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Prospectus Supplement
No. 1
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Filed
pursuant to Rule 424(b)(2)
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(to Prospectus dated December
28, 2009)
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Registration Statement
No. 333-163196
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TOWER
SEMICONDUCTOR LTD.
Up
to $12,500,000 of
Ordinary Shares
We are
party to a Standby Equity Purchase Agreement, or the SEPA, with YA Global Master
SPV Ltd., or YA Global, for the offer and sale of up to $12,050,000 of our
ordinary shares, par value New Israeli Shekels 1.00 per share, offered by this
prospectus supplement and the accompanying base prospectus. We may from time to
time issue all or a portion of these shares to YA Global at 97% of the market
price for the ordinary shares (as determined in accordance with the SEPA) at the
time of such issuance. This prospectus supplement also covers the issuance of
any ordinary shares that we may issue to YA Global in payment of all or a
portion of the $450,000 in commitment fees which are payable to YA Global under
the SEPA at the market price for the ordinary shares (as determined in
accordance with the SEPA) at the time of payment.
We have
been advised by YA Global that the resale of any ordinary shares by YA Global
will be made by means of ordinary brokers’ transactions on the NASDAQ Global
Market, the Tel-Aviv Stock Exchange or otherwise at market prices prevailing at
the time of sale or at prices related to the prevailing market prices. For
additional information on the methods of sale that may be used by YA Global, see
the section entitled “Plan of Distribution” on page S-5.
Our ordinary shares are quoted on the NASDAQ Global Market and the
Tel-Aviv Stock Exchange under the symbol “TSEM.” On February 4, 2010, the last
reported sales prices of our ordinary shares on the NASDAQ Global Market and the
Tel-Aviv Stock Exchange were $1.32 per share and NIS 4.92 per share,
respectively.
Investing in our securities involves
a high degree of risk. See “Risk Factors” referred to and included beginning on
page S-2 of this prospectus supplement.
In
connection with the resale of our ordinary shares, YA Global may be deemed to be
an “underwriter” within the meaning of the Securities Act of 1933, as amended,
and the compensation of YA Global may be deemed to be underwriting commissions
or discounts.
Neither the Securities and Exchange
Commission nor any state securities commission has approved or disapproved of
these securities or passed upon the adequacy or accuracy of this prospectus
supplement or the accompanying base prospectus. Any representation to the
contrary is a criminal offense.
YA Global
Master SPV Ltd.
The date
of this prospectus supplement is February 5, 2010
TABLE OF CONTENTS
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PROSPECTUS
SUPPLEMENT
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S-1
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| S-2 | |
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S-3
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| S-3 | |
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S-5
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BASE
PROSPECTUS
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Prospectus
Summary
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1
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Risk
Factors
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2 |
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Note
Regarding Forward-Looking Statements
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18 |
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Where
You Can Find More Information; Incorporation of Information by
Reference
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19 |
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Ratio
of Earnings to Fixed Charges
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20 |
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Capitalization
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21 |
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Price
Range of Ordinary Shares
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22 |
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Use
of Proceeds
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22 |
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Dilution
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24 |
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Description
of Share Capital
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24 |
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Description
of Capital Notes
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25 |
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Description
of Debt Securities
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26 |
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Description
of Purchase Contracts
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32 |
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Description
of Units
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32
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Description
of Warrants
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33
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Foreign
Exchange Controls and Other Limitations
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34 |
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Plan
of Distribution
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34
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Dividend
Policy
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36 |
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Offering
Expenses
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36
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Legal
Matters
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36 |
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Experts
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36 |
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Enforceability
of Civil Liabilities and Agent for Service of Process in the United
States
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37 |
You should rely only on the
information contained or incorporated by reference in this prospectus supplement
and the accompanying base prospectus. We have not authorized anyone to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not making an offer
to sell these securities in any jurisdiction where the offer and sale is not
permitted.
You should not assume that the
information appearing in this prospectus supplement or the base prospectus is
accurate as of any date other than the date on the front cover of the respective
documents. You should not assume that the information contained in the documents
incorporated by reference in this prospectus supplement or the base prospectus
is accurate as of any date other than the respective dates of those documents.
Our business, financial condition, results of operations, and prospects may have
changed since that date.
i
About
This Prospectus Supplement
This
prospectus supplement and the accompanying base prospectus are part of a
registration statement on Form F-3 (Registration No. 333- 163196) that we filed with
the Securities and Exchange Commission using a “shelf” registration process.
