Document:

exhibit_4-52.htm

EXHIBIT 4.52

 

RECEIVABLES PLEDGE AGREEMENT

THIS RECEIVABLES PLEDGE AGREEMENT (this “Agreement”) is made and entered into as of March 26, 2015 by and among Tower Semiconductor Ltd. (the “Grantor”), Bank Hapoalim B.M. and Bank Leumi le-Israel B.M. as Security Banks (as defined in the Debenture referred to below) (“Security Banks”) and Poalim Trust Services Ltd. as the collateral agent (the “Collateral Agent”).

 

WHEREAS, the Grantor as borrower and the Security Banks as lenders entered into a Facility Agreement dated as of January 18, 2001 (as twice amended and restated and as further amended, supplemented and restated from time to time, the “Facility Agreement”) and a Debenture dated as of January 29, 2001 (as amended, supplemented and as may be restated from time to time, the “Debenture,” and together with the Facility Agreement, the “Loan Documents”); and

WHEREAS, the Grantor wishes to grant to the Security Banks a first priority security interest over the Receivables (as defined below) to secure the Secured Obligations (as defined in the Debenture) upon the terms and conditions more particularly set forth herein and the Security Banks wish to accept such security interest under the terms of this Agreement;

 

NOW THEREFORE, the parties mutually agree as follows:

 

	
Article 1.

	
Definitions

 

	
1.1.

	
Unless otherwise defined in this Agreement, terms defined and references construed in the Loan Documents shall have the same meaning and construction in this Agreement.

 

	
1.2.

	
In this Agreement, unless the context requires otherwise, the following terms shall have the following meanings:

 

“Additional Receivables Pledge Agreement” means an additional receivables pledge agreement and acknowledgement and consent for pledge, such agreement and acknowledgement to be, in all material respects, in the same form, mutatis mutandis, as this Agreement, to be entered into by the Grantor and the Acknowledgement and Consent Letter for Pledge (as detailed in Exhibit 1) by the relevant Debtors with the Security Banks and the Collateral Agent, in each case, in respect of any Additional Receivables.

 

“Additional Receivables” means any and all future receivables of the Grantor from the Debtor(s) arising under any future Contracts to be entered into with any Debtor(s).

 

“Collateral Agent Held Assets” means (i) an original fully executed copy of this Agreement, (ii) certified copies of the Underlying Agreements, (iii) a certified copy of the Notice of Creation of Receivables Pledges (as detailed in Exhibit 1), (iv) an original of the Acknowledgement and Consent Letter for Pledge (as detailed in Exhibit 1), as well as any other documents held by the Collateral Agent under the terms of this Agreement.

 

  

  

  

“Company” means TowerJazz Panasonic Semiconductor Co., Ltd. (TOWERJAZZ PANASONIC SEMICONDUCTOR KABUSHIKI KAISHA), a joint stock company incorporated under Japanese law with its registered headquarters at 800 Higashiyama, Uozu City, Toyama 937-8585, Japan.

 

“Debtor” means any of the Company and any of subsidiaries and controlled affiliates of the Company.

 

“Encumbrance” shall have the meaning ascribed thereto in the Debenture and shall, for the avoidance of doubt, include any bill of sale, deposit, hypothecation and any other right, interest, power or arrangement of any nature whatsoever having the purpose or effect of providing security for, or otherwise protecting against default in respect of, obligations of any person.

 

“Organizational Documents” means the articles of incorporation, by-laws, certificate of incorporation, memorandum of association, articles of association or other documents of incorporation of any person (other than a natural person).

 

“Panasonic” means Panasonic Semiconductor Solutions Co., Ltd. (PANASONIC SEMIKONDAKUTA-SORYUSHONZU KABUSHIKI KAISHA), a joint stock company incorporated under Japanese law and fully owned by Panasonic Corporation (PANASONIC KABUSHIKI KAISHA) having its place of business at 1 Kotariyakemachi, Nagaokakyo City, Kyoto, 617-8520, Japan.

 

“Party” means a party to this Agreement.

 

“Receivables” means any and all existing and future receivables of the Grantor against the Company arising under the Underlying Agreements.

 

“Receivables Documentation” means the records required to be kept by the Grantor pursuant to Article 7.16 below.

 

“Security Period” means the period commencing on the date of this Agreement and ending on the date upon which the Banks are satisfied (i) that none of the Banks is under any commitment, obligation or liability (whether actual or contingent) under the Finance Documents and (ii) that all the Secured Obligations have been irrevocably paid and discharged in full.

 

“Services Agreement” means the Services Agreement between the Grantor and the Company, dated April 1, 2014.

 

“Shareholders Agreement” means the Shareholders Agreement between Panasonic, the Grantor and the Company, which was originally entered into by and between Panasonic Corporation, the Grantor and the Company, dated April 1, 2014.

 

“Underlying Agreements” means the Services Agreement and the Shareholders Agreement.

 

	
Article 2.

	
Creation of Pledge

 

	
2.1.

	
In order to secure the full and punctual payment, performance and discharge of the Secured Obligations to and in favour of the Security Banks by the Grantor and the due and punctual performance by the Grantor of all the terms, covenants, undertakings, conditions and provisions of the Finance Documents, including the Loan Documents, the Grantor hereby pledges and grants to each Security Bank a security interest in the form of a revolving pledge (ne-shichiken) (collectively, the "Pledge") upon all of the Grantor’s rights, title and interest in, to and over the Receivables. The Security Banks may at any time set the principal of the Secured Obligations then secured by the Pledge (ganponkakutei) by written notice to the Grantor.

 

  

2

  

The Parties hereby confirm that (i) each Security Bank holds the Pledge securing the Secured Obligations, (ii) each such Pledge constitutes a separate security interest, but with the same priority and on a pari passu basis with each other Pledge referred to above and (iii) this Agreement constitutes a Finance Document and a Security Document.

 

	
2.2.

	
The Grantor, on the date hereof, shall deliver the documents described in items (i) to (iii) of the definition of “Collateral Agent Held Assets” above to the Collateral Agent who acts as possessing agent on behalf of the Security Banks. For the purpose of effectuating and perfecting the Pledge hereunder, on the date hereof, the Grantor shall:

 

	
  

	
 2.2.1

	
give a notice to the Company of the creation of the Pledge in favour of each of the Security Banks in accordance with the terms in Clause 2.1 (substantially in the form set out in Exhibit 1 attached hereto); and

 

	
  

	
 2.2.2

	
procure, at its own cost and expense, the Company’s acknowledgement and consent thereto (substantially in the form set out in Exhibit 1 (attached hereto) with a certified date stamp of the notary public (kakutei hizuke) and deliver said document (described in item (iv) of the definition of "Collateral Agent Held Assets" above) to the Collateral Agent.

 

	
2.3

	
During the Security Period, the Grantor shall not, and shall procure that the Company shall not, take any action which impairs the Security Banks’ first priority perfected security interests in the Receivables or the Security Banks’ abilities to exercise their rights and remedies available under this Agreement or applicable law.

 

	
2.4.

	
Notwithstanding the execution of this Agreement and anything contained herein to the contrary (i) the Grantor shall remain liable under all contracts and agreements applicable to the Company to which the Grantor is a party or by which it is bound (including the Underlying Agreements) (collectively, the “Related Agreements”), to perform all of Grantor’s duties and obligations thereunder to the same extent as if this Agreement had not been executed, (ii) the exercise by the Security Banks of any of the rights hereunder shall not release the Grantor from any of its duties or obligations under the Related Agreements and (iii) the Security Banks shall have no duty or obligation under any Related Agreements by reason of this Agreement or the enforcement of the Security Banks’ rights hereunder.  The powers conferred on the Security Banks hereunder are solely to protect their interests in the Receivables and shall not impose any duty upon the Security Banks to exercise any such powers.

 

	
2.5

	
The Collateral Agent shall hold any Collateral Agent Held Assets delivered to it for the benefit of the Security Banks.  The Grantor and the Security Banks hereby reciprocally confirm that the delivery of the Collateral Agent Held Assets to the Collateral Agent shall be deemed as having been delivered to the Security Banks.

 

  

3

  

	
2.6

	
The Collateral Agent shall hold the Collateral Agent Held Assets which are delivered to it, as agent for the benefit of Security Banks at the place and in the manner designated by the Collateral Agent until the completion of the Security Period.

 

	
2.7

	
The Collateral Agent may accept without enquiry, objection or investigation the Collateral Agent Held Assets and shall not be liable for any failure or omission to ascertain the authenticity of the Collateral Agent Held Assets or any of them.  The Security Banks shall not claim any liability against the Collateral Agent for any such failure or omission.

 

	
Article 3.

	
Continuing Security

 

Without derogating from the provisions of clause 4 of the Debenture, which shall apply mutatis mutandis to this Agreement, the Pledge shall be (i) a continuing security remaining in full force and effect during the Security Period in whatever currency or currencies the Secured Obligations may from time to time be denominated and notwithstanding any amendments to the Finance Documents and the Secured Obligations, and (ii) independent of, in addition to and without prejudice towards any other security from time-to-time held by the Security Banks or by their agents in respect of the Secured Obligations.

 

	
Article 4.

	
Enforcement of Security Interests

 

	
4.1.

	
If an Enforcement Event is continuing and either: (i) a declaration, in accordance with clause 17.21.3 of the Facility Agreement, that the Loans are immediately due and payable has been made; or (ii) the Loans and/or the amounts referred to in clause 17.21.2 of the Facility Agreement have become, pursuant to clause 17.22 of the Facility Agreement, immediately due and payable, then the Security Banks may, in addition to all the other rights and remedies provided for herein or otherwise available to them under applicable law, exercise all or any of the following powers by notice to the Grantor and the Company with respect to all or any part of the Receivables:

 

	
  

	
 (1)

	
to collect and apply any money payable under the Receivables;

 

	
  

	
 (2)

	
to acquire the ownership of, or definitive title to, all or any part of the Receivables, in such manner, at such price and at such time as the Security Banks deem generally appropriate without following the statutory procedures, and may apply the proceeds from such disposition to the repayment of the Secured Obligations and the Grantor shall have no right to object to the manner, price and method of appropriation made by the Security Banks as long as the price of the Receivables is determined in good faith and in a commercially reasonable manner; or

 

	
  

	
 (3)

	
to sell, transfer, assign, or otherwise dispose of or deal in all or any part of the Receivables in one or more public or private sale or sales, in such manner, at such price and at such time as the Security Banks reasonably deem generally appropriate.

