EXHIBIT 99.13
THESE SECURITIES [(INCLUDING THE SECURITIES ISSUABLE PURSUANT
HERETO)](1) HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED ("THE ACT"), OR ANY U.S. STATE OR
OTHER JURISDICTION'S SECURITIES LAWS. THESE SECURITIES (INCLUDING THE
SECURITIES ISSUABLE PURSUANT HERETO) MAY NOT BE SOLD, OFFERED FOR SALE
OR PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
REGISTRATION STATEMENT IN EFFECT UNDER THE ACT WITH RESPECT TO ANY
SUCH SECURITIES OR AN OPINION OF COUNSEL (REASONABLY SATISFACTORY TO
THE COMPANY) THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD
PURSUANT TO RULE 144 OF THE ACT OR ON THE TEL-AVIV STOCK EXCHANGE IN
COMPLIANCE WITH REGULATION S UNDER THE ACT.
EQUITY EQUIVALENT CONVERTIBLE CAPITAL NOTE
(PRINCIPAL AMOUNT OF US $39,500,000)
THIS EQUITY EQUIVALENT CONVERTIBLE CAPITAL NOTE ("THIS CAPITAL NOTE") in the
principal amount of US $39,500,000 (thirty-nine million five hundred thousand
United States Dollars) ("THE PRINCIPAL AMOUNT") has been issued by Tower
Semiconductor Ltd., an Israeli company ("THE COMPANY"), whose shares are
currently traded on The Nasdaq National Market ("NASDAQ") and the Tel-Aviv Stock
Exchange ("TASE"), to Bank Leumi Le-Israel B.M. ("THE HOLDER"). This Capital
Note was originally issued by the Company in exchange for the conversion by the
original Holder of this Capital Note of loans to the Company in a principal
amount equal to twice the Principal Amount and represents the obligation of the
Company to pay the Principal Amount to the Holder in accordance with and subject
to the terms set forth in this Capital Note.
1. DEFINITIONS
In this Capital Note, the following terms have the meanings given to them
in this clause 1:
1.1. "COMPANY" includes any person that shall succeed to or assume the
obligations of the Company under this Capital Note;
1.2. "HOLDER" shall mean any person who at the time shall be the registered
holder of this Capital Note or any part thereof; and
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(1) Following the effective date of the Registration Statement covering the
Conversion Shares, bracketed language to be removed from all future Capital
Notes to be issued and, at the request of the Holder, a substitute Capital
Note omitting the bracketed language will promptly be delivered to the
Holder.
1.3. "ORDINARY SHARES" means the ordinary shares, nominal value NIS 1.00
(one New Israel Sheqel) per share, of the Company (and any shares of
capital stock substituted for the ordinary shares as a result of any
stock split, stock dividend, recapitalisation, rights offering,
exchange, merger or similar event or otherwise, including as described
in this Capital Note).
2. TERMS
The Principal Amount shall neither bear interest nor be linked to any index
and shall be subordinated to all liabilities of the Company having priority
over the Ordinary Shares.
The Principal Amount shall only be payable by the Company to the Holder out
of distributions made upon the winding-up (whether solvent or insolvent),
liquidation or dissolution of the Company and, in such event, on a PARI
PASSU and pro rata basis with the Ordinary Shares after payment of all
liabilities of the Company having priority over the Ordinary Shares. For
the purposes only of calculation of the allocation of such distributions
between holders of the Capital Note and holders of Ordinary Shares, the
holder of this Capital Note shall be deemed to own the number of Ordinary
Shares into which this Capital Note may then be converted. The Company
shall not be entitled to prepay or redeem this Capital Note.
This Capital Note shall be convertible into Ordinary Shares as set forth
below and, for the removal of doubt, no such conversion shall be deemed a
redemption or prepayment of this Capital Note.
