November 11, 2003
The Israel Corporation Ltd. (the "Safety Net Obligor")
Bank Hapolaim B.M.
Bank Leumi Le-Israel B.M.
Dear Sir or Madam,
Re: Undertaking to Complete Rights Offering
We irrevocably undertake that should we fail to meet any of our
financing obligations under clause 16.27.2 of the Facility Agreement by and
among Bank Hapoalim B.M. and Bank Leumi Le-Israel B.M. (together: "the Banks")
and us, dated January 18, 2001, as amended (the "Facility Agreement") and should
the Banks send a Contribution Notice (as defined in the Facility Agreement), as
amended by the Seventh Amendment thereto and subject to the terms of the
Facility Agreement, provided that the Safety Net Undertaking has not been
terminated, we will complete a rights offering (subject to compliance with
applicable laws) (a "Rights Offering") within three months of the date of the
Contribution Notice on the following terms:
o The amount of a Rights Offering shall not be less than the amount
required under the Contribution Notice, which amount shall not exceed
the difference between what we were obliged to raise under clause
16.27.2 through the date of said Contribution Notice and the amount
actually raised (the "Amount to be Raised").
o We will offer convertible securities to all of our shareholders in
units comprised of convertible debentures ("CD" or "CDs", as
applicable) convertible into, and warrants (the "Warrants" and,
together with the CDs the "Units") exercisable for, our ordinary shares
such that the Warrants included in each unit will be exercisable for a
number of shares equal to 45% of the number of shares which may be
issued on the basis of an assumed conversion of the CDs included in
such units.
o The CDs will contain such terms and conditions so as to constitute
Equity Convertible Debentures (as defined in the Facility Agreement),
save that clause 1.118(a) of the Facility Agreement shall not apply and
no deposit shall be required to be made pursuant to clause 1.118(e) of
the Facility Agreement, and, for the removal of doubt, the amount of
which shall not be limited, and subject to such other terms as set
forth in the Facility Agreement. We shall pay all stamp tax (if due),
VAT on interest and linkage differentials relating to the CD's.
o Each CD will bear interest at the rate of 6% per year; 1% interest will
be payable once a year and the balance of such interest (5%) will
accrue until the maturity of the CDs on a compound basis, which
maturity shall be a date no earlier than December 31, 2009, any such
payment of principal and interest to be subject to the terms and
conditions of the Facility Agreement.
o The CDs will be convertible into our ordinary shares (principal and
compounded interest) at a rate equal to the Amount to be Raised plus
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the accumulated unpaid interest at such time of conversion divided by
the lower of: (a) 50% discount of the trading price for the ordinary
shares of Tower on Nasdaq (or such other stock exchange or quotation
system on which Tower's ordinary shares are listed in the event that
they cease to be traded on Nasdaq) (Nasdaq or such alternative stock
exchange or quotation system, the "Stock Exchange") at the close of
trading on the trading day immediately prior to the date of the
prospectus relating to the Rights Offering or (b) 50% discount of the
average trading price for the ordinary shares of Tower on the Stock
Exchange during the fifteen (15) consecutive trading days preceding the
date of the prospectus relating to the Rights Offering.
o Each Warrant will be exercisable into one of our ordinary shares at
such exercise price which is equivalent to 80% of the lower of: (a) the
trading price for the ordinary shares of Tower on the Stock Exchange at
the close of trading on the trading day immediately prior to the date
of the prospectus relating to the Rights Offering or (b) the average
trading price for the ordinary shares of Tower on the Stock Exchange
during the fifteen (15) consecutive trading days preceding the date of
the prospectus relating to the of the Rights Offering.
o The Warrants shall expire five years from their date of issuance.
o In consideration of the Safety Net Obligor's commitment to execute the
Safety Net Investment, we shall pay such Safety Net Obligor a fee to be
agreed to between us and the Safety Net Obligor, provided that (a) the
terms of such fee are approved by our audit committee and board of
directors and (b) said fee shall be satisfied only by the issue of
Warrants exercisable into shares of the Company.
We understand and agree that the Safety Net Obligor will procure that it or
Safety Net Investors will invest in Tower in accordance with Section 3.2 of the
Safety Net Undertaking (as defined in the Facility Agreement) addressed to the
Banks and agree to take all actions to facilitate compliance by the Safety Net
Obligor with the Safety Net Undertaking, including but not limited to, if
necessary, increasing the authorized capital and completing a private placement
on substantially the same terms and conditions that would have applied to the
Rights Offering, if necessary. We hereby agree that the giving by the Safety Net
Obligor of its Undertaking to the Banks shall not vest any rights in us, our
shareholders or any third party nor any obligations in favour of us, our
shareholders or any third party.
