount of converted Series A-4 Credits are
equivalent to or greater than an aggregate of 5% of Tower's
then outstanding share capital, Tower hereby undertakes to
prepare and file a registration statement, within a reasonable
time following the issuance of the ordinary shares to the
Wafer Partners in connection with their conversion of the
Series A-4 Credits, for the distribution of rights to all of
Tower's shareholders other than Wafer Partners but including
each of the Parties who are either Israel Corporation
Technologies (ICTech) Ltd. ("ICTech") or The Challenge
Fund-Etgar II, LP ("CF") (ICTech and CF shall each be referred
to as an "Equity Partner"), to purchase additional shares in
Tower at the Conversion Price to maintain their percentage of
ordinary shares held in Tower immediately prior to the
conversion of the Series A-4 Credits. Tower shall use its
reasonable best efforts to cause the registration statement to
be declared effective by the Securities and Exchange
Commission and the Israel Securities Authority as soon as
reasonably practicable after filing thereof with the
Securities and Exchange Commission and the Israel Securities
Authority.
5. TERMINATION OF WAFER PARTNER DIFFERENTIAL CONDITION. Upon
satisfaction of the condition set forth in the first sentence
of Section 1.1, the parties shall irrevocably agree to fully
and indefinitely waive
Tower's obligation to raise an additional $50 million from
additional wafer partners in connection with the provisions
set forth in the Fab 2 Investment Agreements and related
letters with respect to the Wafer Partner Differential.
6. RESTRICTION ON TRANSFER OF EQUITY SECURITIES UNDER THE
CONSOLIDATED SHAREHOLDERS AGREEMENT; REGISTRATION RIGHTS. All
of the parties to the Consolidated Shareholders Agreement
dated January 18, 2001 by and between SanDisk, Alliance,
Macronix and Israel Corporation Ltd. (the "CSA"), hereby agree
that all of the ordinary shares in Tower to be issued to such
parties with respect to the Series A-5 Additional Purchase
Obligations will be subject to the restrictions on transfer of
Equity Securities during the Initial Restricted Period and the
Subsequent Restricted Period (all capitalized terms in this
section as defined in the CSA). All shares issued or
contemplated to be issued to the parties pursuant to Sections
2 and 3 of this Amendment shall be deemed to be Purchaser
Group Registrable Securities as defined in and as provided for
in the Registration Rights Agreement made as of January 18,
2001, by and among Tower Semiconductor Ltd., SanDisk
Corporation, Alliance Semiconductor Corp., Macronix
International Co., Ltd, QuickLogic Corporation and The Israel
Corporation Ltd.
7. APPROVALS. This Amendment and the parties obligations
hereunder are subject to and shall only become effective upon
the approval of the Company's audit committee, its board of
directors (which approval shall include the unanimous vote of
approval of its independent directors), its shareholders, the
Office of the Chief Scientist, the Investment Center and, to
the extent applicable, the Israel Land Administration.
8. FAB 2 INVESTMENT AGREEMENTS. Except as expressly set forth in
this Amendment and effective upon payment of the First
Installment in full, the Company hereby irrevocably waives,
forever excuses and releases the Wafer Partners and their
respective officers, directors and employees, from their
obligation to exercise the Series A-5 Additional Purchase
Obligation as provided for in the Fab 2 Investment Agreements,
including without limitation, the Additional Purchase
Obligation Agreement. All other provisions of the Parties' Fab
2 Investment Agreements shall remain unchanged.
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.
/s/ Rafi Levin /s/ Udi Hillman
- --------------------------------- ---------------------------------------
TOWER SEMICONDUCTOR LTD. ISRAEL CORPORATION TECHNOLOGIES
(ICTECH) LTD.
By: Udi Hillman
By: Rafi Levin -----------------------------------
----------------------------- Title: CFO
Title: Co-CEO --------------------------------
/s/ Michael Gray /s/ N.D. Reddy
- --------------------------------- ---------------------------------------
SANDISK CORPORATION ALLIANCE SEMICONDUCTOR CORPORATION
By: Michael Gray By: N.D. Reddy
------------------------------ -----------------------------------
Title: CFO Title: CEO
-------------------------- --------------------------------
/s/ Miin C. Wu
- --------------------------------- --------------------------------------
MACRONIX (BVI) CO., LTD. QUICKLOGIC CORP.
By: Miin C. Wu By:
------------------------------ -----------------------------------
Title: Director Title:
-------------------------- --------------------------------
/s/ I. Ciechanover
- ---------------------------------
THE CHALLENGE FUND-ETGAR II, LP
By: I. Ciechanover
-----------------------------
Title: President
--------------------------
EXHIBIT A
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WAFER PARTNER OR EQUITY PARTNER FIRST SECOND
INSTALLMENT INSTALLMENT
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SanDisk Corp. $6,600,420 $4,400,280
Alliance Semiconductor Corp. $6,600,420 $4,400,280
Macronix International Co., Ltd. $6,600,420 $4,400,280
QuickLogic Corp. $2,200,140 $1,466,760
Israel Corporation Technologies (ICTech) Ltd. $4,400,004 $2,933,336
The Challenge Fund-Etgar II, LP $440,000.40 $293,333.60
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