3. CONVERSION
3.1. CONVERSION RIGHT
The Holder of this Capital Note has the right, at the Holder's option,
at any time and from time to time, to convert this Capital Note,
without payment of any additional consideration, in accordance with
the provisions of this clause 3, in whole or in part, into fully-paid
and non-assessable Ordinary Shares. The number of Ordinary Shares into
which this Capital Note may be converted ("THE CONVERSION SHARES")
shall be determined by dividing the aggregate Principal Amount of this
Capital Note by the conversion price in effect at the time of such
conversion ("THE CONVERSION PRICE"). The Conversion Price initially
shall be US $1.52 (one United States Dollar and fifty-two cents), as
adjusted at any time and from time to time in accordance with clause 7
below.
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3.2. CONVERSION PROCEDURE
This Capital Note may be converted in whole or in part at any time and
from time to time by the surrender of this Capital Note to the Company
at its principal office together with written notice of the election
to convert all or any portion of the Principal Amount thereof, duly
signed on behalf of the Holder. The Company shall, on such surrender
date or as soon as practicable thereafter, issue irrevocable
instructions to its stock transfer agent to deliver to the Holder a
certificate or certificates for the number of Conversion Shares to
which the Holder shall be entitled as a result of such conversion as
aforesaid. Such conversion, the issue and allotment of such Conversion
Shares and the registration of the Holder in the register of members
of the Company as the holder of such Conversion Shares shall be deemed
to have been made immediately prior to the close of business on the
date of such surrender of this Capital Note or portion thereof and the
person or persons entitled to receive the Conversion Shares issuable
upon such conversion shall be treated for all purposes as the record
holder or holders as of such date of such number of Conversion Shares
to which the Holder shall be entitled as a result of such conversion
as aforesaid. In the event of a partial conversion, the Company shall
concurrently issue to the Holder a replacement Capital Note of like
tenor as this Capital Note, but representing the Principal Amount
remaining after such partial conversion. For the avoidance of doubt,
the Company confirms that the terms of this Capital Note, including,
without limitation, this clause 3, constitute the issue terms of the
Conversion Shares and that, accordingly, the right of the Company
pursuant to clauses 16.1 and 16.2 of the Company's Articles of
Association to delay the issuance of stock certificates for up to 6
(six) months after the allotment and registration of transfer is
inapplicable. For the further removal of doubt, nothing herein shall
derogate from the second sentence of clause 16.1 of the Company's
Articles of Association.
4. FRACTIONAL INTEREST
No fractional shares will be issued in connection with any conversion
hereunder. The Company shall round-down, to the nearest whole number, the
number of Conversion Shares issuable in connection with any conversion
hereunder.
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5. CAPITAL NOTE CONFERS NO RIGHTS OF SHAREHOLDER
The Holder shall not, by virtue of this Capital Note, have any rights as a
shareholder of the Company prior to actual conversion into Conversion
Shares in accordance with clause 3.2 above.
6. ACQUISITION FOR INVESTMENT
This Capital Note [, including the Conversion Shares,(2)] has not been
registered under the Securities Act of 1933, as amended ("THE SECURITIES
ACT"), or any other securities laws. The Holder acknowledges by acceptance
of this Capital Note that it has acquired this Capital Note for investment
and not with a view to distribution. [The Holder agrees that, unless the
Conversion Shares have been registered under the Securities Act, any
Conversion Shares issuable upon conversion of this Capital Note will be
acquired for investment and not with a view to distribution in a manner
inconsistent with the registration requirements of the U.S. securities laws
and may have to be held indefinitely unless they are subsequently
registered under the Securities Act or, based on an opinion of counsel
reasonably satisfactory to the Company, an exemption from such registration
is available; provided, however, that no opinion shall be required if sold
pursuant to Rule 144 of the Securities Act or the transfer will be effected
on the TASE and the Holder represents that the applicable conditions under
Regulation S under the Securities Act have been satisfied.(3)] The Holder,
by acceptance hereof, consents to the placement of legend(s) on this
Capital Note and also on the Conversion Shares issuable upon conversion of
this Capital Note, as to the applicable restrictions on transferability in
order to ensure compliance with the Securities Act, unless in the
reasonable opinion of counsel for the Company such legend is not required
in order to ensure compliance with the Securities Act. The Company may
issue stop transfer instructions to its transfer agent in connection with
such restrictions.
