FEB. 12 Migdal Haemek, Israel–Tower Semiconductor Ltd. announced today the signing of a definitive agreement with The Challenge Fund – Etgar II, a venture capital partnership registered in Delaware, under which The Challenge Fund will invest $5 million in Tower common shares under terms similar to Tower’s recent investment agreement with Israel Corp.

The proceeds of this investment will be used in connection with the funding of Tower’s Fab 2. In return, Challenge Fund will receive corresponding equity in Tower. Under these terms the investment will be made over a period of about 2 years, upon reaching specified milestones along the project plan. On achieving each milestone, Tower will receive the corresponding installment and, in return, issue the agreed upon common shares. The first installment of $1.33 million is expected today. In return, The Challenge Fund will receive 99,115 Tower common shares.

Tower recently began construction of an advanced fab adjacent to its current facility in Migdal Haemek, Israel. The new fab, referred to as “Fab 2,” will employ approximately 1,000 and produce up to 33,000 200-mm wafers per month in geometries of 0.18 micron and below, using advanced CMOS technology from Toshiba. Funding for the project is provided by wafer partners, Israel Corp., other financial investors, an Israeli government grant, bank loans and Tower’s own resources. Wafer partners include SanDisk Corp., Alliance Semiconductor, QuickLogic Corp., and Macronix International.