 

	
4.2.

	
In each of the cases described in Article 4.1 above, the order and the method of the application to the repayment of the Secured Obligations shall be made in accordance with clause 9.4 of the Debenture.

 

	
4.3.

	
For the avoidance of doubt, in addition to, and without derogating from, the foregoing Articles 4.1 and 4.2 above, upon the occurrence of an Enforcement Event which is continuing, the Security Banks shall have the right to exercise any and all rights and remedies available to them under the Finance Documents or pursuant to applicable law.

 

  

4

  

	
4.4

	
During the Security Period, the Grantor shall, promptly upon the reasonable request of the Security Banks:

 

	
  

	
 4.4.1

	
take any such steps as are required to be taken on the part of the Grantor for the purposes of the transfer of any Receivables to the Security Banks or any third party purchaser pursuant to Clause 4.1; and

 

	
  

	
 4.4.2

	
take any such steps as are required to be taken on the part of the Grantor for the purposes of facilitating the enforcement of the Pledge by the Security Banks pursuant to Article 4.1, including, without limitation, the delivery to the Security Banks of any and all Receivables Documentation.

 

	
Article 5.

	
Grantor’s Rights

 

Unless and until an Enforcement Event shall have occurred and is continuing, the Grantor shall be entitled to receive and retain all lawful monies received in respect of the Receivables.

 

	
Article 6.

	
Representations of the Grantor

 

	
6.1.

	
The Grantor hereby represents and warrants to the Security Banks and the Collateral Agent that each of the following statements is true and accurate on the date hereof:

 

	
  

	
 (1)

	
(i) the Grantor is duly incorporated and validly existing under the laws of Israel with full power and authority to execute and deliver this Agreement and perform its obligations under this Agreement; and (ii) the Company is duly incorporated and validly existing under the laws of Japan with full power and authority to execute and deliver  theAcknowledgement and Consent Letter for Pledge (as detailed in Exhibit 1) and perform  its obligations thereunder ;

 

	
  

	
 (2)

	
no action or thing (other than as taken, fulfilled or done on or prior to the date hereof) is required to be taken, fulfilled or done by the Grantor or the Company, respectively, to create and perfect the Pledge;

 

	
  

	
 (3)

	
the execution, delivery and performance of this Agreement by the Grantor do not and will not (i) violate or contravene any applicable provision of law or other governmental directive, whether or not having the force of law; (ii) conflict with the Organizational Documents of the Grantor or of the Company; (iii) conflict with or result in a breach of any provision of any agreement or instrument to which any of them is a party or by which any of them or any of their assets may be bound; and (iv) result in the existence of, or oblige the Grantor or the Company to create, any Encumbrances over all or any of its present or future revenues or assets, save as otherwise required under this Agreement;

 

	
  

	
 (4)

	
the execution, delivery and performance of this Agreement have been duly authorized by the Grantor by all requisite action, and this Agreement constitutes the legal, valid and binding obligations of the Grantor, enforceable against the Grantor in accordance with its terms, subject to bankruptcy, suspension of payments, insolvency or similar laws affecting creditors’ rights generally;

 

  

5

  

	
  

	
 (5)

	
neither the Grantor nor the Company is insolvent, nor has any of them suspended payment and the respective liabilities of the Grantor and/or of the Company have not exceeded their respective assets, and there is no threat of their either becoming insolvent, suspending payments or threat of either’s liabilities exceeding its assets by the consummation of this Agreement or the transactions contemplated hereby;

 

	
  

	
 (6)

	
no application has been made with respect to the Grantor or the Company for legal insolvency proceedings in or outside of Japan, no Receiver, liquidator or similar officer has been appointed with respect to the Grantor or the Company or any material part of their respective assets and neither the Grantor nor the Company is aware of any such application, proceedings or appointment pending;

 

	
  

	
 (7)

	
the Receivables are free and clear of all Encumbrances of any kind whatsoever except with regard to the Pledge hereunder and neither the Grantor nor the Company has received notice of adverse claims with respect to any Receivables;

 

	
  

	
 (8)

	
the Pledge constitutes a valid, perfected, first priority revolving pledge (ne-shichiken) in and to all of the Receivables and is not liable to be voided or otherwise set aside on the liquidation of the Grantor or the Company or otherwise;

 

	
  

	
 (9)

	
no promissory note or other securities have been issued in respect of any Receivables;

 

	
  

	
 (10)

	
no electronically recorded claim (denshi saiken) has arisen in respect of any Receivables;

 

	
  

	
 (11)

	
the Grantor is the legal holder of the Receivables;

 

	
  

	
 (12)

	
the Grantor has title to and is entitled to the legal and beneficial interest and ownership of the Receivables, free from any Encumbrance (other than any Encumbrance created by or pursuant to this Agreement);

 

	
  

	
 (13)

	
no person has any right or option to purchase the Receivables and there is no restriction or limit on the transfer or sale of the Receivables; and there is no restriction on the pledging and/or charging of the Receivables pursuant to this Agreement, upon the realisation of the Pledge hereunder or upon the transfer or sale of the Receivables in connection therewith;

 

	
  

	
 (14)

	
no consent, approval, authorisation or other action by any person is required (which has not been obtained) for: (i) the Pledge created pursuant to this Agreement; (ii) the execution, delivery or performance of this Agreement and theAcknowledgement and Consent Letter for Pledge (as detailed in Exhibit 1)  by the Grantor and the Company, respectively; or (iii) the realisation of the rights or remedies provided in this Agreement, other than as detailed in this Agreement;

 

  

6

  

	
  

	
 (15)

	
in any Proceedings taken in relation to this Agreement, neither the Grantor nor the Company will be entitled to claim for itself or any of its assets immunity from suit, execution, attachment or other legal process;

 

	
  

	
 (16)

	
it is not necessary that this Agreement be filed, recorded or enrolled with any court or other authority or that any stamp, registration or similar tax be paid on or in relation to this Agreement, other than stamp duty under the Stamp Tax Act of Japan, the filing of this Agreement (and a notarised Hebrew translation thereof) with the Israeli Registrar of Companies pursuant to Chapter 8 of the Companies Ordinance [New Version], 5743–1983 and the registration, pursuant to the Israeli Pledges Law, of the particulars of this Agreement with the Israeli Registrar of Pledges;

 

	
  

	
 (17)

	
the Receivables are legally and validly existing and are enforceable against the Company;

 

	
  

	
 (18)

	
the Receivables are not subject to attachment (sashiosae), temporary attachment (kari sashiosae) or provisional injunction (karishobun); and

 

	
  

	
 (19)

	
the governing law of the Receivables is Japanese law.

 

	
Article 7.

	
Undertakings by the Grantor

 

The Grantor hereby undertakes and covenants to the Security Banks and the Collateral Agent, as follows:

 

	
7.1.

	
The Grantor shall not at any time during the Security Period, without the prior written consent of the Security Banks, sell, assign, transfer, exchange, or otherwise dispose of or grant any option with respect to, the Receivables or any part thereof.  The Grantor shall not create, incur or permit to exist any Encumbrance (other than any Encumbrance created by or pursuant to this Agreement) with respect to the Receivables or any part thereof, or any interest therein, or any proceeds thereof.

 

	
7.2.

	
Without derogating from Article 16.6 below, if at any time the Grantor shall enter into Contracts additional to the Underlying Agreements with the Company pursuant to which any Additional Receivables may be generated or the Grantor otherwise enters into Contracts with any other Debtor pursuant to which any Additional Receivables may be generated, (i) the Grantor shall promptly notify the Security Banks of any such Contracts and the Additional Receivables that may be generated therefrom and provide a certified copy of any such Contract to the Security Banks, and (ii) the Grantor shall execute and deliver, and cause the Debtor to execute and deliver, an Additional Receivables Pledge Agreement to the Collateral Agent in order to further create, effectuate and perfect first priority security interests in favour of each of the Security Banks.

 

	
7.3.

	
To obtain and comply with, perform and observe the terms and do all that is necessary to maintain in full force and effect all authorisations, consents and approvals required in or by all applicable laws and regulations, so as to enable the Grantor lawfully to enter into and perform its obligations under this Agreement, and to ensure the legality, validity and enforceability of this Agreement.

 

	
7.4.

	
To notify the Security Banks and the Collateral Agent immediately of the imposition of any attachment, or the issue of any execution proceedings or of any application for the appointment of a Receiver over or with respect to the Receivables or any part thereof, or any act, proceedings or application similar to any of the foregoing, and to notify immediately the authorities which levied such attachment or issued such execution proceedings or received the application for the appointment of such Receiver and any third party who initiated or applied for such action, of this Agreement in favour of the Security Banks and to take, as soon as possible, but in any event no later than 45 (forty-five) days after such attachment, execution, proceeding, appointment of Receiver or similar act or proceedings as aforesaid, at the expense of the Grantor, all steps and measures necessary for the discharge or cancellation of such attachment, execution proceedings or appointment of Receiver, or any act, proceedings or appointment similar to the foregoing, as the case may be.

 

  

7

  

	
7.5.

	
To be liable towards the Security Banks and the Collateral Agent for any defect in the Grantor’s title to the Receivables, including the Collateral Agent Held Assets, and to bear the responsibility for the authenticity, regularity and correctness of all the signatures, endorsements and particulars of any Receivables (including the Collateral Agent Held Assets and the Receivables Documentation) which, under this Agreement has been or may, during the Security Period, be delivered to the Collateral Agent or the Security Banks, or otherwise pursuant to the provisions of this Agreement.

 

	
7.6.

	
To make, from time to time, all such filings, reports and other communications as may be required under all applicable laws in connection with the Receivables (including, any transaction, omission, act or holding of any interest, by the Grantor, in the Receivables).

 

	
7.7.

	
To refrain from any act or omission which would in any way lead to any restriction whatsoever on the ability of the Security Banks to realise their rights under this Agreement.

 

	
7.8.