Nothing in this clause 6 shall derogate from any obligations of the Company
under any Registration Rights Agreement to which the Company and the Holder
are parties.
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(2) Following the effective date of the Registration Statement covering the
Conversion Shares, bracketed language to be removed from all future Capital
Notes to be issued and, at the request of the Holder, a substitute Capital
Note omitting the bracketed language will promptly be delivered to the
Holder.
(3) Following the effective date of the Registration Statement covering the
Conversion Shares, bracketed language to be replaced with the following:
"The Conversion Shares have been registered under the Securities Act on
Form F-3 Registration Statement No. [INSERT RELEVANT REGISTRATION NUMBER]."
on all future Capital Notes to be issued, and, at the request of the
Holder, a substitute Capital Note having such replacement language will
promptly be delivered to the Holder.
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7. ADJUSTMENT OF CONVERSION PRICE AND NUMBER OF CONVERSION SHARES
The number and kind of securities issuable initially upon the conversion of
this Capital Note and the Conversion Price shall be subject to adjustment
at any time and from time to time upon the occurrence of certain events, as
follows:
7.1 ADJUSTMENT FOR SHARES SPLITS AND COMBINATIONS
If the Company at any time or from time to time effects a subdivision
of the outstanding Ordinary Shares, the number of Conversion Shares
issuable upon conversion of this Capital Note immediately before the
subdivision shall be proportionately increased, and conversely, if the
Company at any time or from time to time combines the outstanding
Ordinary Shares, the number of Conversion Shares issuable upon
conversion of this Capital Note immediately before the combination
shall be proportionately decreased. Any adjustment under this clause
7.1 shall become effective at the close of business on the date the
subdivision or combination becomes effective.
7.2. ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS
In the event the Company at any time, or from time to time, makes or
fixes a record date for the determination of holders of Ordinary
Shares entitled to receive a dividend or other distribution payable in
additional Ordinary Shares, then and in each such event, the number of
Ordinary Shares issuable upon conversion of this Capital Note shall be
increased as of the time of such issuance or, in the event such a
record date is fixed, as of the close of business on such record date,
by multiplying the number of Ordinary Shares issuable upon conversion
of this Capital Note by a fraction: (i) the numerator of which shall
be the total number of Ordinary Shares issued and outstanding
immediately prior to the time of such issuance or the close of
business on such record date, as applicable, plus the number of
Ordinary Shares issuable in payment of such dividend or distribution;
and (ii) the denominator of which is the total number of Ordinary
Shares issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date, as applicable;
provided, however, that if such record date is fixed and such dividend
is not fully paid or if such distribution is not fully made on the
date fixed therefor, the number of Ordinary Shares issuable upon
conversion of this Capital Note shall be recomputed accordingly as of
the close of business on such record date and thereafter the number of
Ordinary Shares issuable upon conversion of this Capital Note shall be
adjusted pursuant to this clause 7.2 as of the time of the actual
payment of such dividends or distribution.
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7.3. ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS
In the event the Company at any time or from time to time makes, or
fixes a record date for the determination of holders of Ordinary
Shares entitled to receive a dividend or other distribution payable in
securities of the Company other than Ordinary Shares (for the
avoidance of doubt, other than in a rights offering as to which clause
7.7 shall be applicable), then in each such event provision shall be
made so that the Holder shall receive upon conversion of this Capital
Note and for no additional consideration, in addition to the number of
Ordinary Shares receivable thereupon, the amount of securities of the
Company that the Holder would have received had this Capital Note been
converted immediately prior to such event, or the record date for such
event, as applicable.
7.4. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION
If the Ordinary Shares issuable upon conversion of this Capital Note
are changed into the same or a different number of shares of any class
or classes of shares, whether by recapitalization, reclassification,
exchange, substitution or otherwise (other than a subdivision or
combination of shares, dividends payable in Ordinary Shares or other
securities of the Company or a reorganization, merger, consolidation
or sale of assets, provided for elsewhere in this clause 7), then and
in any such event the Holder shall have the right thereafter to
exercise this Capital Note into the kind and amount of shares and
other securities receivable upon such recapitalization,
reclassification, exchange, substitution or other change, by holders
of the number of Ordinary Shares for which this Capital Note might
have been converted immediately prior to such recapitalization,
reclassification, exchange, substitution or other change (or the
record date for such event), all subject to further adjustment as
provided herein and under the Company's Articles of Association.
