S-8









Exhibit 4.9  




Option Grant Letter
Agreement 



Re: Grant of Options
– Chairman Share Option Plan 2006  



Dear: Mr. Dov Moran 



        Tower
Semiconductor Ltd. (the “Company”) is pleased to grant you, subject to the
receipt of the Company’s shareholders’ approval, options (“Options”)
to purchase up to 3,158,090 (three million one hundred and fifty eight thousand and
ninety) Ordinary Shares, nominal value NIS 1.00 each, of the Company (the
“Shares”), pursuant to the Chairman Share Option Plan 2006 of the Company (the
“Plan”), as of the date of the shareholders of the Company approve the grant of
Options to you (the “Date of Grant”). Capitalized terms not defined in this
letter agreement (this “Option Agreement”) shall have the meaning ascribed to
them in the Plan or in the Agreement dated as of December 21, 2006, by and between the
Company and you (the “Chairman Agreement”). 



        The
grant and issuance of Options pursuant to this Option Agreement is subject to the receipt
of all the approvals required under Section 102 of the Income Tax Ordinance (“Section
102”). The Options will therefore be issued to the Trustee, as such term is defined
in the Plan. The Options are granted as 102 Capital Gains Track Options. 



        The
exercise price of each Option shall be the closing price of the Ordinary Shares on the
Nasdaq Global Market on the trading day immediately preceding the Date of Grant (but no
less than the nominal value per Share). The terms and conditions set forth in this Option
Agreement are subject to and supplemented by the terms and conditions set forth in the
Plan, a copy of which is attached hereto. You are urged to review the Plan and shall be
deemed to be fully aware of all the terms and conditions governing the Options set forth
in the Plan. By your signature below, you agree to be bound by the terms and conditions of
the Plan. Notwithstanding the above, in the event of any contradiction between the terms
of this Option Agreement and the terms of the Plan, the terms of this Option Agreement
shall prevail. 



        The
Options granted pursuant to this Option Agreement will be issued once you sign and return
to the Company: (I) this Option Agreement, (II) the attached Declaration, and (III) any
other form which is required under Section 102 and which will be provided to you by the
Company. 



        The
issuance of the Options is subject to the main terms and conditions set out below. Other
terms and conditions of the Options are set out in the Plan. 



	1.  	Issuance
of Options.  






	 	
The
Options are hereby issued to the Trustee for your benefit, subject to the terms and
conditions hereunder. 






	 	
The
Options will not be listed on any stock exchange and are not transferable (except to your
legal heirs or estate). 

















	2.  	Vesting;
Period of Exercise.  






	 	2.1 	Vesting
Schedule. Subject to the terms and conditions of the Plan and this Option Agreement
(including Section 2.6 below), the Options granted pursuant to this Option Agreement
shall become exercisable (vest) over a period of four years in accordance with the
following vesting schedule: 






	 	
(a)
               25% of the Options shall vest on the 12th month anniversary of
the                Date of Grant (the “First Vesting Date”);  






	 	
(b)
               the remaining 75% of the Options shall vest over the 3 years following the
First                Vesting Date as follows: 6.25% of the Options shall vest on each 3
month                anniversary of the First Vesting Date.  






In the event of any fractions, the
number of Options that vest shall be rounded down to the nearest whole number and on the
last vesting date the aggregate of all such fractions shall also vest, provided that the
total number of Options that vest pursuant to this Option Agreement does not exceed the
maximum number of Options granted pursuant to this Option Agreement. 



	 	2.2 	The
above Options will vest, and subject to the terms hereof, become exercisable, only if on
the date of vesting you serve as Chairman of the Board of Directors of the Company. 






	 	2.3 	Other
than as set forth in applicable law and Section 2.5 below, vested Options may be
exercised in whole or in part, at any time within a period of ten (10) years from the
Date of Grant (the “Exercise Period”). Any Option not exercised within the
Exercise Period shall lapse and become void and unexercisable. 






	 	2.4 	The
Company will come to an agreement with you as to how to value the Ordinary Shares of the
Company in the event that they are not publicly traded at the time of an option exercise. 






	 	2.5 	In
the event of the termination of the Chairman Agreement other than for Cause (as defined
in the Chairman Agreement) all unvested Options shall immediately expire and all vested
Options shall be exercisable within a 24-month period following termination, subject to
Section 2.3 above. In the event of the termination of the Chairman Agreement for Cause,
all vested and unvested Options shall immediately expire and become unexercisable. 






