[TO BE TYPED ON THE LETTERHEAD
OF TOWER SEMICONDUCTOR LTD.]
September __, 2002
TO: Bank Hapoalim B.M. Bank Leumi Le-Israel B.M.
Dear Sirs,
Re: FACILITY AGREEMENT DATED JANUARY 18, 2001 BETWEEN BANK HAPOALIM B.M. AND
BANK LEUMI LE-ISRAEL B.M., ON THE ONE HAND AND TOWER SEMICONDUCTOR LTD., ON
THE OTHER HAND, AS AMENDED BY A LETTER DATED JANUARY 29, 2001, BY A SECOND
AMENDMENT DATED JANUARY 10, 2002, BY A LETTER DATED MARCH 7, 2002 AND BY A
LETTER DATED APRIL 29, 2002 (THE FACILITY AGREEMENT, AS AMENDED AS
AFORESAID, "THE FACILITY AGREEMENT")
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1.1. Terms defined in the Facility Agreement shall have the same meanings when
used in this letter.
1.2. References herein to clauses and schedules, are to clauses and schedules of
the Facility Agreement.
1.3. References herein to paragraphs, are to paragraphs of this letter.
1.4. For the purposes of this letter: (i) "PERMITTED SOURCES" shall mean any of
the sources detailed in paragraphs (a)-(e) of clause 16.27.2, as amended
pursuant to paragraph 2.4 below; and (ii) "SCHEDULE 4.6 AMOUNTS" shall mean
amounts of Paid-in Equity invested in the Borrower or of wafer prepayments
under Qualifying Wafer Prepayment Contracts received by the Borrower, in
each case, in accordance with the undertakings referred to in clauses 4.6
and 16.27.1 of the Facility Agreement, from the entities referred to in
clause 4.6 and otherwise in accordance with Schedule 4.6 and clause 16.27.1
of the Facility Agreement.
2. We hereby confirm that at our request the following amendments shall be
made to the Facility Agreement:
2.1. The following new clauses 1.1.103A, 1.1.103B and 1.1.103C, shall be
inserted after clause 1.1.103:
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"1.1.103A `MEI' - means Matsushita Electric Industrial Co.
Ltd., a company traded in Japan on the 1st
Section of the Tokyo Exchange Stock Market;
1.1.103B `MEI AGREEMENT' - means the Joint Development and
Cross-Licence Agreement between the
Borrower and MEI dated May 28, 2002;
1.1.103C `MEI PROCEEDS' - means unconditional, non-refundable
payments (net of Taxes, including
withholding Taxes) actually received by the
Borrower from MEI under the MEI Agreement
in respect of the development of technology
under the MEI Agreement;".
2.2. In clause 5.1.1(ii), in the 18th line, after the words "wafer prepayments
(including credits);", there shall be inserted the following:
"; MEI Proceeds (other than any MEI Proceeds constituting wafer
prepayments and which are taken into account as such under this clause
5.1.1(ii) above) ...."
2.3. In clause 16.1.1(v)(d), the words ", as well as the amounts received in
such Quarter by way of MEI Proceeds", shall be inserted at the end thereof
after the words "Wafer Prepayments" and Schedule 16.1.1(v)B, shall be
amended by: (i) inserting in the last sentence, prior to the words "and the
Wafer Prepayments", the following: ", the amounts received by way of MEI
Proceeds amounted to US $________ (___________ United States Dollars)"; and
(ii) inserting in the second sentence prior to the words "and the
cumulative amount of the Wafer Prepayments...", the following: ", the
cumulative amount received by way of MEI Proceeds amounted to US $________
(_____________ United States Dollars)".