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7.5. REORGANIZATION, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS
If at any time or from time to time there is a capital reorganization
of the Ordinary Shares (other than a recapitalization, subdivision,
combination, reclassification, exchange or substitution of shares as
provided for elsewhere in this clause 7), or a merger or consolidation
of the Company with or into another corporation, or the sale of all or
substantially all of the Company's properties and assets to any other
person, then, as a part of such reorganization, merger, consolidation
or sale, provision shall be made so that the Holder shall thereafter
be entitled to receive upon conversion of this Capital Note and for no
additional consideration, the number of shares or other securities or
property (including, without limitation, cash) of the Company, or of
the successor corporation resulting from such merger or consolidation
or sale, to which a holder of the number of Ordinary Shares issuable
upon conversion of this Capital Note would have been entitled on such
capital reorganization, merger, consolidation or sale.
7.6. OTHER TRANSACTIONS
In the event that the Company shall issue shares to its shareholders
as a result of a split-off, spin-off or the like, then the Company
shall only complete such issuance or other action if, as part thereof,
allowance is made to protect the economic interest of the Holder
either by increasing the number of Conversion Shares or by procuring
that the Holder shall be entitled, on terms economically proportionate
to those provided to its shareholders, to acquire additional shares of
the spun-off or split-off entities.
7.7. RIGHTS OFFERINGS
If the Company, at any time and from time to time, shall fix a record
date for, or shall make a distribution to, its shareholders of rights
or warrants to subscribe for or purchase any security (collectively,
"RIGHTS"), then, in each such event, the Company will provide the
Holder, concurrently with the distribution of the Rights to its
shareholders, identical rights, having terms and conditions identical
to the Rights (for the avoidance of doubt, exercisable at the same
time as the Rights), in such number to which the Holder would be
entitled had the Holder converted this Capital Note into Conversion
Shares immediately prior to the record date for such distribution, or
if no record date shall be fixed, then immediately prior to such
distribution , as applicable. Nothing in this clause 7.7 shall require
the Company to complete any such distribution of Rights to its
shareholders, including following the record date thereof, unless
required pursuant to the terms of such distribution and, if such
distribution of Rights to its shareholders is not completed in
conformity with the terms of such distribution, then the Company shall
be entitled not to complete the provision of rights to the Holder
pursuant to this clause 7.7 above.
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7.8. ADJUSTMENT FOR CASH DIVIDENDS AND DISTRIBUTIONS
In the event the Company, at any time or from time to time until
September 28, 2021, makes or fixes a record date for the determination
of holders of Ordinary Shares entitled to receive a cash dividend or
distribution, then and in each such event, the number of Ordinary
Shares issuable upon conversion of this Capital Note shall be adjusted
(for the avoidance of doubt, never decreased but either shall remain
the same or increased), as of the close of business on such record
date, by multiplying the number of Ordinary Shares issuable upon
conversion of this Capital Note by a fraction: (i) the numerator of
which shall be the closing price per share of the Ordinary Shares on
the TASE on the determining date ("HAYOM HAKOVAYA") for such dividend
or distribution; and (ii) the denominator of which shall be the
adjusted "ex-dividend" price of the Ordinary Shares as such prices set
out in (i) and (ii) are determined in each case by the TASE in
accordance with its rules.
7.9. GENERAL PROTECTION
The Company will not, by amendment of its Articles of Association or
other charter document or through any reorganization,
recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder, or impair the
economic interest of the Holder, but will at all times in good faith
assist in the carrying out of all the provisions hereof and in taking
of all such actions and making all such adjustments as may be
necessary or appropriate in order to protect the rights and the
economic interests of the Holder against impairment.