Under this shelf process, we may offer to sell any combination of the securities
described in the base prospectus in one or more offerings up to a total dollar
amount of $50,000,000. The base prospectus provides you with a general
description of the securities we may offer. Each time we sell securities under
this shelf registration, we will provide a prospectus supplement that will
contain specific information about the terms of that offering. The prospectus
supplement may also add, update or change information contained in the base
prospectus. You should read both this prospectus supplement and the accompanying
base prospectus, including all documents incorporated by reference.
This
prospectus supplement provides specific details regarding the issuance of up to
$12,500,000 of our ordinary shares pursuant to the SEPA. To the extent there is
a conflict between the information contained in this prospectus supplement and
the base prospectus, you should rely on the information in this prospectus
supplement. This prospectus supplement, the base prospectus and the documents we
incorporate by reference herein and therein include important information about
us and our ordinary shares, and other information you should know before
investing. You should read both this prospectus supplement and the base
prospectus, together with the additional information described in the base
prospectus under the heading “Where You Can Find More Information; Incorporation
of Information by Reference.”
Company
Overview
We are a
pure-play independent specialty wafer foundry dedicated to the manufacture of
semiconductors. Typically, pure-play foundries do not offer products of their
own, but focus on producing integrated circuits, or ICs, based on the design
specifications of their customers. We manufacture semiconductors for our
customers primarily based on third party designs and our own process technology
and engineering support. We currently offer the manufacture of ICs with
geometries ranging from 1.0 to 0.13-micron. We also provide design services and
complementary technical services. ICs manufactured by us are incorporated into a
wide range of products in diverse markets, including consumer electronics,
personal computers, communications, automotive, industrial and medical device
products.
In
January 2001, we commenced construction of a state-of-the-art wafer fabrication
facility, which we refer to as Fab 2, located in Migdal Haemek, Israel and
adjacent to our first facility, Fab 1. In 2003, we completed the infrastructure
of Fab 2 and commenced production at this Fab. Fab 2 is designed to
operate in geometries of 0.18-micron and below, using advanced materials and
advanced CMOS technology licensed from Freescale and Toshiba and other
technologies that we developed and will develop independently or with
development partners. Depending on the process technology and product mix, when
fully ramped-up, we estimate that Fab 2 will be able to achieve capacity levels
of approximately 40,000 wafers per month. We have not completed the full ramp-up
of Fab 2. The timing of that decision and its implementation will depend upon
several factors, including funding, cost and availability of equipment and
market conditions.
In
September 2008, we acquired Jazz Technologies in a stock for stock transaction.
Jazz is now an independent semiconductor foundry focused on specialty process
technologies for the manufacture of analog and mixed-signal semiconductor
devices. Jazz’s specialty process technologies include advanced analog, radio
frequency, high voltage, bipolar and silicon germanium bipolar complementary
metal oxide (“SiGe”) semiconductor processes, for the manufacture of analog and
mixed-signal semiconductors. Jazz’s customers use the analog and mixed-signal
semiconductor devices in products they design that are used in cellular phones,
wireless local area networking devices, digital TVs, set-top boxes, gaming
devices, switches, routers and broadband modems. Jazz operates one semiconductor
fabrication facility in Newport Beach, California, in which it currently
produces the majority of its products and in which all of Jazz’s process
research and development is performed.
Our
executive offices are located in the Ramat Gavriel Industrial Park, Post Office
Box 619, Migdal Haemek, 23105 Israel, and our telephone number is
972-4-650-6611.
Additional
information about us and our operations may be found on our web site:
www.towersemi.com. Information on our website is not incorporated by reference
in this prospectus.
S-1
An
investment in our securities involves a high degree of risk. In addition to
the risk factors set forth below relating to this offering, you should carefully
consider the risk factors in the base prospectus in the section entitled “Risk
Factors” . These risk factors may be amended or supplemented or
superseded from time to time by other reports we file with the SEC in the
future. If any of the events or developments described therein actually
occurs, our business, financial condition and results of operations may suffer.
In that case, the value of our securities may decline, and you could lose all or
part of your investment.
Risks
Related to this Offering
Investors may experience significant
dilution as a result of the sale of shares under the SEPA or the issuance of
ordinary shares under outstanding securities convertible into or exercisable for
our ordinary shares.