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2.4. Clause 16.27.2 shall be amended to read as follows:
"16.27.2 procure that there shall have been: (a) invested in the
Paid-in Equity of the Borrower, by way of private placement
or public offering (including exercise of employee share
options or any other warrants issued by the Borrower);
and/or (b) received by the Borrower proceeds, net of taxes
paid and related expenses, generated from the sale of shares
of the Borrower in Saifun, Azalea Microelectronics
Corporation, Chip Express Corporation and/or Virage Logic
Corporation; provided that, the Borrower shall have
undertaken in writing to the Banks to capitalise the amount
of such proceeds, which comprises a net capital gain, into
Paid-in Equity by way of share issue, by no later than
September 30, 2003 (to the extent necessary to satisfy the
Borrower's obligations on such date pursuant to the last
sentence of this clause 16.27.2) and that such capital gains
are recognised as additional paid-up share capital by the
Investment Centre in accordance with the terms of the
Investment Centre Fab 2 Grants (to the extent necessary to
satisfy the Borrower's obligations pursuant to the last
sentence of this clause 16.27.2) (such net capital gains,
when duly capitalised and recognised as aforesaid,
hereinafter `THE RECOGNISED INVESTMENTS'); and/or (c) the
Borrower shall have received wafer prepayments (including
credits) under Qualifying Wafer Prepayment Contracts; and/or
(d) received by the Borrower an amount (net of discounts,
but not net of commissions, fees and other issuance costs),
in respect of the principal amount of Equity Convertible
Debentures (subject to the terms of clause 1.1.118 above);
and/or (e) the Borrower shall have received MEI Proceeds
(excluding any MEI Proceeds comprising wafer prepayments
under Qualifying Wafer Prepayment Contracts which are taken
into account under (c) above);
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all the above in an aggregate amount of not less than US
$144,000,000 (one hundred and forty-four million United States
Dollars) to be invested and/or received as aforesaid, as to US
$40,000,000 (forty million United States Dollars) (out of which
US $40,000,000 (forty million United States Dollars) at least US
$20,000,000 (twenty million United States Dollars) shall have
been invested or received from the sources detailed in paragraphs
(a) (excluding investments received from Etgar) and (d) above
only), by not later than January 31, 2002, as to US $60,000,000
(sixty million United States Dollars) by not later than April 30,
2002, as to US $80,000,000 (eighty million United States Dollars)
by not later thanSeptember 30, 2002, as to US $110,000,000 (one
hundred and ten million United States Dollars), by not later than
December 31, 2002 and as to the full amount of US $144,000,000
(one hundred and forty-four million United States Dollars), by
not later than December 31, 2003 (such amount of US $144,000,000
(one hundred and forty-four million) being in addition to the
investment of US $309,990,000 (three hundred and nine million,
nine hundred and ninety thousand United States Dollars) to be
invested in accordance with clauses 4.5 and 4.6 above (for the
purposes of the aforegoing, in the event that the Borrower shall
provide to the Banks a binding commitment by Etgar to invest in
the Borrower's Paid-in Equity in an amount of US $2,200,000 (two
million two hundred thousand United States Dollars), which such
investments are, pursuant to such commitment, to be made in
accordance with the timetable set out in Schedule 4.6 (pro rata
and PARI PASSU with the investments by TIC in accordance with
TIC's undertakings as referred to in clause 4.6 above), then, for
so long as such investments are made in accordance with such
schedule as aforesaid, the aggregate amount of US $2,200,000 (two
million two hundred thousand United States Dollars) as aforesaid
shall be deemed to have been received on January 31, 2002 and
shall comprise Paid-in Equity for all purposes herein);
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provided that, notwithstanding anything to the contrary in this
Agreement, the aggregate investments in Paid-in Equity as
referred to in clauses 4.5 and 4.6 above, the investments in
Paid-in Equity as described above in paragraph (a), the proceeds
referred to in paragraph (b) above in respect of which the
Borrower shall have given an undertaking with respect to net
capital gains as aforesaid, the Equity Convertible Debentures and
the MEI Proceeds (excluding any MEI Proceeds comprising wafer
prepayments under Qualifying Wafer Prepayment Contracts) shall
not be less than US $369,000,000 (three hundred and sixty-nine