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7.10. NOTICE OF CAPITAL CHANGES
If at any time the Company shall declare any dividend or distribution
of any kind, or offer for subscription pro rata to the holders of
Ordinary Shares any additional shares of any class, other rights or
any security of any kind, or there shall be any capital reorganization
or reclassification of the capital shares of the Company, or
consolidation or merger of the Company with, or sale of all or
substantially all of its assets to another company or there shall be a
voluntary or involuntary dissolution, liquidation or winding-up of the
Company, or other transaction described in this clause 7, then, in any
one or more of the said cases, the Company shall give the Holder prior
written notice, by registered or certified mail, postage prepaid, of
the date on which: (i) a record shall be taken for such dividend,
distribution or subscription rights; or (ii) such reorganization,
reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up shall take place, as the case may be. Such
notice shall also specify the date as of which the holders of record
of Ordinary Shares shall participate in such dividend or distribution,
subscription rights, or shall be entitled to exchange their Ordinary
Shares for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding-up, as the case may be. Such
written notice shall be given at least 14 (fourteen) days prior to the
action in question and not less than 14 (fourteen) days prior to the
record date in respect thereto.
7.11. ADJUSTMENT OF CONVERSION PRICE
Upon each adjustment in the number of Ordinary Shares purchasable
hereunder, the Conversion Price shall be proportionately increased or
decreased, as the case may be, in a manner that is the inverse of the
manner in which the number of Ordinary Shares purchasable hereunder
shall be adjusted.
7.12. NOTICE OF ADJUSTMENTS
Whenever the Conversion Price or the number of Ordinary Shares
issuable upon conversion of this Capital Note shall be adjusted
pursuant to this clause 7, the Company shall prepare a certificate
signed by the chief financial officer of the Company setting forth, in
reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated,
and the Conversion Price and the number of Conversion Shares issuable
upon conversion of this Capital Note after giving effect to such
adjustment, and shall cause copies of such certificate to be mailed
(by first class mail, postage prepaid) to the Holder.
8. OTHER TRANSACTIONS
In the event that the Company or its shareholders receive an offer to
transfer all or substantially all of the shares in the Company, or to
effect a merger or acquisition or sale of all or substantially all of the
assets of the Company, then the Company shall promptly inform the Holder in
writing of such offer.
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9. TRANSFER OF THIS CAPITAL NOTE BY THE HOLDER
This Capital Note shall be freely transferable or assignable by the Holder
in whole or in part, at any time and from time to time, subject to the
provisions of this clause 9. With respect to any transfer of this Capital
Note, in whole or in part, the Holder shall surrender the Capital Note,
together with a written request to transfer all or a portion of the
Principal Amount of this Capital Note to the transferee, as well as, if
reasonably requested by the Company, a written opinion of such Holder's
counsel, to the effect that such offer, sale or other distribution may be
effected without registration under the Securities Act. Upon surrender of
such Capital Note (and delivery of such opinion, if so requested) by the
Holder, the Company shall immediately register such transferee as the
Holder of this Capital Note, or the portion thereof, transferred to such
transferee, such registration shall be deemed to have been made immediately
prior to the close of business on the date of such surrender and delivery
(if applicable), and such transferee or transferees shall be treated for
all purposes as the record holder or holders as of such date of a Capital
Note in that portion of the Principal Amount of this Capital Note so
transferred. The Company shall, as promptly as practicable, deliver to the
Holder one or more Capital Notes, of like tenor as this Capital Note,
except that the Principal Amount thereof shall be the amount transferred to
such transferee, for delivery to the transferee or transferees (or, if the
Holder requests, deliver such Capital Note directly to such transferee or
transferees) and shall, if only a portion of the Principal Amount of this
Capital Note is being transferred, concurrently deliver to the Holder one
or more replacement Capital Notes to represent the portion of the Principal
Amount of this Capital Note not so transferred. For the avoidance of doubt,
the Company confirms that no approval by the Board of Directors of the
Company of any transfer of this Capital Note or the Conversion Shares is
required.