We confirm that should we fail to file a registration statement with the United
States Securities and Exchange Commission ((hereinafter: the "SEC") within 12
(twelve) Business Days of the date a Contribution Notice is given by the Banks
as described in Section 3.1 above, or fail promptly to respond, to the
satisfaction of the staff of the SEC, to SEC staff comments with respect to said
registration statement, or fail promptly to take all actions required by all
applicable jurisdictions in which shareholders of Tower are resident to qualify
said rights offering in such jurisdiction, including, without limitation, Israel
and applicable states within the United States, or otherwise fail to diligently
proceed with the rights offering, and any such failure is attributed by us or
our counsel to one or more legal impediments, then we or any of, the Company or
the Banks may request that Xxxxx Xxxxxxx, Adv. (or failing him Cliff
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Felig, Adv.) (hereinafter: the "Expert"), within 2 (two) weeks of the date
requested to do so by any of us, the Company and the Banks, confirm whether or
not the Rights Offering may legally proceed, notwithstanding the legal
impediment or impediments cited by us. We agree that if the Expert confirms that
the Rights Offering may legally proceed, we undertake, pursuant to this
undertaking, promptly to cure such failures, in consultation with the Expert,
and complete the Rights Offering in accordance with this undertaking. We further
undertake to bear the reasonable fees of, and reasonable costs incurred by, the
Expert in providing his confirmation as aforesaid.
We further agree that we will indemnify the Safety Net Obligor and/or its
subsidiary, Israel Corporation Technologies (ICTech) Ltd., jointly but not
severally, (the "Indemnified Party"), subject to the Safety Net Undertaking
coming into effect, from and against any claims, actions, suits, proceedings,
damages and liabilities awarded thereunder and expenses in relation to such
claims, actions, suits, or proceedings (including reasonable legal fees) based
on a final judgment by a competent court which is not subject to appeal (the
"Judgment") incurred by the Indemnified Party arising out of its giving the
Safety Net Undertaking or the making of a Safety Net Investment (collectively,
"Losses"). We shall not, however, be liable under the foregoing indemnity to the
extent that any such Losses result from the gross negligence, willful
misconduct, or bad faith of any of the Safety Net Obligor and/or Israel
Corporation Technologies (ICTech) Ltd. The foregoing indemnity shall be limited
to maximum payments aggregating no more than $100,000,000 (one hundred million
US dollars) (the "Maximum Amount"), whose terms of payment are subject to the
below conditions, and will be the exclusive monetary remedy of the Indemnified
Party.
In addition to the condition that the maximum aggregate payments shall not
exceed the Maximum Amount, payments under this indemnity shall be subject to the
following conditions:
1) (a) On account of any requirement to make a payment to the Indemnified
Party, we will pay to the Indemnified Party, within 60 (sixty) days
from the date of the Judgment (the "Period"), in cash, equal to the
Losses, up to the maximum aggregate amount of $25,000,000 (twenty five
million US dollars) (the "Base Payment").
(b) If on account of any requirement to make a payment, the Base
Payment does not satisfy our indemnification obligation hereunder with
respect thereto (the "Completing Amount"), the Completing Amount will
accrue interest from the date of the Judgment at a rate per annum equal
to three-month LIBOR plus 2.5% (such interest accruing from day to day
and calculated on the basis of the actual number of days elapsed and a
360 (three hundred and sixty) day year. Such interest and principal to
be paid by us in equal installments, on the dates that we actually pay
the Banks in accordance with the repayment schedule for Loans (other
than Safety Net Loans) (as such terms are defined in the Facility
Agreement) beginning no earlier than the next repayment date following
the date of the Judgment and ending on the Final Maturity Date (as such
term is defined in the
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Facility Agreement) (as amended from time to time).
2) Notwithstanding anything herein, should we have adequate insurance that
will cover an amount of any of our indemnification payment obligations,
then we have the option to make any such payment in full or any lesser
amount that we choose without regard to the conditions set forth in
clause 1)(a) above, but at all times, without derogating from the
condition that the maximum aggregate payments shall not exceed the
Maximum Amount.
If any of the Safety Net Obligor or Israel Corporation Technologies (ICTech)
Ltd. becomes aware of any claim, action, suit, or proceeding which may give rise
to a liability hereunder, such person will promptly give notice thereof to us in
writing. Without our prior written consent, which shall not be unreasonably
withheld, the Indemnified Party may not agree to any settlement or compromise of
any claim, action, suit, or proceeding involving a payment for which it intends
to seek indemnification hereunder. We will make our best commercial efforts to
obtain insurance with respect to our aforegoing indemnification undertaking.
We hereby confirm that all corporate action to be taken by us (including by our
Board of Directors, Audit Committee and by our shareholders) in order to approve
the contents of this undertaking has been duly and properly obtained or will be
obtained prior to the Seventh Amendment Closing Date. Notwithstanding the
previous sentence, this undertaking, including our indemnification obligations
as set forth above, is subject to our obtaining shareholder approval in
accordance with law.
This undertaking is being made to you pursuant to clause 16.34 of the Facility
Agreement.
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Sincerely,
___________________________
Xxxxxx Xxxxxx, Chairman and Acting CEO
Tower Semiconductor Ltd.
Acknowledged and agreed:
___________________________
The Israel Corporation Ltd.
By: __________________
Title: __________________
Acknowledged and agreed:
___________________________
Bank Hapoalim B.M.
By: __________________
Title: __________________
Acknowledged and agreed:
___________________________
Bank Leumi Le-Israel B.M.
By: __________________
Title: __________________
[Signature Page - Undertaking to Complete Rights Offering]
