EXHIBIT 1
SHARE PURCHASE AGREEMENT
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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
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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
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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 Xxxxxx Haemek
in Israel, all as further set forth in the Business Plan.
"Facilities"- any real property, leaseholds, or other interests currently
owned 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.
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"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:
Such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day
operations of such Person; and
Such action is similar in nature and magnitude to actions
customarily taken in the ordinary course of the normal day-to-day
operations of other Persons that are in the same line of business
as such Person.
"Ordinary Shares" - the ordinary shares of the Company, par value NIS1.00
per share.
"Organizational Documents"- (a) the memorandum of association, articles of
association, certificate of incorporation and/or the bylaws of a
corporation; (b) the partnership agreement and any statement of partnership
of a general partnership; (c) the limited partnership agreement and the
certificate of limited partnership of a limited partnership; (d) any
charter or 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.
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"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.
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"Additional Purchase Obligations" - Conditional obligations to purchase
Ordinary Shares of the Company issued under the Additional Purchase
Obligation Agreement.
Additional Defined Terms
6K Reports Section 3.4.1 Material Adverse Effect Section 3.1.1
Additional Incentive Plans Section 1.14 Offered Securities Section 11.8.1
Additional Purchase Obligation Patents Section 3.20.1
Agreement Section 2.4
Additional Purchase Obligation Project Committee Section 11.4
Shares Section 2.4
Additional Wafer Partner Pro Rata Share Section 11.8.1
Financing Date Section 7.6
Annual Report Section 3.4.1 Purchase Price Section 2.2
Articles Section 2.5.1.2 Registration Right Agreement Section 2.5.1.5
Board Section 2.4 Rights in Mask Works Section 3.10.1
Copyrights Section 3.20.1 SEC Section 3.4.1
Debt Financing Term Sheet Section 5.6.4 Shareholders Agreement Section 2.5.1.5
Environmental Study Section 3.5.1 SEC Documents Section 3.4.1
Executed Transaction Steering Committee Section 5.10
Documents Section 3.2.1
Grants Section 3.2.1 Taxes
Indemnified Persons Section 10.2 Toshiba Agreement Section 3.2.3
Foundry Agreement Section 2.4 Wafer Commitments Section 7.7
Marks Section 3.20.1 Wafer Partner Differential Section 7.6
2. Sale and Transfer of Shares; Purchase Price; Closings
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2.1. Delivery. Subject to the terms and conditions of this Agreement, at
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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 $23.08 (all
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references herein to "$" 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.
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2.3. Closing. The closing provided for in this Agreement (the " Closing")
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will take place at the offices of Meitar, Liquornik, Geva & Co. at 00
Xxxx Xxxxxx Xxxxxx Xxxx, Xxxxx Xxx, 00000, 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
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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;
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2.5.1.4. The opinion of Xxxxx Xxxxx & 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
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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
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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
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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
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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
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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
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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
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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
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"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 Xxxxxxxxx
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
----------------------------------------
-12-
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,
-13-
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
-14-
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.
-15-
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.
-16-
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
-17-
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
-18-
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
-19-
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,
-20-
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
-21-
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");
3.10.1.2. 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
-22-
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 Xxxx 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, Xxxx or Copyright is (with respect to
issued Patents relating to wafer fabrication
technology, to the best
-23-
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
xxxx 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
-24-
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
---------------------------------------
-25-
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
-26-
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.
-27-
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
-28-
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.
----------
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.
-29-
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
-30-
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
-31-
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
---------------------
-32-
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.
-33-
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
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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.
-35-
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
-36-
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,
-37-
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
-38-
(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
-39-
(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
-40-
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
-------------------------------------------------------
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).
-41-
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
-43-
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
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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 Xxxxxxx
X.X. Xxx 000
Xxxxxx Xxxxxx 00000 Xxxxxx
Facsimile No.: 972-6-654-7788
with a copy to: Xxxxx Xxxxx & Co.
0 Xxxxxx Xxxxxx Xxxxxx
Xxx Xxxx, Xxxxxx
Attention: Xxxxx X. Xxxxxxxx, Adv.
Facsimile No.: 972-3-608-7714
Buyer:
Attention: President and CEO
SanDisk Corporation
000 Xxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Facsimile No.: (000) 000-0000
with a copy to: SanDisk Corporation
000 Xxxxxxx Xxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Vice President and General Counsel
Facsimile No.: (000) 000-0000
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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
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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.
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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
-------------------------------
Agreement are provided for convenience only and will not affect its
construction or interpretation. All references to "Section" or
"Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be
of such gender or number as the circumstances require. Unless
otherwise expressly provided, the word "including" does not limit
the preceding words or terms.
12.13. Time of Essence. With regard to all dates and time periods set
----------------
forth or referred to in this Agreement, time is of the essence.
12.14. Governing Law. This Agreement will be governed by the laws of the
--------------
State of California without regard to conflicts of law principles.
12.15. Counterparts. This Agreement may be executed in one or more
-------------
counterparts, each of which will be deemed to be an original copy
of this Agreement and all of which, when taken together, will be
deemed to constitute one and the same agreement.
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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/ Xxx Xxxxxx By: /s/ Yoav Nissan Xxxxx
----------------------- ----------------------
Chief Executive Officer Co-Chief Executive Officer
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