	
Forthwith upon the Security Banks’ first demand, to furnish to the Security Banks any consent, authorisation, approval or other document which, in the Security Banks’ reasonable opinion, is required or necessary for the purpose of proof of compliance by the Grantor with its respective obligations under this Article 7.

 

	
7.9.

	
Not to institute any Proceedings whatsoever in respect of the Receivables which would have an adverse effect on the ability of the Security Banks to realise the Receivables.

 

	
7.10

	
Not to cause any electronically recorded claim (denshi saiken) to arise, in respect of any Receivables.

 

	
7.11

	
Not to cause any promissory note or other securities to be issued in respect of any Receivables.

 

	
7.12

	
The Grantor shall perform in all material respects all of its obligations under the Underlying Agreements.

 

	
7.13

	
The Grantor shall not amend, modify or waive any relevant provisions of the Underlying Agreements, or any Receivable, that shall reasonably be expected to materially reduce the aggregate amount of the Receivables.

 

	
7.14

	
Not to set-off any of the Receivables of the Grantor against the Company against any claims of the Company against the Grantor (and the Grantor shall procure that the Company shall not set-off any of the Receivables of the Company against the Grantor against any claims of the Grantor against the Company), and the Grantor confirms and agrees, and shall procure that the Company confirms and agrees, that any such attempted set-off shall be null and void ab initio.

 

  

8

  

	
7.15

	
The Grantor shall only enter into Contracts with the Debtors which do not prohibit the pledging, assignment or any other disposal of Additional Receivables arising under such Contracts.

 

	
7.16

	
The Grantor shall keep and maintain, at its own cost and expense, records of and in respect of the Receivables, including, the originals (or true, complete and accurate copies) of all documentation (including invoices and all attachments thereto and/or other supporting documentation therefor) with respect to all Receivables and records of all payments received from the Company in connection therewith.

 

	
7.17

	
The Grantor shall provide a written report to the Security Banks of the outstanding balance, and other details in respect, of the Receivables (i) as at the end of each Quarter within 15 Business Days after the end of such Quarter; and (ii) at any other time, promptly following the request of the Security Banks therefor.

 

	
Article 8.

	
Nature of Collateral

 

	
8.1.

	
The security interest created hereunder is in addition to the other collateral held by the Security Banks relating to the Secured Obligations and the Grantor acknowledges and agrees that the creation of the security interest hereunder shall not affect any such other collateral

 

	
8.2.

	
Grantor shall not object to a change in or cancellation of other collateral securing the Secured Obligations made by the Security Banks at their discretion, or to the timing of realisation of any of the collateral, as the Security Banks may determine at their discretion, including without limitation, as to which collateral and what part thereof shall be firstly enforced and whether the whole collateral or a part thereof is enforced.

 

	
Article 9.

	
Expenses and Fees

 

	
9.1

	
All costs, fees and expenses (including legal fees), incurred by the Security Banks in the preparation and execution of this Agreement, the registration of this Agreement and/or any document ancillary hereto and/or to be entered into hereunder and/or otherwise incurred by the Security Banks and the Collateral Agent in connection with the perfection, protection or creation of any security contemplated under this Agreement (including under Japanese and Israeli law), together with any VAT or other Taxes incurred or levied thereto, all custodial costs, fees and expenses of the Collateral Agent in holding the Collateral Agent Held Assets, and all and any costs, fees and expenses (including legal fees) incurred by the Security Banks or the Collateral Agent in, or in connection with, the realisation of the Receivables (or any part thereof), the institution of proceedings for collection of any Secured Obligation (including attorneys’ fees and disbursements) or otherwise incurred in connection with, or arising from, the preservation and enforcement of the Security Banks’ and Collateral Agent’s rights hereunder, whether or not any of the same are occasioned by any act, neglect or default of the Grantor, shall be paid, together with Interest payable in accordance with clause 18 (“Default Interest”) of the Facility Agreement from the date of the same being incurred or becoming payable until the date the same are unconditionally and irrevocably paid and discharged in full, by the Grantor, forthwith on demand.

 

  

9

  

	
9.2

	
The Security Banks, the Collateral Agent, every Receiver, attorney, agent and every other person appointed in connection with this Agreement shall be entitled to be indemnified out of the Receivables in respect of all liabilities, damages, losses, expenses and other amounts incurred by, or demanded from, any of them in connection with or arising from any action taken or omitted from being taken by any of them under or pursuant to this Agreement and/or in connection with the execution or purported execution of any action and/or omission of the powers, authorities or discretions vested in them pursuant hereto and/or by law and against all actions, proceedings, costs, claims and demands in respect of any matter or thing done or omitted in any way relating to the Receivables (or any part thereof) (save, in respect of any Security Bank, Collateral Agent, Receiver, attorney, agent or any other person appointed in connection with this Agreement, to the extent any such actions, proceedings, costs, claims or demands result from such person’s gross negligence or wilful default).

 

	
9.3

	
The Grantor shall pay the Collateral Agent an annual fee of NIS 10,000 (ten thousand New Israel Sheqels) for safekeeping the Collateral Agent Held Assets.  Such fee to be paid on the date hereof and every 12 (twelve) months thereafter.

 

Article 10.            Currency

 

	
10.1

	
Any payment by the Grantor under this Agreement shall be made in the currency in which the relevant Secured Obligation is stated, in the applicable Finance Document, as being payable or, where no currency is stated, as aforesaid, for payment of a particular Secured Obligation, then payment of such Secured Obligation shall be made in Dollars.

 

	
10.2

	
If any sum due from the Grantor under this Agreement or any order or judgment given or made in relation to this Agreement has to be converted from the currency (the “first currency”) in which the same is payable under this Agreement or under such order or judgment into another currency (the “second currency”) for the purpose of: (i) making or filing a claim or proof against the Grantor; (ii) obtaining an order or judgment in any court or other tribunal or (iii) enforcing any order or judgment given or made in relation to this Agreement, the Grantor shall indemnify and hold harmless each Security Bank from and against any loss suffered as a result of any difference between: (a) the rate of exchange used for such purpose to convert the sum in question from the first currency into the second currency; and (b) the buying rate or rates of exchange (cheques and remittances) of the relevant Security Bank for the purchase of the first currency with the second currency as at the date of receipt of the sum paid to such Security Bank, as aforesaid, in satisfaction, in whole or in part, of any such order, judgment, claim or proof.

 

	
Article 11.

	
Delegation

 

The Security Banks may at any time and from time to time delegate by power of attorney or in any other manner to any person or persons all or any of the powers, authorities and discretions exercisable by the Security Banks under or in connection with this Agreement.  Any such delegation may be made upon such terms (including power to sub-delegate) and subject to such regulations as the Security Banks may think fit.  The Security Banks shall not in any way be liable or responsible to the Grantor, the Company, or any other person for any loss or damage arising from any act, default, omission or misconduct on the part of any such delegate, save for any loss or damage arising from the gross negligence or wilful default of any such delegate.

 

  

10

  

Article 12.            Power of Attorney

 

	
12.1.

	
The Grantor hereby, by way of security and in order more fully to secure the performance of its obligations hereunder, irrevocably appoints the Security Banks and every delegate or sub-delegate, as referred to in Article 11 above, to be its attorney acting on its behalf and in its name or otherwise to execute and do all such acts and things which the Grantor ought to do under or in connection with this Agreement (including to execute, deliver and register any pledges, charges, mortgages, assignments or other security and otherwise to perfect any security granted hereunder or thereunder and to perfect any agreement, instrument or act which the Security Banks may deem proper) to the extent permitted by applicable law.

 

	
12.2.

	
The Grantor hereby ratifies and confirms and agrees to ratify and confirm whatever any such attorney as is mentioned in Article 12.1 above shall do or purport to do in the exercise or purported exercise of all or any of the powers, authorities and discretions referred to in such Article.

 

	
Article 13.

	
Taxes

 

All payments to be made by the Grantor under or in connection with this Agreement shall be made free and clear of and without deduction for or on account of Tax, unless the Grantor is required to make such payment subject to the deduction of withholding of Tax, in which case the sum payable by the Grantor, as applicable, in respect of which such deduction or withholding is required to be made, shall, subject to the provisions of clauses 12 and 25.3 of the Facility Agreement, be increased to the extent necessary to ensure that, after the making of the required deduction or withholding, there is received and retained (free from any liability in respect of any such deduction or withholding), a net sum equal to the sum which would have been received and retained, had no such deduction or withholding been made or required to be made.

 

	
Article 14.

	
Books of Accounts

 

Without derogating from clauses 23.2 and 23.3 of the Facility Agreement:

 

	
14.1.

	
the Grantor confirms that each of the Security Bank’s respective books, accounts and entries shall be binding upon the Grantor and the Company, shall be deemed to be correct and shall, in the absence of manifest or proven error, be prima facie evidence against the Grantor and the Company in all their particulars; and

 

	
14.2.

	
a certificate by each of the Security Banks setting out the amount of any Secured Obligation due from the Grantor to such Security Bank shall, in the absence of manifest or proven error, be prima facie evidence of such amount against the Grantor.

 

	
Article 15.

	
Collateral Agent

 

Without derogating from Article 5 above, the Grantor hereby irrevocably agrees:

 

	
15.1

	
that until the expiry of the Security Period, the Collateral Agent shall hold the Collateral Agent Held Assets and shall only act in relation to the Collateral Agent Held Assets and manage and administer the same, all in accordance with the instructions of the Security Banks and in accordance with the provisions of this Agreement.  Without derogating from the foregoing, the Grantor agrees that the Collateral Agent shall (to the exclusion of the Grantor) only refer to, and/or take instructions from, the Security Banks with respect to any matter and/or act and/or thing relating to, or in connection with, the Collateral Agent Held Assets.  The Grantor further agrees that it may not give the Collateral Agent any instructions regarding any of the foregoing and such instructions if given, shall not be of any effect and shall not obligate the Collateral Agent in any way or in any manner;

 

  

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15.2.

	
that the nature of any instructions that may, from time to time, be given to the Collateral Agent, and/or the Security Banks refraining from issuing instructions, are, in each case, in the sole and absolute discretion of the Security Banks;

 

	
15.3.

	
that the Collateral Agent may execute any document and do all such acts as the Security Banks may require in order to perfect the pledges and charges created hereunder with respect to the Collateral Agent Held Assets and/or to facilitate the realisation thereof; and

 

	
15.4.

	
that the Collateral Agent shall be entitled, upon the instructions of the Security Banks and without any further authority being required from the Grantor, to do all such acts as the Security Banks may request in connection with, or within the framework of, the realisation of the Collateral Agent Held Assets (or any part thereof).