	 	2.6 	Notwithstanding
anything to the contrary in the Plan, upon the consummation of a sale of all or
substantially all of the shares and/or assets of the Company to any party (other than a
transaction in which the shareholders of the Company immediately prior to the
consummation thereof maintain the direct or indirect voting control of the surviving
entity or directly or indirectly control the purchaser immediately following such
transaction), all Options that were to vest over the next 12 months from the date such
transaction is consummated shall vest and become exercisable immediately prior to the
date such transaction is consummated and the balance of the Options shall vest 12 months
earlier than otherwise contemplated pursuant to their original vesting schedule and
terms, provided that you are serving as Chairman of the Board of Directors of the Company
at such time and that the Chairman Agreement has not been terminated. 

















	 	2.7 	The
procedure for exercise of the Options shall be as detailed on the intranet website of the
Company (www.towersemi.com). However, the Company may change the procedure for
exercise of the Options at its discretion. The Company will notify you of any changes in
the procedure. 






	 	2.8 	There
shall be no restrictions on the resale of Shares by you, except as imposed by applicable
laws, including applicable securities laws. 






	3.  	Notices.  






	 	
Any
notice or other communication required or permitted hereunder shall be in writing and
shall be delivered personally, sent by facsimile transmission, electronic mail or
certified, registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, sent by facsimile transmission or electronic mail or,
if mailed, three days after the date of deposit in the Israeli mail, 






	 	(a) 	If
to you, at your address, fax number or e-mail listed beneath your signature
          below;  






	 	(b) 	If
to the Company: Human Resources Department, Tower Semiconductor, P.O. Box           619,
Migdal Ha’emek, Israel;  






	 	(c) 	If
with respect to Option exercise procedures: www.tamirfishman.com or Tel:
          +972-3-6849282 Fax: +972-3-6853773  






	 	
Email:
sop@tamfish.com  






	4.  	No
Waiver.  






	 	
The
delay or failure on the part of any party hereto to insist, in any one instance or more,
upon strict performance of any of the terms or conditions of this Option Agreement, or to
exercise any right or privilege herein conferred shall not be construed as a waiver of any
such terms, conditions, rights or privileges but the same shall continue and remain in
full force and effect. 






	5.  	Governing
Law; Jurisdiction.  






	 	
This
Option Agreement shall be governed by, and interpreted in accordance with, the laws of
the State of Israel. The District Court in Tel Aviv shall have exclusive jurisdiction to
settle any disputes that may arise out of or in connection with this Option Agreement and
that, accordingly, any suit, action or proceeding arising out of or in connection with
this Option Agreement may be brought in such court.  

















	6.  	Effectiveness.  






	 	
The
terms and conditions of this Option Agreement shall be subject to and contingent upon the
approval of the shareholders of the Company and no Option may be exercised until such time
as the approval by the Company’s shareholders shall have been received. 






			Sincerely,

Tower Semiconductor Ltd.







		
	Name of Grantee: Mr. Dov Moran	Date: December 21, 2006





Grantee signature:
_____________________ 



Grantee Israeli Identity
Number: 



Grantee address, fax number and
e-mail:    
















Grantee Declaration  



     1.    
          I, the undersigned, confirm that the contents of this Option Agreement, dated
          December 21, 2006 are acceptable and agreed to by me. 



     2.    
          Any tax consequences arising from (i) the grant or exercise of any Option, (ii)
          the issuance of Underlying Shares and payment therefor, (iii) the sale, transfer
          or exchange of Underlying Shares, or (iv) any other event or act of mine or of
          the Company hereunder, and any commissions and other expenses related thereto,
          shall be borne solely by me. The Company, any of its subsidiaries and/or the
          Trustee may withhold any taxes, expenses and commissions as required. I agree to
          indemnify the Company, any of its subsidiaries and/or the Trustee and hold them
          harmless from and against any and all liability for any such tax consequences,
          commissions, expenses or interest or penalty thereon, including without
          limitation, liabilities relating to the necessity to withhold, or to have
          withheld, any such tax from any payment made to me. 



     3.    
          I acknowledge and agree that in the event the Company issues securities as bonus
          shares or performs a share split or a similar dissolution, such bonus shares or
          other similar rights on the shares granted to me pursuant to this Option
          Agreement, shall be transferred by the Company to the Trustee, and the terms and
          provisions of the Ordinance and the Rules (as such terms are defined below)
          shall apply to the bonus shares and/or other similar rights, as shall the
          Trustee’s undertakings under the Agreement between the Trustee and the
          Company. 