million United States Dollars) (out of the total investment of US
$454,000,000 (four hundred and fifty-four million United States
Dollars)) and the Equity Convertible Debentures shall, for the
removal of doubt, not exceed US $60,000,000 (sixty million United
States Dollars). Accordingly, in the event that at any date for
receipt of an investment under Schedule 4.6 it becomes apparent
that the amount received by the Borrower in respect of wafer
prepayments (including credits) under Qualifying Wafer Prepayment
Contracts (it being recorded that all amounts of MEI Proceeds in
excess of US $8,000,000 (eight million United States Dollars) in
aggregate shall, for this purpose, be deemed to constitute wafer
prepayments under Qualifying Wafer Prepayment Contracts as
aforesaid) is in excess of US $85,000,000 (eighty-five million
United States Dollars), the Borrower shall, within 41/2 (four
and-a-half) months of the SDPP, procure that there shall have
been invested in the Borrower in Paid-in Equity an amount equal
to the excess of such wafer prepayments over US $85,000,000
(eighty-five million United States Dollars) as aforesaid (in
addition to all other Paid-in Equity to be invested pursuant to
this Agreement).
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The Borrower shall within 7 (seven) days of receipt of each
investment, proceeds from the sale of shares, wafer prepayment,
payment on account of Equity Convertible Debentures or MEI
Proceeds, submit to the Banks a confirmation by the Auditors of
each investment in Paid-in Equity, proceeds and net capital gains
referred to in paragraph (b) above, wafer payment or payment on
account of Equity Convertible Debentures or MEI Proceeds referred
to in this clause 16.27.2 above, together, with respect to net
capital gains as referred to in paragraph (b) above, with the
undertaking by the Borrower to capitalise same as aforesaid. In
addition, by no later than September 30, 2003, the aggregate
investments in Paid-in Equity as referred to in clauses 4.5 and
4.6 above and as described above in paragraph (a) above and the
Recognised Investments of the Borrower under Schedule 4.6 shall
not be less than US $345,000,000 (three hundred and forty-five
million United States Dollars);"
2.5. For the purposes of clause 16.27.2 (as amended pursuant to paragraph 2.4
above), notwithstanding anything to the contrary in the Facility Agreement
(including in any amendments thereto):
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2.5.1. in the event that the Borrower shall fail to comply with its
obligations pursuant to clause 16.27.2 to procure that it shall have
received by not later than September 30, 2002 from Permitted Sources
an aggregate amount of at least US $80,000,000 (eighty million United
States Dollars), it being recorded that, in accordance with the
certificates of the Auditors (copies of such certificates being
attached hereto as ANNEX A), the Borrower has received US $41,223,181
(forty-one million, two hundred and twenty-three thousand, one hundred
and eighty-one United States Dollars) from Permitted Sources prior to
the date hereof, but shall have received, by not later than September
30, 2002, an aggregate amount from Permitted Sources which equals at
least US $76,000,000 (seventy-six million United States Dollars),
including MEI Proceeds of at least US $4,950,000 (four million, nine
hundred and fifty thousand United States Dollars), then, for the
purposes only of clause 16.27.2, subject to the Borrower not having
received notice or otherwise having reason to believe that MEI will
not fulfill all terms of the MEI Agreement, the Borrower shall be
deemed to have complied with its obligations under clause 16.27.2
which are required to be complied with by September 30, 2002; provided
that, in the event of the operation of such deeming provision as
aforesaid, then, without derogating from the Borrower's other
obligations under clause 16.27, the Borrower shall be required to
procure that it shall receive, by no later than December 31, 2002,
from Permitted Sources, an amount equal at least to the difference
between US $80,000,000 (eighty million United States Dollars) and the
aggregate amount from Permitted Sources received by it as of September
30, 2002, such difference to be in addition to all other amounts from
Permitted Sources which the Borrower is required, under the Facility
Agreement, to receive by not later than December 31, 2002. For the
removal of doubt, the deeming provision referred to above (if
relevant) shall apply only to determine compliance by the Borrower
with those obligations of the Borrower under clause 16.27.2 which must
be fulfilled by September 30, 2002, and shall not be relevant for any
other purpose under the Facility Agreement.