 

	
15.5.

	
None of the Security Banks, the Collateral Agent and any person acting on behalf of any of the foregoing, shall be liable for, and the Grantor hereby waives any claim it may have against each Security Bank, the Collateral Agent and/or any other person acting on behalf of any of the foregoing, which arises from, any loss or damage which may be caused as a result of the non-exercise, exercise or purported exercise of the powers, authorities, rights or discretions vested in any Security Bank or otherwise caused in connection herewith and the Grantor shall indemnify each Security Bank, the Collateral Agent and any person acting on behalf of any of the foregoing against any loss or damage suffered by any of the foregoing in respect of any matter or thing done or omitted to be done by any such person in connection with the Receivables (including any action or claim made against any of the foregoing persons which may be caused as a result of the non-exercise, exercise or purported exercise of such powers, authorities, rights or discretions, as aforesaid) or otherwise in connection with this Agreement.

 

	
Article 16.

	
Miscellaneous

 

	
16.1.

	
Amendments

 

This Agreement may not be amended or modified except by an instrument in writing signed by all of the Parties.

 

	
16.2.

	
No Waiver

 

No failure on the part of the Security Banks or the Collateral Agent to exercise, and no delay in exercising, and no course of dealing with respect to, any right hereunder will operate as a waiver hereof, and no single or partial exercise of any right hereunder will preclude any other or further exercise of the same right or any other right.  No waiver of any right hereunder nor consent to any departure herefrom by any Party hereto will in any event be effective unless the same is in writing and signed by the Party against which enforcement of such waiver or consent is sought, and then such waiver or consent will be effective only in the specific instance and for the specific purpose for which such waiver is given.

 

  

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16.3. 

	
Remedies Cumulative

 

The remedies herein provided are cumulative and not exclusive of any remedies provided or granted by applicable law.

 

	
16.4 

	
Assignment

 

This Agreement will be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns.  The Grantor may not assign its rights or transfer its obligations hereunder without the prior written consent of the Security Banks.  The Grantor hereby irrevocably and unconditionally consents to the Security Banks being able, at any time, without any further consent being required from the Grantor, to assign this Agreement and its rights and/or obligations arising thereunder in whole to any person to whom any Security Bank is entitled, pursuant to, and in accordance with the terms of, clause 25.3 of the Facility Agreement, to assign all or any of its rights, benefits and obligations under the Finance Documents and who is appointed in accordance with the provisions of the Intercreditor Agreement to act as trustee for the benefit of the Banks over the security granted hereunder and any such assignee may also reassign the said rights as aforesaid to a person approved by the Grantor as aforesaid without any further consent being required from the Grantor.  Such assignment may be effected by endorsement on this Agreement or in any other way the Security Banks or any subsequent assignor deems fit.

 

	
16.5.

	
Notice, etc.

 

	
16.5.1.

	
Every notice, request, demand or other communication under this Agreement (i) to be given by the Grantor to any other Party, shall be given to each of the Security Banks and to the Collateral Agent; and (ii) to be given to the Grantor shall (except as otherwise provided under this Agreement), be given by the Security Banks or the Collateral Agent.

 

	
16.5.2.

	
Notices to be given hereunder shall be in writing and may be given personally, by facsimile or as required by Article 16.5.3 below.  Any notice to be given to a Security Bank or the Collateral Agent must be given during normal banking hours of such Security Bank to the person and at the address designated below.  If notice is sent by facsimile during normal banking hours as aforesaid, it shall be deemed to have been served when confirmation of receipt by the intended recipient has been received.  All notices given by facsimile shall be confirmed by letter despatched in the manner provided in Article 16.5.3 within 24 (twenty-four) hours of transmission.  No notice by the Grantor to the Collateral Agent shall be valid unless a copy thereof is simultaneously served, in the same manner as that served, on the Security Banks.

 

	
16.5.3.

	
Any other notices to be given hereunder shall be served on a Party by prepaid express registered letter (or nearest equivalent) to its address given below or such other address as may from time to time be notified for this purpose and any notice so served shall be deemed to have been served within 10 (ten) days after the time at which such notice was posted and in proving such service, it shall be sufficient to prove that the notice was properly addressed and posted:

 

  

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	16.5.3.1. 	to the Grantor at:   	
Tower Semiconductor Ltd.

P.O. Box 619

Migdal Haemek

Israel

Facsimile:  (04) 604 7242

Attention:   Oren Shirazi,

Chief Financial Officer

	 
	 	 	 	 
	 	with a copy to:  	
Yigal Arnon & Co.

1 Azrieli Centre

46th Floor, The Round Tower

Tel-Aviv, 67021

Israel

Facsimile:  (03) 608 7714

Attention:   David H. Schapiro, Adv.

	 

 

	16.5.3.2. 	to Bank Hapoalim at:	
Corporate Division

Midgal Levenstein

23 Menachem Begin Road

Tel-Aviv, Israel

Facsimile:  (03) 567 4719

Attention:   Head of  

Special Credits Division

	 
	 	 	 	 
	16.5.3.3. 	to Bank Leumi at: 	
Special Credits Division

13 Ahad Haam Street

Tel-Aviv, Israel

Facsimile:  (03) 514 7092

Attention:   Head of 

Special Credits Division

	 
	 	 	 	 
	16.5.3.4. 	to the Collateral Agent at:	
Poalim Trust Services Ltd.

Migdal Levinstein

23 Menachem Begin Road

Tel-Aviv

Israel

Facsimile:    (03) 567 3624

Attention:     Chief Executive Officer

	 

 

	
16.6.

	
Further Assurances

 

The Grantor shall, and shall procure that the Company shall (as applicable), at their own expense execute and do all such acts and things as the Security Banks may from time to time require or consider desirable in order: (i) to perfect or protect the security intended to be created hereby over the Receivables or any part thereof (including the entering into of such documents and the performance of all such acts as may be necessary in order to create, in respect of the Receivables located or otherwise subject to any law or jurisdiction other than Japan, such Encumbrance which in the Security Banks’ opinion, nearly corresponds, under such law or in that jurisdiction, to a first priority security interest); (ii) to facilitate the realisation of the Receivables or any part thereof; or (iii) to facilitate, preserve and protect any of the rights of each Security Bank and the Collateral Agent under this Agreement, including the exercise of all or any powers, authorities and discretions vested in the Security Banks, the Collateral Agent or any Receiver in connection with the Receivables or any part thereof.  To that intent, the Grantor shall, and shall procure that the Company shall (as applicable), in particular execute all transfers and assignments of such property, assets or rights, whether to the Security Banks or to the Security Banks’ nominees and give all notices (including notices of all assignments made by the Grantor hereunder), orders and directions and to make all filings and registrations and to take all such steps as may be necessary in connection with the creation, perfection, protection or maintenance of any security or Encumbrance which the Grantor may, or may be required to, create in connection with any Finance Document (including this Agreement), which the Security Banks may, from time to time, deem expedient.

 

  

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16.7.           Severability

 

If at any time any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions hereof nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby.

 

	
16.8.

	
Counterparts

 

This Agreement may be executed and delivered in separate counterparts, each of which when executed and delivered is an original but all of which taken together constitute one and the same instrument.

 

	
16.9.

	
Governing Law

 

This Agreement and the rights and obligations of the Parties hereunder will be governed by, and construed in accordance with, the laws of Japan.

 

	
16.10.

	
Jurisdiction

 

The Grantor hereby irrevocably agrees that, in relation to any legal action or proceedings arising out of or in connection with this Agreement (“Action”), the Tokyo District Court and any court in any other jurisdiction in which the Grantor has an office or holds assets (but only where the Security Banks (or any of them) and/or the Collateral Agent initiates such Action in such court against the Grantor ) shall have jurisdiction, and waive any objections to Actions in such courts on the grounds of venue or on the grounds that the Actions have been brought in an inconvenient forum.

 

[Signature Pages Follow]

 

  

15

  

IN WITNESS WHEREOF, this Receivables Pledge Agreement has been prepared and signed by each Party hereto, one original retained by the Collateral Agent with additional original copies retained by the Security Banks, and the Grantor.

March 26, 2015

 

	 	
Grantor:

 

Tower Semiconductor Ltd.

By:_____________________________________________

Name:___________________________________________

Title:____________________________________________

 

Security Bank:

 

Bank Hapoalim B.M.

By:_____________________________________________

Name:___________________________________________

Title:____________________________________________

Security Bank:

Bank Leumi le-Israel B.M.

By:_____________________________________________

Name:___________________________________________

Title:____________________________________________

Collateral Agent:

 

Poalim Trust Services Ltd.

By:_____________________________________________

Name:___________________________________________

Title:____________________________________________

 

  

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Exhibit 1

 

NOTICE OF CREATION OF RECEIVABLES PLEDGE

[Date] 2015

	
To: 

	
TowerJazz Panasonic Semiconductor Co., Ltd. as the Company

	
Cc: 

	
Bank Hapoalim B.M. and Bank Leumi le-Israel B.M. as Security Banks

PoalimTrust Services Ltd. as Collateral Agent

	
Re: 

	
The Receivables owed to TOWER SEMICONDUCTOR LTD.

Dear Sirs,

We, hereby, inform you by this letter that, pursuant to the terms of the Receivables Pledge Agreement dated March 26, 2015 between the undersigned, TOWER SEMICONDUCTOR LTD. as the Grantor, the Security Banks as named therein and Poalim Trust Services Ltd. as Collateral Agent (the “Receivables Pledge Agreement”), the Grantor has created in favour of each of the Security Banks a first priority security interest in the form of revolving pledge (ne-shichiken) over the Receivables in accordance with the terms of the Receivables Pledge Agreement and it is hereby confirmed that the Receivables are intended to be subject to the Receivables Pledge Agreement.