     4.    
          Without derogating from the former provisions, I acknowledge that the ultimate
          liability for income tax, social insurance or other tax-related withholding in
          connection with this grant or its exercise is my responsibility. I specifically
          acknowledge that any and all applicable laws and regulations in Israel
          pertaining to the granting of options including but not limited to the
          provisions set forth in Section 102 of the Income Tax Ordinance [New Version]
          – 1961 (the “Ordinance”) and any rules promulgated thereunder
          including any amendment thereto, any interpretation published by the Israeli tax
          authorities in their official guidelines and any judicial interpretation of the
          Israeli courts, shall each apply with respect to my options and may affect the
          terms of my options. Any exercise of an option and sale of shares received upon
          the exercise of my options (the “Shares”), which deviates from the
          rules set forth in Section 102 of the Ordinance or in regulations promulgated
          thereunder may result in adverse tax consequences for me. I further acknowledge
          that each of the Company, brokers effecting transactions relating to my options
          and the Trustee (as defined in the Plan) is under no obligation to inform me as
          to whether a particular transaction I may consider effecting complies with the
          provisions of Section 102 of the Ordinance or the rules promulgated thereunder.
          I further acknowledge that the Company has not, nor does it intend to, provide
          tax advice with respect to the tax ramifications of an option grant under the
          laws of any jurisdiction, including Section 102 of the Ordinance or any rules
          promulgated thereunder, and that I am urged to seek my own personal tax advice. 














     5.    
          Appointment of a Trustee. I acknowledge that the Trustee has been
          appointed to administer my options in accordance with Section 102 of the
          Ordinance and the Income Tax Rules (Tax Benefits Regarding the Grant of Options
          to Employees), 2003 (the “Rules”) and pursuant to an agreement between
          the Company and the Trustee that may be amended from time to time (the
          “Trust Agreement”). In accordance with the terms of this Option
          Agreement, the Company and/or the Trustee are responsible, among other things,
          to: (a) withhold and pay any applicable taxes owed to the tax authorities in
          Israel in connection with my options, including as a result of an exercise of my
          options and sale of the Shares by me, prior to releasing any funds owed to me,
          (b) provide the tax authorities in Israel with an annual report in accordance
          with the Rules, and (c) provide the Israeli tax authorities with a report
          regarding the grant of Options under the Plan, within ninety (90) days from the
          Grant Date in accordance with the Rules. Any fees associated with the exercise
          of my options as specified in the Trust Agreement will be borne solely by me. In
          accordance with the approval granted by the Israel tax authorities in connection
          with the Plan, certain of the functions related to the administration of my
          options may be performed by the Company. 



     6.    
          Required Holding Period. In accepting this grant, I acknowledge that
          unless otherwise permitted by the Israeli tax authorities, the Rules as of the
          Option Date, prohibit me from selling my Shares during a period of twenty-four
          months from the date the grant took place as my options are subject to the
          “capital gains track” as set forth in Section 102(b)(2) of the
          Ordinance (the “Capital Gains Track”). Notwithstanding the above, if I
          elect to sell my Shares during the Required Holding Period, I hereby acknowledge
          that the sale of the Shares will be taxed in accordance with the relevant
          provisions of Section 102 of the Ordinance and the Rules regarding a breach of
          the terms of the Required Holding Period. For the avoidance of doubt, a sale of
          the Shares during the Required Holding Period will forfeit my right to receive
          the tax benefits of the Capital Gains Track and the income derived from the
          exercise of the Options and the sale of the Shares will be taxed as ordinary
          income (and not at the reduced capital gains tax rate, if applicable) and will
          be generally subject to National Insurance and Health Tax. 



     7.    
          I am aware that: (i) the Company intends to issue additional shares and options
          in the future to various entities and individuals, as the Company, in its sole
          discretion, shall determine; and (ii) the Company may increase its share capital
          by new securities in such amount as it finds expedient; and I hereby waive any
          claim I might or may have regarding such issuance or increase other than any
          claim or right I may have pursuant to any written agreement between myself and
          the Company. 



     8.    
          I am aware that pursuant to Section 102(b)(3) of the Ordinance if my options are
          issued with an exercise price lower than the average closing price of the
          Company’s shares on the 30 (thirty) trading days preceding the issuance of
          the options, a part of any benefit ultimately derived from the exercise of the
          Options and the sale of the Shares, generally up to the amount equivalent to the
          difference between these prices, will be taxed as ordinary income and not at the
          reduced capital gains tax rate and generally will be subject to National
          Insurance and Health Tax. 














     9.    
          Transfer of Information. I hereby consent to the transfer of information
          that the Company is required to report to the tax authorities and to the Trustee
          relating to the Options in accordance with the provisions of Section 102 of the
          Ordinance and the Rules. 


		
	Name of Grantee: Mr. Dov Moran	Signature: ___________
	 
	ID Number: 	Date: December 21, 2006