The sale of our ordinary shares pursuant to the SEPA will result in
dilution of the percentage of our ordinary shares held by current and future
shareholders. If we were to sell all $12,500,000 of the ordinary shares which we
may offer for sale under the SEPA at a price equal to $1.32, which was the last reported sale price for our ordinary
shares on the NASDAQ Global Market on February 4, 2010, we would issue
approximately 9,469,697 additional ordinary shares under the SEPA, in
addition to our 198,961,286 shares currently outstanding. Because the sales
pursuant to the SEPA will be made based on prevailing market prices at the time
advances are made, the prices at which we sell these shares and the number of
shares we will issue will vary, perhaps significantly, with the market price of
our ordinary shares. In addition we may issue additional ordinary shares upon
the conversion or exercise of our outstanding convertible notes, capital notes,
warrants, options and other rights to acquire our ordinary
shares. See “Capitalization” for a summary of the ordinary shares
issuable under such securities.
Our ability to raise funds under the
SEPA will depend on several factors, including the trading volume for our
ordinary shares.
While
under the SEPA, YA Global is committed to purchase our ordinary shares in
accordance with the terms of the SEPA, YA Global may not make any advances which
would result in YA Global owning more than 4.99% of our outstanding ordinary
shares. Our ability to sell additional shares to YA Global and raise funds under
the SEPA will depend on YA Global’s ability to sell shares previously purchased
under the SEPA in a timely manner. This will depend, among other factors, on the
trading volume for our shares on the NASDAQ and the Tel-Aviv Stock Exchange and
prevailing conditions in the capital markets generally. There is no assurance as
to the extent to which we will be able to utilize the SEPA to fund our
operations.
Sales
of shares to YA Global pursuant to the SEPA and the resale of such shares by YA
Global may result in declines in the price of our stock.
The ordinary shares purchased by YA
Global under the SEPA are freely tradable and YA Global may promptly sell the
shares we issue to them under the SEPA in the public markets. Such sales, and
the potential for such sales, could cause the market price of our ordinary
shares to decline significantly. To the extent of any such decline, any
subsequent advances requested by us under the SEPA would require the issuance of
a greater number of ordinary shares to YA Global to raise a given dollar amount.
This may result in significant dilution to our shareholders.
S-2
During
the remaining term of the SEPA, we may receive up to $12,050,000 in
proceeds from the sale of shares of ordinary shares to YA Global pursuant to the
SEPA. We anticipate, and have represented to YA Global in the SEPA, that the
proceeds received under the SEPA will be utilized for general corporate
purposes, which may include working capital, purchases of equipment or
technologies, manufacturing improvements, capital expenditures and repayment of
debt. We may also issue up to $450,000 of our ordinary shares in payment of all
or part of the remaining commitment fee payable to YA Global under the
SEPA.
The
following table sets forth our long-term debt, debentures and capitalization as
of March 31, 2009 on an actual basis. This table was prepared in accordance with
the US GAAP. The financial data is derived from our unaudited interim
consolidated financial statements as of September 30, 2009.
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Actual
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(US dollars in thousands)
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Short
term bank loan
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$ | 4,440 | ||||||
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Long-term
bank loans
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184,687 | |||||||
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Convertible
debentures excluding current maturities
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231,868 | |||||||
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Long-term
customers’ advances
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12,412 | |||||||
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Other
long-term liabilities
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55,020 | |||||||
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Shareholders’
equity (deficit):
Ordinary
Shares, NIS 1.00 par value per share; 1,100,000,000 authorized
shares, 188,240,247 issued shares* and 186,940,247 outstanding
shares
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$ | 47,036 | ||||||
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Additional
paid-in capital
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682,275 | |||||||
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Capital
notes
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311,472 | |||||||
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Equity
component of convertible debentures and cumulative stock based
compensation
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21,273 | |||||||
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Accumulated
other comprehensive loss
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(2,176 | ) | ||||||
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Accumulated
deficit
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(977,153 | ) | ||||||
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Treasury
stock, 1,300,000 shares
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(9,072 | ) | ||||||
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Total
shareholders’ equity
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73,655 | |||||||
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Total
capitalization
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$ | 562,082 | ||||||
______________
*Includes
1,300,000 treasury shares
The
information set forth on an actual basis in the foregoing table excludes the
following securities as of December 31, 2009:
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(i)
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approximately
26.7 million ordinary shares issuable upon exercise of options granted to
employees and directors at a weighted average exercise price
of $1.14;
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(ii)
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23.4
million ordinary shares issuable upon exercise of options granted to our
Chief Executive Officer at a weighted average exercise price of
$1.15;
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(iii)
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11.5
million ordinary shares issuable upon exercise of options granted to our
Chairman of the Board at an exercise price of
$0.29;
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S-3
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(iv)
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5.4
million ordinary shares issuable upon exercise of warrants issued to our
banks and Israel Corp. with an exercise price of $2.04 per share
exercisable until June 2013.