Capitalised terms used but not defined herein shall have the meanings given to them in the Receivables Pledge Agreement.

Notwithstanding the pledge to the Security Banks of the Receivables, the undersigned shall remain liable to perform any and all of the obligations assumed by the undersigned under or in relation to the Underlying Agreements and the Security Banks shall be under no obligation of any kind whatsoever in the event of any failure by the undersigned to perform said obligations.

Until such time, if any, as you are directed otherwise by the Security Banks by notice in writing, you shall pay all amounts payable under or in connection with the Underlying Agreements to the undersigned's account number 545409 at Bank Hapoalim B.M., Haifa Business Branch No. 562 or to the undersigned's account number 13030062 at Bank Leumi le-Israel B.M., Haifa Main Branch No. 876, in each case in Haifa, Israel, all such payments to be made in U.S. Dollars.

Please acknowledge receipt of this Notice by signing the enclosed Consent Letter, with a certified date stamp of the notary public (kakutei hizuke). This Consent Letter evidences your consent, without objection, to (i) the foregoing creation of the Pledge and (ii) the assignment and transfer of the Receivables to a third party pursuant to the Receivables Pledge Agreement upon enforcement of the Pledge.

Sincerely yours,

By: TOWER SEMICONDUCTOR LTD.

Name: Russell Ellwanger                                                   Name: Itzhak Edrei

Title: Chief Executive Officer                                            Title: President

 

encl.

 

a form of the Consent Letter for Pledge

  

17

  

 

Form of ACKNOWLEDGEMENT AND CONSENT LETTER FOR PLEDGE

[Date] 2015

 

	
To:

	
TOWER SEMICONDUCTOR LTD. as the Grantor, Bank Hapoalim B.M. and Bank Leumi le-Israel B.M. as Security Banks and Poalim Trust Services Ltd. as Collateral Agent

	
Re:

	
The Receivables owed to TOWER SEMICONDUCTOR, LTD.

Dear Sirs,

Reference is made to the Receivables Pledge Agreement dated March 26, 2015 between TOWER SEMICONDUCTOR LTD. as the Grantor, the Security Banks as named therein and Poalim Trust Services Ltd. as Collateral Agent (the "Receivables Pledge Agreement”).

Capitalised terms used but not defined herein shall have the meanings given to them in the Receivables Pledge Agreement.

We hereby acknowledge receipt of a copy of the Notice of Creation of Pledge dated [  ] 2015 (your “Notice”) pursuant to the terms of the Receivables Pledge Agreement, and consent, without objection, to the creation of the Pledge and the assignment and transfer of the Receivables to a third party pursuant to the Receivables Pledge Agreement upon enforcement of the Pledge.

We shall ensure that payments of all Receivables are made in accordance with the terms of your Notice.

Sincerely yours,

By: TowerJazz Panasonic Semiconductor Co., Ltd. as the Company

Name: Guy Eristoff

Title: Representative Director (CEO)

Date: [Date] 2015

 

	
 

 

 

 

 

 

 

	 	 	 	 	 	 	 	 

 

(a certified date stamp of the notary public)

 

18exhibit_4-54.htm

Exhibit 4.54

 

TOWER SEMICONDUCTOR LTD.

2013 SHARE INCENTIVE PLAN

 

A. NAME AND PURPOSE 

 

1.         Name: This plan, as amended from time to time, shall be known as the “2013 Share Incentive Plan” or the “Plan”.

 

2.         Purpose: The purpose and intent of the Plan is to provide incentives to employees and other Office Holders of the Company by providing them with opportunities to purchase Shares, pursuant to a plan approved by Tower’s Board of Directors (the “Board”) which is designed to enable the Company to issue equity related awards.

 

3.         Incentives under the Plan will only be issued to Grantees (as defined below) subject to the applicable law in their respective country of residence for tax or other purposes.

 

B. DEFINITIONS 

 

“Administrator” means (i) the Board, or (ii) Tower’s Compensation Committee (the “Committee”).

 

“Affiliate” means any company in which Tower Semiconductor Ltd., a company organized under the laws of the State of Israel (“Tower”), holds, directly or indirectly, at least 10% of the issued share capital or voting power.

 

“Award” means any type of Option and/or Restricted Share Unit under the Plan.

 

“Cause” means with respect to any Grantee, the meaning of such term as set forth in the employment or other service agreement between the Company (or any Affiliate) and the Grantee or, in the event there is no such employment or service agreement (or if any such employment or service agreement does not contain such a definition), such term shall mean (i) breach of the Grantee’s duty of loyalty towards the Company, (ii) breach of the Grantee’s duty of care towards the Company, (iii) the commission of any criminal offense by the Grantee, (iv) the commission of any act of fraud, embezzlement or dishonesty towards the Company by the Grantee, (v) any unauthorized use or disclosure by the Grantee of confidential information or trade secrets of the Company, (vi) involvement in a transaction in connection with the performance of duties to the Company which transaction is adverse to the interests of the Company and which is engaged in for personal profit, (vii) any other intentional misconduct by the Grantee (by act or omission) adversely affecting the business or affairs of the Company in a material manner, or (viii) any act or omission by an Israeli Grantee which would allow for the termination of the Grantee’s employment without severance pay, according to the Israeli Severance Pay Law, 1963, or any similar provision of law in the jurisdiction in which the Grantee is employed.(ix) material breach of any employment or service agreement with the Company

 

 “Cessation of Service” means the cessation of the employee-employer relationship between the Grantee and the Company for any reason; “Cessation of Service” shall not include the transfer of a Grantee from the employ of Tower to the employ of an Affiliate, or from the employ of an Affiliate to the employ of the Tower or another Affiliate.  Regarding other Office Holders means the cessation of the engagement of the Grantee as a member of the Board for any reason.

  

  

  

 

“Change of Control” or “COC”- means (a) any person or entity that is not then a controlling shareholder and obtains control of the Company as defined in Section 268 of the Companies Law; (b) the Company is party to a merger or consolidation, or series of related transactions, which results in the voting securities of the Company outstanding immediately prior thereto failing to continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving or another entity) at least fifty (50%) percent of the combined voting power of the voting securities of the Company or such surviving or other entity outstanding immediately after such merger or consolidation; (c) the sale or disposition of all or substantially all of the Company’s assets (or consummation of any transaction, or series of related transactions, having similar effect); (d) there occurs a change in the composition of the Board of Directors of the Company within a two-year period, as a result of which a majority of the directors, other than the External directors, are no longer the incumbent directors or representatives of the same entity which the incumbent directors represent; (e) the dissolution or liquidation of the Company; or (f) any transaction or series of related transactions that has the substantial effect of any one or more of the foregoing.

 

“Companies Law” means the Israeli Companies Law, 1999.

 

“Company” means Tower Semiconductor Ltd. and/or any Affiliate thereof.

 

“Corporate Transaction” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events: (i) a sale or other disposition of all or substantially all of the consolidated assets of the Company and its subsidiaries; (ii) a sale or other disposition of at least eighty percent (80%) of the outstanding equity securities  of the Company; (iii) a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or (iv) a merger, consolidation or reorganization following which the Company is the surviving corporation but the Shares of the Company outstanding immediately preceding the merger, consolidation or reorganization are converted or exchanged by virtue of the merger, consolidation or reorganization into other property, whether in the form of securities, cash or otherwise.  Whether a transaction is a “Corporate Transaction” as defined above, shall be finally and conclusively determined by the Administrator in its absolute discretion.

 

“Date of Grant” means the effective date of grant of an Award, as detailed in Section 6.1 below.

 

“Date of Cessation” means the effective date of a Cessation of Service.

 

“Disability” means the inability to engage in any substantial gainful occupation for which the Grantee is suited by education, training or experience, by reason of any medically determinable physical or mental impairment that is expected to result in such person’s death or to continue for a period of six (6) consecutive months or more.

 

“Equity Value” means the economic value of the option award based on either B&S, Bionomic, Lattice model or other model as determined by the Administrator and the share market price of a share.

 

“Exercise Conditions” means a Vesting Period, exercise terms as defined in section 9 below and/or Performance Conditions.

 

  

2

  

 

“Exercise Price” means (i) the purchase price per Share, or (ii) the nominal value per Share to be paid upon the vesting of an Award that does not require exercise by the Grantee, to the extent the Grantee is required to pay such nominal value hereunder, as applicable.

 

“Exercised Share” means a Share issued upon exercise of an Award or vesting of an Award, as applicable,

 

“Office Holder”- as such term is defined in the Companies Law.

 

“Grantee” means an employee or Office Holder of the Company to whom an Award shall be granted under the Plan.

 

“Notice of Exercise” means a written notice of exercise of an Award delivered by a Grantee to the Representative.

 

“Notice of Grant” means a written notice of the grant of an Award delivered by the Company to a Grantee relating to the terms of the grant.

 

“Option” means an option to purchase a Share or Shares.

 

“Performance Based Award” means a performance based Award as defined in Section 11.1 below.

 

“Performance Conditions” as defined in Section 11.1 below.

 

 “Representative” means any third party designated by the Company for the purpose of the exercise of Awards, as provided in Section 9.2 below.

 

“RSU” means Restricted Share Unit, as defined in Section 10 below.

 

“Sale” means the sale of all or substantially all of the issued and outstanding share capital of the Company.

 

“Share” means an ordinary share, nominal value of NIS 15.00 each of the Company.

 

 “Successor Entity Award” means Awards for which the underlying Shares are replaced by securities of any successor entity, as provided in Section 12.5 below.

 

“Tax” means any and all federal, provincial, state and local taxes of any applicable jurisdiction, and other governmental fees, charges, duties, impositions and liabilities of any kind whatsoever, including social security, national health insurance or similar compulsory payments, together with all interest, linkage for inflation, penalties and additions imposed with respect to such amounts.

 

“Vesting Period” means the period between the Date of Grant and the date on which (i) the Grantee may exercise the Award into Exercised Shares; or (ii) if said Award does not require the Grantee to exercise it, the date on which the Award vests into an Exercised Share.