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2.5.2. without derogating from clauses 16.27.1(a) and (b), the Borrower
confirms and represents that, in accordance with the certificate of
the Auditors (a copy of such certificate being attached hereto as
ANNEX B), the Borrower has received, prior to July 31, 2002, Schedule
4.6 Amounts in respect of the Third Milestone in an aggregate amount
of at least US $44,000,000 (forty-four million United States Dollars);
and
2.5.3. all MEI Proceeds in excess of an aggregate amount of US $8,000,000
(eight million United States Dollars) shall be deemed as credits
and/or wafer prepayments from Qualifying Wafer Prepayment Contracts in
terms of the Facility Agreement.
2.5.4. for the removal of doubt, Schedule 4.6 Amounts do not constitute
Permitted Sources and shall not be taken into account for purposes of
clause 16.27.2 (other than as was specifically permitted under the
terms of the amendment to the Faciltiy Agreement, dated April 29,
2002, and for that purpose only).
3. We agree that notwithstanding anything to the contrary in the Facility
Agreement, the Borrower shall not be entitled to obtain any Advances and
Loans during the period from the date of signature of this letter and until
the Borrower shall have received from Permitted Sources (other than the
Schedule 4.6 Amounts) all of the amounts required by September 30, 2002
pursuant to paragraph 2.5.1 above. Accordingly (for the removal of doubt,
with respect to further Advances and Loans, subject to compliance by the
Borrower with all the provisions of the Facility Agreement relating to the
making available of Advances and Loans (including pursuant to clauses 5.1,
5.2 and 16.27.2 of the Facility Agreement, as amended by this letter) and
provided that the Total Outstandings in respect of Advances and Loans only
(including, for the removal of doubt, in respect of Advances and Loans made
prior to such period) shall at no time exceed the limits prescribed under
the Facility Agreement), notwithstanding anything to the contrary in the
Facility Agreement (including Schedule 1.1.104), the Total Outstandings in
respect of Advances and Loans only (including, for the removal of doubt, in
respect of Advances and Loans made prior to such period) shall at no time
during any of the periods set out in column A below, exceed the maximum
amount set out in column B opposite such period below:
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COLUMN A COLUMN B
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(PERIOD) (MAXIMUM TOTAL OUTSTANDINGS-
LOANS AND ADVANCES)
======================================================= =======================
1.Until compliance with clause 16.27.1 investments US $244,000,000
required to be made by not later than July 31, 2002
(US $44,000,000 of Schedule 4.6 Amounts in respect
of the Third Milestone) and compliance with
clause 16.27.2 investments required to be made by
not later than September 30, 2002
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2.After compliance with all investment requirements US $265,000,000
referred to in item 1 above, but before
September 30, 2002
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3.After compliance with all investment requirements US $333,000,000
referred to in item 1 above, during the period
October 1, 2002-December 31, 2002
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4. The Facility Agreement is hereby amended as expressly set out in this
letter above. This letter shall be read together with the Facility
Agreement as one agreement and save for the amendments expressly set out in
this letter above, the terms and conditions of the Facility Agreement shall
remain unchanged and in full force and effect.
5. Please confirm your agreement to the above by signing in the place
indicated therefor below.
Yours sincerely,
____________________________
TOWER SEMICONDUCTOR LTD.
We hereby confirm our agreement to the above.
for BANK HAPOALIM B.M. for BANK LEUMI LE-ISRAEL B.M.
By: By:
__________________________ __________________________
Title: Title:
__________________________ __________________________
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