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 Addtional 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 Addtional 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.
"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 Migdal 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.
"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 3.20.
"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 3.21.
"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:
(a) 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
(c) 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 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, 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
Addtional 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 Material Adverse Section
3.4.1 Effect 3.1.1
Additional Incentive Section Offered Securities Section
Plans 1.14 11.8.1
Additional Purchase Patents Section
Obligation Agreement Section 3.20.1
2.4
Additional Purchase Project Committee Section
Obligation Shares Section 11.4
2.4
Additional Wafer Pro Rata Share Section
Partner Financing Section 11.8.1
Date 7.6
Annual Report Section Purchase Price Section
3.4.1 2.2
Articles Section2.5Registration Right Section
Agreement 2.5.1.5
Board Section Rights in Mask Section
2.4 Works 3.10.1
Copyrights Section SEC Section
3.20.1 3.4.1
Debt Financing Term Section Shareholders Section
Sheet 5.6.4 Agreement 2.5.1.5
Environmental Study Section SEC Documents Section
3.5.1 3.4.1
Executed Steering Committee Section
Transaction Section 5.10
Documents 3.2.1
Grants Section Taxes
3.2.1
Indemnified Persons Section Toshiba Agreement Section
10.2 3.2.3
Foundry Agreement Section Wafer Commitments Section
2.4 7.7
Marks Section3.2Wafer Partner Section
Differential 7.6
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 nonassesable
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 Hillel Silver Road, Ramat Gan, 52506, 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 Addtional Purchase
Obligation Agreement in the form of Exhibit B hereto (the "Addtional
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 Addtional Purchase Obligations under
the Addtional Purchase Obligation Agreement (the "Addtional Purchase
Obligation Shares") (subject, in relation to the issuance of the
Shares and the Addtional 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.
2.5. CLOSING OBLIGATIONS. At the Closing:
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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 Addtional 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 certificate 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 Yigal Arnon & 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 date 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.
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 Addtional 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
Addtional 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 such 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 Addtional Purchase Obligation
Agreement, the Addtional 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 Addtional Purchase
Obligation Shares, to receipt of shareholder approval by
Closing) and, assuming the due execution and delivery
hereof and thereof by Buyer, constitutes the legal, valid,
and binding obligation of 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 Addtional
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 or 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
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. CAPITALIZATION; ISSUANCE OF SHARES; OFFICERS AND DIRECTORS.
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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 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.
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 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 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 Brightman 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 the 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 Addtional 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.
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.
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 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 (TZAVEI 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 employ 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 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.
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
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.
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 a 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 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 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 acordance 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 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 Mark 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, Mark 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 mark 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 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 Company pursuant to Item 13 of Form 20-F
promulgated by the SEC under the Exchange Act .
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 Addtional 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 to 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.
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.
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.
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 that may make the satisfaction of the
conditions in Section 7 below impossible or unlikely.
5.6. FINANCINGS.
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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.
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 favorable (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 Fnancing 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.
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.
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
Addtional Purchase Obligation Shares to Buyer in accordance with all
aplicable 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 OBLIGATION 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 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 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 Addtional 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
Addtional Purchase Obligations not exercised prior to such time
pursuant to the Addtional 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 Addtional 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 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 Addtional
Purchase Obligations under the Addtional 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 deemed to be the Business Plan for
all purposes of this Agreement) which shall, among other things (a)
provide that water 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.
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 Addtional
Purchase Obligations under the Addtional 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 Addtional 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 Addtional
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
Addtional 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
Addtional Purchase Obligation under the terms and conditions of the
Addtional Purchase Obligation Agreement (after giving effect to all
applicable grace periods and extensions under the Addtional Purchase
Obligation Agreement). The right to indemnification, payment of
Damages or other remedies based on such representations, warranties,
covenants, and obligations will not be 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 Addtional
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).
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 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
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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 Addtional 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 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 memer 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 liasion 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 participated in intenal meetings
and discussions of the Company with respect to the progress of the
project. The Company will coordinate with the liasion 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 is filed or furnished to the SEC.
11.7. PRE-EMPTIVE RIGHTS.
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11.7.1. Until the later of such time as (a) the Series B-1 Addtional
Purchase Obligation shall have expired in accordance with
its terms and (b) Buyer shall have exercised the Series B-1
Addtional 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 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 purhasers 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 Addtional 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 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 Officer
P.O. Box 619
Migdal Haemek 23105 Israel
Facsimile No.: 972-6-654-7788
with a copy to: Yigal Arnon & Co.
3 Daniel Frisch Street
Tel Aviv, Israel
Attention: David H. Schapiro, Adv.
Facsimile No.: 972-3-608-7714
Buyer:
Attention: President and CEO
SanDisk Corporation
140 Caspian Court
Sunnyvale, California 94089
Facsimile No.:(408) 542-0600
with a copy to: SanDisk Corporation
140 Caspian Court
Sunnyvale, California 94089
Attention: Vice President and General Counsel
Facsimile No.: (408) 548-0385
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.
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
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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 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
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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
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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
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State of California without regard to conflicts of law principles.
12.15. COUNTERPARTS. This Agreement may be executed in one or more
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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.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
the date first written above.
SanDisk Corporation: Tower Semiconductor Ltd.:
By: /S/ ELI HARARI By: /S/ YOAV NISSAN COHEN
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Chief Executive Officer Co-Chief Executive Officer