 

  

3

  

 

C. GENERAL TERMS AND CONDITIONS OF THE PLAN 

 

4.         Administration:

 

4.1         The Plan will be administered by the Administrator, subject to applicable law.

 

4.2         Subject to the general terms and conditions of the Plan, the Administrator shall have the full authority in its discretion, from time to time and at any time to determine (i) the Grantees under the Plan, (ii) the number of Shares in each Award, the type of Award  , (iii) the time or times at which the same shall be granted, (iv) the schedule and conditions, including Performance Conditions, if applicable, on which Awards may vest or be exercised and on which Shares shall be paid for, (v) the method of payment for Shares purchased pursuant to any Award,(vi) the method for satisfaction of any tax withholding obligation arising in connection with an Award, including by the withholding, delivery or sale of Shares, (vii) rules and provisions, as may be necessary or appropriate to permit eligible Grantees resident or employed in any specific jurisdiction to participate in the Plan and/or to receive preferential tax treatment in their country of residence, with respect to Awards granted hereunder, and/or (viii) any other matter which is necessary or desirable for, or incidental to, the administration of the Plan.

 

4.3         The Company may retain the right in an Award Agreement to cause a forfeiture of the gain realized by a Grantee on account of actions taken by the Grantee in violation or breach of or in conflict with any agreement, non-competition agreement, any agreement prohibiting solicitation of employees or clients of the Company or any confidentiality obligation with respect to the Company or otherwise in competition with the Company, to the extent specified in such Award Agreement applicable to the Grantee. Furthermore, the Company may annul an Award if the Grantee is terminated for Cause as defined in the applicable Award Agreement or the Plan, as applicable.

 

4.4         Any provision of the Plan or any Award Agreement notwithstanding, the Committee may cause any Award granted hereunder to be amended, modified or cancelled in consideration of a cash payment, an alternative Award or both made to the holder of such cancelled Award equal to or greater than the Fair  Market Value of such cancelled Award.    

 

4.5         The Administrator may, from time to time, adopt such rules and regulations for carrying out the Plan, as it may deem necessary.

 

4.6         The interpretation and construction by the Administrator of any provision of the Plan or of any Award thereunder shall be final and conclusive and binding on all parties who have an interest in the Plan or any Award or Exercised Share, unless otherwise determined by the Administrator.

 

5.         Eligible Grantees:

 

5.1         The administrator, at its discretion, may grant Awards to any employee or Office Holder of the Company, subject to and in compliance with Company’s policies.

 

5.2         The grant of an Award to a Grantee hereunder, shall neither entitle such Grantee to participate, nor disqualify him from participating, in any other grant of Awards pursuant to the Plan or any other incentive plan of Tower, subject to and in compliance with Company’s policies.

  

4

  

 

6.         Date of Grant and Shareholder Rights:

 

6.1         Date of Grant. Subject to Sections 8.1 and 8.2 hereof, the Date of Grant shall be the date the Administrator resolves to grant such Award, or any later date, if so specified by the Administrator in its determination relating to the grant of such Award. The Company shall promptly give the Grantee a Notice of Grant following such resolution.

 

6.2         Shareholder Rights. A Grantee holding an Award shall have no shareholder rights with respect to the Shares subject to such Award until such Grantee (i) shall have exercised such Award or such Award has vested, as applicable, (ii) shall have all restrictions applicable to any Shares issued to him removed, if applicable; (iii) has paid the applicable Exercise Price, if any; and (iv) has become the record holder of the Exercised Shares.

 

7.         Reserved Shares:

 

7.1         The maximum number of Shares that may be subject to Awards granted under the Plan shall be 7,000,000 Shares, provided that the total number of Shares underlying all grants of Options and RSUs at any time shall not exceed 10% from the Company’s total Shares on a fully diluted basis.

 

7.2         Without derogating from the foregoing in Section 7.1, all Shares under the Plan, in respect of which the right of a Grantee to hold or purchase or be issued the same shall, for any reason, terminate, expire or otherwise cease to exist without having been exercised, shall again be available for grant through Awards under the Plan, and under any sub-plans of the Plan, as the Administrator may determine at its own discretion, from time to time. Notwithstanding the above, Shares withheld or reacquired by the Company in satisfaction of tax withholding obligations pursuant to Section 15  below shall not be taken into account for the purposes of calculating the maximum number of Shares that may be subject to Awards pursuant to Section 7.1 above.

 

8.         Required Approvals; Notice of Grant; Vesting:

 

8.1         The implementation of the Plan and the granting of any Award under the Plan shall be subject to the Company’s procurement of all approvals and permits required by applicable laws or regulatory authorities having jurisdiction over the Plan, the Awards granted under it, and the Shares issued pursuant to it.

 

8.2         The Notice of Grant shall state, inter alia, the number of Shares subject to each Award, the type of Award, the vesting schedule, the dates when the Award may be exercised and/or will vest (as applicable), any restrictions upon transfer or sale of Shares (if applicable), the Exercise Price, the tax treatment to which the Award is subject and such other terms and conditions as the Administrator at its discretion may prescribe, provided that they are consistent with the Plan.

 

8.3         Vesting of Awards. Unless determined otherwise by the Administrator, Awards shall vest over a one to three year period according to the applicable vesting schedule and subject to Exercise Conditions, if any, included in the Award. The Administrator may determine extended vesting schedule at its discretion. Specifically with respect to RSUs, unless determined otherwise by the Administrator, RSUs shall be fully vested upon the fulfillment of their vesting conditions, such that at the end of the applicable Vesting Period Tower shall issue the underlying Shares.

  

5

  

 

9.         Options:

 

9.1         Exercise Price. The Exercise Price of an Option shall be equal to the arithmetic average closing price of Tower’s Shares, as quoted on the NASDAQ market (or if Tower shares will not be traded in NASDAQ, the Tel Aviv Stock Exchange or any principal national securities exchange upon which Tower’s Shares are listed or traded) for the last 30 market trading days prior to the Date of Grant.  Notwithstanding the above, the exercise price will not be lower than the nominal value of the Shares, unless it is determined by the Board of Directors that such exercise price lower than the nominal value of the Shares would otherwise be in compliance with the Israeli Companies Law.

 

9.2         Exercise of Options. Options shall be exercisable pursuant to the terms under which they were awarded and subject to the terms and conditions of the Plan. The exercise of an Option shall be made by a written Notice of Exercise delivered by the Grantee to the Representative, in such form and method as may be determined by the Company, specifying the number of Shares to be purchased, at the Representative’s principal office, and containing such other terms and conditions as the Administrator shall prescribe from time to time.

 

Without derogating from the foregoing, Options shall not be exercised on the determining date with respect to the distribution of bonus shares, offer by way of rights issue, distribution of dividends, consolidation of share capital, consolidation of shares, reduction or split in share capital or company split (each hereinafter referred to as a "Corporate Event"). In addition, if the Ex Date with respect to a Corporate Event occurs before the determining date relating to such Corporate Event, then the exercise of Options shall not occur on such Ex Date.

 

The limitations pursuant to this subsection 9.2 shall be in effect only as long as the Company's securities are traded on the Tel-Aviv Stock Exchange (the "TASE").

 

9.3         Mandatory Options' exercise and sale of shares.  Specific Option grant(s) may include a provision that in case the market price of the Share shall reach a certain price (which can also be denominated as a multiple of the Exercise Price), all vested Options under the specific Award may be triggered for an automatic exercise of the Options and sale of the underlying shares at a price not lower than said certain price.

 

9.4         Term of Options. Without derogating from the provisions of Section 9.5 below, if any Option has not been exercised and the Shares subject thereto not paid for within seven (7) years after the Date of Grant (or any shorter period set forth in the Notice of Grant), such Option and the right to acquire such Shares shall terminate, all interests and rights of the Grantee in and to the same shall ipso facto expire, and the Shares subject to such Options shall again be available for grant through Awards under the Plan, any sub-plans of the Plan, as provided for in Section 7 herein.

 

9.5         The exercise of the Options shall be subject to applicable law, including when applicable, the limitations in connection with the use of nonpublic information.

 

9.6         Cessation of Service.

 

(a)     In the event of a Cessation of Service, all Options granted to such Grantee that are vested and exercisable on the Date of Cessation shall  terminate ninety (90) days from the Date of Cessation, unless determined otherwise by the Administrator or as otherwise set forth in this section.  All Options that are not vested on the Date of Cessation, and whose vesting is not otherwise accelerated pursuant to the terms of this plan, shall expire immediately.

  

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(b)     Notwithstanding subsection (a) above, in the event the Company terminates the employment/ services of a Grantee under circumstances that entitle the Company to terminate the Grantee for Cause, all of the Grantee’s Options, whether vested or not, shall expire on the Date of Cessation.

 

(c)     If the Grantee’s Cessation of Service is by reason of such Grantee’s Disability, illness retirement at the legal retirement age, death or other cause approved by the Committee, Options that are vested on the Date of Cessation shall be exercisable by the Grantee or the Grantee’s guardian, legal representative, estate or other person to whom the Grantee’s rights are transferred by will or by laws of descent or distribution, at any time until one (1) year from the Date of Cessation.

 

(d)     Notwithstanding the aforesaid, under no circumstances shall any Option be exercisable after the expiration of the term of such Option.

 

10.       Restricted Share Units:

 

10.1       Subject to the sole and absolute discretion of the Administrator, the Administrator may decide to grant Restricted Share Units (“RSU(s)”) under the Plan.  An RSU is a right to receive a Share of the Company, under certain terms and conditions. Upon the end of the applicable Vesting Period and/or the fulfillment of the Exercise Conditions of an RSU as set forth in the specific Award, such RSU shall automatically vest into an Exercised Share of the Company (subject to adjustments under Section 12 herein).

 

10.2       As soon as reasonably practicable following the lapse of the applicable portion of the Vesting Period, the Company shall cause to be delivered to the Grantee, the Exercised Shares, subject to satisfaction of applicable tax withholding obligations and other costs with respect thereto.  The Company may provide that any Exercised Shares be held, by issuing the Exercised Shares to a trustee which shall hold such Shares for the benefit of the Grantee. Following the lapse of the Vesting Period the Company is hereby authorized by itself or any party acting on its behalf to deduct the applicable taxes and other costs from the Grantee's salary or via cash or check, or via partial sale of the issued Shares or from any other amount payable to the Grantee, all subject to the applicable tax rules and regulations.