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(v)
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0.9
million ordinary shares issuable upon exercise of warrants issued to our
banks in connection with our credit facility with an exercise price of
$6.17 per share exercisable until September
2011;
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(vi)
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1.1
million ordinary shares issuable upon exercise of warrants issued to our
banks in connection with our credit facility with an exercise price of
$0.89 per share exercisable until September
2012;
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(vii)
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30.8
million ordinary shares issuable upon conversion of our debentures
convertible series E until January 2013, issued pursuant to our June 2007
public offering in Israel at conversion rate of approximately
$1.1;
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(viii)
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8.3
million ordinary shares issuable upon exercise of warrants we issued to
our banks with an exercise price of $1.21 in connection with the July 2005
amendment to our facility agreement exercisable until June
2013;
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(ix)
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9.6
million ordinary shares issuable upon conversion of our debentures
convertible series B until December 2011, pursuant to the prospectus dated
December 15, 2005 at conversion rate of
$1.1;
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(x)
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398.9
million ordinary shares issuable upon conversion of the equity equivalent
convertible capital notes we issued to our banks and to Israel Corp.
;
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(xi)
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8
million ordinary shares issuable upon exercise of warrants series 6, with
an exercise price of approximately $1.06 per share and exercisable until
August 2011;
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(xii)
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5.2
million ordinary shares issuable upon exercise of warrants series 5 sold
in our private placements completed in November 2006, with an exercise
price of approximately $2.5 per share and exercisable until December
2010;
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(xiii)
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44.2
million ordinary shares issuable upon conversion of our debentures
convertible series C until December 2011, issued pursuant to our June 2006
public offering in Israel at conversion rate of approximately
$1.15;
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(xiv)
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6.9
million ordinary shares issuable upon exercise of the warrants series I
issued in our March 2007 private placement at exercise price of $0.74
exercisable until March
2012.
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(xv)
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59.5
million ordinary shares issuable upon exercise of warrants, with an
exercise price of approximately $2.78 per share and exercisable until
March 2011;and
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(xvi)
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30.3
million ordinary shares issuable upon conversion of our debentures
convertible until December 2011 at conversion rate of
$4.07.
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This
information does not take into account potential dilutive issuances of
securities pursuant to our credit facility agreement and warrants issuable to
our banks since the number of shares issuable will depend upon future
transactions in which we may engage and/or the market price of our shares and/or
other conditions.
S-4
On August
11, 2009, we entered into a Standby Equity Purchase Agreement, or SEPA, with YA
Global. The SEPA was amended by Amendment No. 1 thereto dated August 27, 2009
and Amendment No. 2 thereto dated February 4, 2010. The SEPA provides that, upon
the terms and subject to the conditions set forth therein, YA Global is
committed to purchase up to $25,000,000 of our ordinary shares over a two-year
commitment period. Through the date hereof, YA Global has purchased an aggregate
of $12,950,000 of our ordinary shares. Therefore under the terms of the SEPA,
from time to time through August 11, 2011, and at our sole discretion, we may
present YA Global with advance notices to purchase $12,050,000 of our ordinary
shares. For each ordinary share purchased under the SEPA, YA Global will pay 97%
of the lowest volume weighted average price, or VWAP, of the ordinary shares on
the Tel-Aviv Stock Exchange during the five trading day pricing period following
the advance notice. The aggregate amount of each advance requested cannot exceed
$5,000,000, unless otherwise mutually agreed to by us and YA Global. The amount
issued pursuant to any advance also cannot cause the aggregate number of
ordinary shares beneficially owned by YA Global and its affiliates to exceed
4.99% of the then outstanding ordinary shares. If an advance notice requests the
purchase of shares exceeding any of these amounts, that portion of the advance
notice will be deemed to be automatically withdrawn.
Promptly
after the end of the five trading day period following delivery of the advance
notice, we will deliver to YA Global the requisite number of shares against
payment by YA Global of the advance amount requested, subject to our
satisfaction of certain conditions under the SEPA. There is no
arrangement for funds to be received in an escrow, trust, or similar
arrangement. We may continue to deliver additional advance notices until the
commitment amount is purchased or the expiration of the two-year
period.