10. REPRESENTATIONS, WARRANTIES AND COVENANTS
The Company represents, warrants and covenants to the Holder as follows:
10.1. this Capital Note has been duly authorized and executed by the
Company and is a valid and binding obligation of the Company
enforceable in accordance with its terms;
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10.2. the Conversion Shares are duly authorized and are, and will be,
reserved (for the avoidance of doubt, without the need for further
corporate action by the Company) for issuance by the Company and, when
issued in accordance with the terms hereof, will be validly issued,
fully paid and non-assessable and not subject to any pre-emptive
rights;
10.3. the execution and delivery of this Capital Note are not, and the
issuance of the Conversion Shares upon conversion of this Capital Note
in accordance with the terms hereof will not be, inconsistent with the
Company's Certificate of Incorporation, Memorandum of Association or
Articles of Association, do not and will not contravene any law,
governmental or regulatory rule or regulation, including NASDAQ and
TASE rules and regulations, judgment or order applicable to the
Company, do not and will not conflict with or contravene any provision
of, or constitute a default under, any indenture, mortgage, contract
or other instrument of which the Company is a party or by which it is
bound or, except for consents that have already been obtained and
filings already made, require the consent or approval of, the giving
of notice to, the registration with or the taking of any action in
respect of or by, any Israeli or foreign governmental authority or
agency or other person; and
10.4. the Conversion Shares have been approved for listing and trading on
TASE.
11. LOSS, THEFT, DESTRUCTION OR MUTILATION OF CAPITAL NOTE
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of any Capital Note or
Conversion Shares certificate, and in case of loss, theft or destruction,
of indemnity, or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto,
and upon surrender and cancellation of such Capital Note or Conversion
Shares certificate, if mutilated, the Company will make and deliver a new
Capital Note or Conversion Shares certificate of like tenor and dated as of
such cancellation, in lieu of such Capital Note or Conversion Shares
certificate.
12. NOTICES
All notices and other communications required or permitted hereunder to be
given to a party to this Agreement shall be in writing and shall be faxed
or mailed by registered or certified mail, postage prepaid, or otherwise
delivered by hand or by messenger, addressed to such party's address as set
forth below:
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If to the Holder: Bank Leumi Le-Israel B.M.
Corporate Division
34 Yehuda Halevi Street
Tel Aviv, Israel
ATTENTION: MANAGER OF HI-TECH
INDUSTRIES SECTION
FACSIMILE: (03) 514 9278
with a copy to
(which shall not
constitute notice): Leumi and Co. Investment House Ltd.
25 Kalisher Street
Tel-Aviv 65165
Israel
ATTENTION: HEAD OF INVESTMENT SECTOR
FACSIMILE: (03) 5141 215
If to the Company: Tower Semiconductor Ltd.
P.O. Box 619
Ramat Gabriel Industrial Zone
Migdal Haemek 23105
ATTENTION: OREN SHIRAZI, ACTING
CHIEF FINANCIAL OFFICER
FACSIMILE: (04) 604 7242
WITH A COPY TO: Yigal Arnon & Co.
1 Azrieli Center
Tel Aviv
Israel
ATTENTION: DAVID H. SCHAPIRO, ADV./
ARI FRIED, ADV.
FACSIMILE: (03) 608 7714
or such other address with respect to a party as such party shall notify
each other party in writing as above provided. Any notice sent in
accordance with this clause 12 shall be effective: (a) if mailed, 5 (five)
business days after mailing; (b) if sent by messenger, upon delivery; and
(c) if sent via facsimile, 1 (one) business day following transmission and
electronic confirmation of receipt.
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13. APPLICABLE LAW; JURISDICTION
This Capital Note shall be governed by and construed in accordance with the
laws of the State of Israel as applicable to contracts between two
residents of the State of Israel entered into and to be performed entirely
within the State of Israel. Any dispute arising under or in relation to
this Capital Note shall be resolved in the competent court for Tel
Aviv-Jaffa district, and the Company and the Holder hereby submits
irrevocably to the jurisdiction of such court.
Dated: September 28, 2006
for TOWER SEMICONDUCTOR LTD.
By: __________________________
Title: __________________________
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