 

10.3       All other terms and conditions of the Plan applicable to Options, shall apply to RSUs, mutatis mutandis.

 

11.       Performance Based Awards:

 

11.1       Subject to the sole and absolute discretion and determination of the Administrator, the Administrator may decide to grant Awards under the Plan, the exercise or vesting of which, as applicable, shall be conditional upon the performance of the Company and/or an Affiliate and/or a division or other business unit of the Company or of an Affiliate and/or upon the performance of the Grantee to the sole and absolute discretion and determination of the Administrator, over such period and measured against such objective criteria as shall be determined by the Administrator and notified to the Grantee (“Performance Based Award(s)”). In granting each Performance Based Award, the Administrator shall establish in writing the applicable performance period (“Performance Period”), performance formula (“Performance Formula”) and one or more performance goals (“Performance Goal(s)”) which, when measured at the end of the Performance Period, shall determine on the basis of said Performance Formula the extent to which the Performance Based Award has vested and/or become exercisable (collectively, the “Performance Conditions”). For the avoidance of doubt, Performance Conditions may be determined for an Award either in addition to, or in substitution for, a Vesting Period.

  

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11.2       After a Performance Based Award has been granted, the Administrator may, in appropriate circumstances, amend any Performance Condition, at its sole and absolute discretion.

 

11.3       If, in consequence of the applicable Performance Conditions being met a Performance Based Award becomes vested and/or exercisable in respect of some, but not all of the number of Shares underlying such Award, the portion of the Shares not available for vesting or exercise shall lapse and cease to be exercisable.  

 

11.4       Performance Conditions shall not be automatically waived merely due to an event of (i) a Cessation of Service, (ii) a Corporate Transaction, (iii) any other adjustment under Section 12 below, or (iv) a Sale under Section 12.6 below.

 

11.5       Measurement of Performance Goals. Performance Goals shall be established by the Administrator on the basis of targets to be attained with respect to one or more measures of business or financial performance that shall have the same meanings as used in the Company’s financial statements, or, if such terms are not used in the Company’s financial statements, they shall have the meaning applied pursuant to generally accepted accounting principles, or as used generally in the Company’s industry (“Performance Measures”). For purposes of the Plan, the Performance Measures applicable to a Performance Based Award shall be calculated in accordance with generally accepted accounting principles, excluding the effect (whether positive or negative) of any change in accounting standards or any extraordinary, unusual or nonrecurring item, as determined by the Administrator, occurring after the establishment of the Performance Goals applicable to the Performance Based Award. Each such adjustment, if any, shall be made solely for the purpose of providing a consistent basis from period to period for the calculation of Performance Measures in order to prevent the dilution or enlargement of the Grantee’s rights with respect to a Performance Based Award. Performance Measures may be one or more of the following, as determined by the Administrator: revenue; sales; expenses; operating income; gross margin; operating margin; earnings before any one or more of: share-based compensation expense, interest, taxes, depreciation and amortization; pre-tax profit; net operating income; net income; economic value added; free cash flow; operating cash flow; share price; earnings per share; return on shareholder equity; return on capital; return on assets; return on investment; employee satisfaction; employee retention; balance of cash, cash equivalents and marketable securities; market share; customer satisfaction; product development; research and development expenses; completion of an identified special project; and completion of a joint venture or other Corporate Transaction.

 

11.6       All other terms and conditions of the Plan applicable to Awards, shall apply to Performance Based Awards, mutatis mutandis.

 

12.       Adjustments, Liquidation and Corporate Transaction:

 

12.1       Adjustments. Subject to any required action under any applicable law, the number and/or type of Shares subject to each outstanding Award,  shall be proportionately adjusted, as the Administrator deems necessary or appropriate, for any increase or decrease in the number of issued Shares resulting from a share split, reverse share split, stock dividend, combination or reclassification of the Shares, or any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company, in such manner as is appropriate in order to prevent dilution or enlargement of the rights of a Grantee under the Plan, and the number of Shares which have been authorized for issuance under the Plan shall likewise be proportionately adjusted, (provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Except as expressly provided in this Section 12, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an Award.)  Any such adjustment in outstanding Options shall include a corresponding proportionate adjustment in the Exercise Price per share. In case of rights offering made by Company to its securities holders the Options holders will be entitled to participate in such right offering under similar conditions to the other security holders, provided however that they will not be entitled to any further adjustments to their Award under this clause as a result of such rights offering.

 

  

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Except as expressly provided in this Section 12, the grant of Awards under the Plan shall in no way affect the right of the Company to distribute bonus shares, to offer rights to purchase its securities, or to distribute dividends.

 

12.2       Adjustments to Options’ Exercise Price due to Distribution of Dividends. If the Company distributes cash dividends on an extraordinary basis with respect to all Shares issued to its shareholders, and the record date for determining the right to receive such dividends (the “Determining Date”) is earlier than the Exercise Date of any Options granted hereunder, then the Exercise Price for each Option granted but not exercised prior to the Determining Date, shall be reduced by an amount equal to the gross amount of the dividend per Share distributed. If such distribution is in a currency different than the currency in which the Exercise Price is stated, said amount of reduction will be calculated in the same currency as the Exercise Price according to the representative rate of exchange as of the Determining Date, if applicable. Unless determined otherwise by the Administrator, the Exercise Price shall not be reduced to less than the nominal value of a Share.

 

12.3       Liquidation. In the event of the proposed dissolution or liquidation of the Company, all outstanding Awards will terminate immediately prior to the consummation of such proposed action. Notwithstanding the above, the Administrator may declare that any Award shall terminate as of a date fixed by the Administrator and give each Grantee the right to exercise his Award or have it vested, including Awards that would not otherwise vest or be exercisable.

 

12.4       In the event of a COC, at the sole discretion of the Administrator, all or any of the unvested Options or RSUs  may be accelerated.

 

12.5       If the Company shall be the surviving entity in any reorganization, merger, or consolidation of the Company with one or more other entities which does not constitute a Corporate Transaction, any Option theretofore granted pursuant to the Plan shall pertain to and apply to the securities to which a holder of the number of Shares subject to such Option would have been entitled immediately following such reorganization, merger, or consolidation, with a corresponding proportionate adjustment of the Exercise  Price per share so that the aggregate Exercise Price thereafter shall be the same as the aggregate Exercise Price of the shares remaining subject to the Option immediately prior to such reorganization, merger, or consolidation. Subject to any contrary language in an Award Agreement evidencing an Award, any restrictions applicable to such Award shall apply as well to any replacement shares received by the Grantee as a result of the reorganization, merger or consolidation. In the event of a transaction described in this Section 12.4, RSUs shall be adjusted so as to apply to the securities that a holder of the number of Shares subject to the RSUs would have been entitled to receive immediately following such transaction.

 

  

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12.6       Corporate Transaction.

 

(a)      In the event of a Corporate Transaction, immediately prior to the effective date of such Corporate Transaction, each Award shall  among other things, at the sole and absolute discretion of the Administrator, either:

 

(i)    Be substituted for a Successor Entity Award such that the Grantee may exercise the Successor Entity Award or have it become vested, as the case may be, for such number and class of securities of the successor entity which would have been issuable to the Grantee in consummation of such Corporate Transaction, had the Award vested or been exercised (as applicable), immediately prior to the effective date of such Corporate Transaction, given the exchange ratio or consideration paid in the Corporate Transaction, the Vesting Period and Performance Conditions (if any) of the Awards and such other terms and factors that the Administrator determines to be relevant for purposes of calculating the number of Successor Entity Awards granted to each Grantee;

 

(ii)   Be assumed by any successor entity such that the Grantee may exercise the Award or have his/her Award vest (as applicable), for such number and class of securities of the successor entity which would have been issuable to the Grantee in consummation of such Corporate Transaction, had the Award vested or been exercised immediately prior to the effective date of such Corporate Transaction, given the exchange ratio or consideration paid in the Corporate Transaction, the Vesting Period and Performance Conditions (if any) of the Awards and such other terms and factors that the Administrator determines to be relevant for this purpose; or

 

(iii)  Determine that the Awards shall be cashed out for a consideration equal to the difference between the price per share determined in the Corporate Transaction and the Exercise Price, purchase price, or nominal value, as the case may be, of such Award.

 

In the event of a clause (i) or clause (ii) action, appropriate adjustments shall be made to the Exercise Price per Share to reflect such action.

 

(b)     Immediately following the consummation of the Corporate Transaction, all outstanding Awards (excluding Successor Entity Awards) shall terminate and cease to be outstanding, except to the extent assumed by a successor entity.

 

(c)     Notwithstanding the foregoing, and without derogating from the power of the Administrator pursuant to the provisions of the Plan, the Administrator shall have full authority and sole discretion to determine that any of the provisions of Sections 12.5(a)(i) or 12.5(a)(ii) above shall apply in the event of a Corporate Transaction in which the consideration received by the shareholders of the Company is not solely comprised of securities of a successor entity, or in which such consideration is solely cash or assets other than securities of a successor entity. In addition, in the event that the Administrator determines in good faith that, in the context of a Corporate Transaction, certain Options have no monetary value and thus do not entitle the holders of such Options to any consideration under the terms of the Corporate Transaction, the Administrator may determine that such Options shall terminate effective as of the effective date of the Corporate Transaction. It is the intention that the Administrator’s authority to make determinations, adjustments and clarifications in connection with the treatment of Awards shall be interpreted as widely as possible, to allow the Administrator maximal power and flexibility to interpret and implement the provisions of the Plan in the event of  Transaction, provided that the Administrator shall determine in good faith that a Grantee’s  rights are not thereby adversely affected without the Grantee’s express written consent.

  

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12.7       Sale. Subject to any provision in the Articles of Association of the Company and to the Administrator’s sole and absolute discretion, in the event of a Sale, each Grantee shall be obligated to participate in the Sale and sell his or her Shares and/or Awards in the Company, provided, however, that each such Share or Award shall be sold at a price equal to that of any other Share sold under the Sale (and, unless determined otherwise by the Administrator, less the applicable Exercise Price), while accounting for changes in such price due to the respective terms of any such Award, and subject to the absolute discretion of the Administrator.