For each
advance notice, we may indicate a minimum acceptable price, which cannot be more
than 95% of the last closing price of our ordinary shares on the Tel-Aviv Stock
Exchange at the time of delivery of the advance notice. If during the five
trading day pricing period following any advance notice the VWAP for the
ordinary shares is below the indicated minimum acceptable price, the amount of
the advance will generally be reduced by 20% for each day the VWAP is below the
minimum acceptable price and that trading day will be excluded from the pricing
period for purposes of determining the purchase price.
The SEPA
provides for the payment of a $650,000 commitment fee to YA Global which may be
paid either in cash, in our ordinary shares (using the VWAP on the Tel-Aviv
Stock Exchange on the day immediately preceding the payment date) or some
combination of cash and ordinary shares. We have already paid $200,000 of the
commitment fee. We are obligated to pay YA Global the $450,000 balance of the
commitment fee, $200,000 on or about February 20, 2010 and $250,000 on or about
August 19, 2010,. This prospectus supplement also covers the issuance
of any shares to YA Global in payment of all or part of the balance of the
commitment fee.
We may
terminate the SEPA upon 15 trading days’ prior notice to YA Global, as long
as there are no advances outstanding and we have paid to YA Global all amounts
then due. A copy of the SEPA and copies of the amendments thereto are attached
as exhibits to our Report on Form 6-K as filed with the SEC on February 5,
2010.
In
addition to our issuance of ordinary shares to YA Global pursuant to the SEPA,
this prospectus supplement also covers the resale of those shares from time to
time by YA Global to the public. In connection with YA Global’s sale of our
ordinary shares, YA Global may be deemed to be an “underwriter” within the
meaning of the Securities Act and the compensation paid to YA Global may be
deemed to be underwriting commissions or discounts. We have agreed in the SEPA
to provide indemnification to YA Global against certain civil
liabilities.
We will
file a prospectus supplement indicating the price and number of ordinary shares
issued in connection with each sale of ordinary shares under the
SEPA.
S-5
YA Global
has informed us that it will use an unaffiliated broker-dealer to effectuate any
sales of ordinary shares that it may purchase from us pursuant to the SEPA. Such
sales will be made on the NASDAQ, the Tel-Aviv Stock Exchange or otherwise at
prices and at terms then prevailing or at prices related to the then current
market price. Each such unaffiliated broker-dealer may be an underwriter within
the meaning of Section 2(a)(11) of the Securities Act. YA Global has
informed us that each such broker-dealer will receive commissions from YA Global
which will not exceed customary brokerage commissions.
Our
ordinary shares may be sold by YA Global in one or more of the following
manners:
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·
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ordinary
brokerage transactions and transactions in which the broker solicits
purchasers;
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·
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a
block trade in which the broker or dealer so engaged will attempt to sell
the shares as agent, but may position and resell a portion of the block as
principal to facilitate the
transaction;
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·
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to
a broker-dealer as principal and resale by the broker-dealer for its
account; or
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·
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a
combination of any such methods of
sale.
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YA Global
has agreed that, during the term of the SEPA, neither YA Global nor its
affiliates will engage in any short sales or hedging transactions with respect
to our ordinary shares, provided that upon receipt of an advance notice YA
Global may sell shares that it is obligated to purchase under such advance
notice prior to taking possession of such shares.
YA
Global and any unaffiliated broker-dealer will be subject to liability under the
federal securities laws and must comply with the requirements of the Securities
Act and the Exchange Act, including without limitation, Rule 10b-5 and
Regulation M under the Exchange Act. These rules and regulations may limit
the timing of purchases and sales of ordinary shares by YA Global or any
unaffiliated broker-dealer. Under these rules and regulations, YA Global and any
unaffiliated broker-dealer:
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·
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may
not engage in any stabilization activity in connection with our
securities;
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·
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must
furnish each broker which offers shares of our ordinary shares covered by
the prospectus that is a part of our Registration Statement with the
number of copies of such prospectus and any prospectus supplement which
are required by each broker; and
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·
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may
not bid for or purchase any of our securities or attempt to induce any
person to purchase any of our securities other than as permitted under the
Exchange Act.
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These
restrictions may affect the marketability of the ordinary shares by YA Global
and any unaffiliated broker-dealer.
S-6