 

For purposes of a Sale, whether “all or substantially all of the issued and outstanding share capital of the Company is to be sold”, shall be finally and conclusively determined by the Administrator in its absolute discretion.

 

12.8       The grant of Awards under the Plan shall in no way affect the right of the Company to adjust, reclassify, reorganize or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. 

 

13.       Limitations on Transfer.

 

13.1       Unless determined otherwise by the Administrator, no Award shall be assignable or transferable by the Grantee otherwise than by will or the laws of descent and distribution, and an Award shall vest or may be exercised (as applicable) only by such Grantee or his/her guardian or legal representative. The terms of such Award shall be binding upon the beneficiaries, executors, administrators, heirs and successors of such Grantee. Any Shares acquired upon exercise or vesting of Awards shall be transferable only in accordance with applicable securities and other local laws, and may be subject to substantial statutory or regulatory restrictions on transfer, except to the extent exemptions (whether by registration or otherwise) are available

 

13.2       Underwriter’s Lock-up and Limitations on the Use of Nonpublic Information. The Grantee’s rights to sell Exercised Shares may be subject to certain limitations (including a lock-up period), as may be requested by the Company or its underwriters, from time to time, or upon a specific occurrence, and the Grantee unconditionally agrees and accepts any such limitations. Furthermore, the Grantee’s right to sell Exercised Shares is subject to applicable law, including in connection with limitations relating to the use of non-public information, Company-wide black out periods and so forth.

 

14.       Term and Amendment of the Plan:

 

14.1       The Plan shall continue until terminated by the Administrator. All Awards outstanding at the time of termination, as aforementioned, shall continue to have full force and effect in accordance with the provisions of the Plan and the documents evidencing such Awards.

 

14.2       Subject to applicable laws and regulations, the Administrator in its discretion may, at any time and from time to time, amend, alter, extend or terminate the Plan, as it deems advisable.  In addition, the Administrator may adopt, as part of the Plan and based on it, sub-plans, in order to comply with all relevant and applicable laws and regulations of the country of residence of any Grantees.

  

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14.3       For the avoidance of doubt, as long as the Company's securities are traded on the TASE, the provisions of this Plan shall be subject to the directives, rules and regulations of the TASE, as those are established from time to time ("TASE Directives"). In the event that any of the provisions this Plan do not comply with the TASE Directives, the Administrator shall be entitled to automatically amend the provisions of this Plan in order to comply with the TASE Directives.

 

15.       Withholding and Tax Consequences:

 

15.1       All Tax consequences and obligations arising from the grant, vesting, or exercise of any Award (as applicable), or the subsequent disposition of, Shares subject thereto or from any other event or act (of the Company or of the Grantee) hereunder, shall be borne solely by the Grantee, and the Grantee shall indemnify the Company and hold it harmless against and from any and all liability for any such Tax, including without limitation, monetary liabilities relating to the necessity to withhold, or to have withheld, any such Tax payment from any payment made to the Grantee. The Company or any of its affiliates may make such provisions and take such steps as it may deem  necessary or appropriate for the withholding of all taxes required by law to be withheld with respect to Awards granted under the Plan and the exercise or vesting thereof, including, but not limited, to (i) deducting the amount so required to be withheld from any other amount (or Shares issuable) then or thereafter  to be provided to the Grantee, including by deducting any such amount from a Grantee’s salary or other amounts payable to the Grantee, to the maximum extent permitted under law and/or (ii) requiring  the Grantee to pay to the Company or any of its affiliates the amount so required to be withheld as a condition of the issuance, delivery, distribution or release of any Shares and/or (iii) by causing the exercise and sale of any Options or Shares held by on behalf of the Grantee to cover such liability, up to the amount required to satisfy  minimum statutory withholding requirements. In addition, the Grantee will be required to pay any amount due in excess of the tax withheld and transferred to the tax authorities, pursuant to applicable tax laws, regulations and rules. Notwithstanding the above, the Company’s obligation to deliver Shares upon the exercise or vesting of any Awards granted under the Plan shall be subject to the satisfaction of all applicable Tax withholding requirements and any other required payments as governed by applicable law or practice. The Company shall have the right, but not the obligation, to deduct from the Shares issuable to a Grantee upon the exercise or vesting of an Award, or to accept from the Grantee the tender of, a number of whole Shares having a fair market value, as determined by the Company, that will enable the Company to satisfy any Tax withholding obligations of the Company. The maximum number of Shares that may be withheld from any Award to satisfy any federal, state or local tax withholding requirements upon the exercise, vesting, lapse of restrictions applicable to such Award or payment of shares pursuant to such Award, as applicable, cannot exceed such number of shares having a fair market value equal to the minimum statutory amount required by the Company to be withheld and paid to any such federal, state or local taxing authority with respect to such exercise, vesting, lapse of restrictions or payment of shares.

 

15.2       The Grantee shall, if requested at any time by the Company, provide to the Company within 10 calendar days of such request, any information regarding the transfer or other disposition of Shares reasonably required by the Company in order for the Company to comply with applicable local laws and regulations or to obtain any benefits thereunder.

  

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16.       Miscellaneous:

 

16.1       Continuance of Employment. Neither the Plan nor the grant of an Award thereunder shall impose any obligation on the Company to continue the employment or service of any Grantee. Nothing in the Plan or in any Award granted thereunder shall confer upon any Grantee any right to continue in the employ or service of the Company for any period of specific duration, or interfere with or otherwise restrict in any way the right of the Company to terminate such employment or service at any time, for any reason, with or without cause.

 

16.2       Governing Law. The Plan and all instruments issued thereunder or in connection therewith, shall be governed by, and interpreted in accordance with, the laws of the State of Israel, excluding the choice of law rules thereof.

 

16.3       Multiple Agreements. The terms of each Award may differ from other Awards granted under the Plan at the same time, or at any other time. The Administrator may also grant more than one grant of Awards to a given Grantee during the term of the Plan, either in addition to, or in substitution for, one or more Awards previously granted to that Grantee. The grant of multiple Awards may be evidenced by a single Notice of Grant or multiple Notices of Grant, as determined by the Administrator.

 

16.4       Non-Exclusivity of the Plan. The adoption of the Plan by the Administrator shall not be construed as amending, modifying or rescinding any previously approved incentive arrangement or as creating any limitations on the power of the Administrator to adopt such other incentive arrangements as it may deem desirable.

 

  

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TOWER SEMICONDUCTOR LTD.

 

ADDENDUM TO THE 2013 SHARE INCENTIVE PLAN

FOR ISRAELI GRANTEES

 

1.General

 

1.1         This addendum (the “Addendum”) shall apply only to Grantees who are residents of the State of Israel or those who are deemed to be residents of the State of Israel for tax purposes (collectively, “Israeli Grantees”). The provisions specified hereunder shall form an integral part of the Tower Semiconductor Ltd. 2013 Share Incentive Plan (the “Plan”), which applies to the grant of Awards.

 

1.2         This Addendum is to be read as a continuation of the Plan and only modifies the terms of Awards granted to Israeli Grantees so that they comply with the requirements set by the Israeli law in general, and in particular with the provisions of the Israeli Tax Ordinance (as defined below), as may be amended or replaced from time to time.

 

1.3         The Plan and this Addendum are complimentary to each other and shall be deemed as one. In any case of contradiction with respect to Awards granted to Israeli Grantees, whether explicit or implied, between the provisions of this Addendum and the Plan, the provisions set out in this Addendum shall prevail.

 

1.4         Any capitalized term not specifically defined in this Addendum shall be construed according to the definition or interpretation given to it in the Plan

 

2      Definitions 

 

“102 Award” means a grant of an Award to an Israeli employee, director or other Office Holder of the Company, other than to a Controlling Shareholder, pursuant to the provisions of Section 102 of the Tax Ordinance, the 102 Rules, and any other regulations, rulings, procedures or clarifications promulgated thereunder, or under any other section of the Tax Ordinance that will be relevant for such issuance in the future.

 

“102(c) Award” means a 102 Award that will not be subject to a Taxation Route, as detailed in Section 102(c) of the Tax Ordinance.

 

 “Beneficial Grantee” means the Grantee for the benefit of whom the Trustee holds an Award in Trust.

 

“Capital Gains Route” means the capital gains tax route under Section 102(b)(2) of the Tax Ordinance.

 

“Controlling Shareholder” means a “controlling shareholder” of the Company, as such term is defined in Section 32(9)(a) of the Tax Ordinance.

 

“Minimum Trust Period” means the minimum period of time required under a Taxation Route for Awards and/or Exercised Shares to be held in Trust in order for the Beneficial Grantee to enjoy to the fullest extent the tax benefits afforded under such Taxation Route, as prescribed at any time by Section 102 of the Tax Ordinance.

 

“Ordinary Income Route” means the ordinary income route under Section 102(b)(1) of the Tax Ordinance.

 

“Rights” means rights issued in respect of Exercised Shares, including bonus shares.

 

“102 Rules” means the Israeli Income Tax Rules (Tax Relief in Issuance of Shares to Employees), 2003.

 

  

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“Taxation Route” means each of the Ordinary Income Route or the Capital Gains Route.

 

“Tax Ordinance” means the Israeli Income Tax Ordinance [New Version], 1961, as amended.

 

“Trust” means the holding of an Award or Exercised Share by the Trustee in Trust for the benefit of the Beneficial Grantee, pursuant to the instructions of a Taxation Route.

 

“Trustee” means a trustee designated by the Administrator in accordance with the provisions of Section 3 below and, with respect to 102 Awards, approved by the Israeli Tax Authorities.

 

3.Administration: 

 

3.1       The Administrator has elected the Capital Gains Route for grants of 102 Awards pursuant to the provisions of Section 102 of the Ordinance and the applicable regulations.

 

3.2       Subject to the general terms and conditions of the Plan, the Tax Ordinance, and any other applicable laws and regulations, the Administrator shall have the full authority in its discretion, from time to time, to determine with respect to grants of 102 Awards –the identity of the trustee who shall be granted such 102 Awards in accordance with the provisions of the Plan and the then prevailing Taxation Route.

 

3.3       Notwithstanding the aforesaid, the Administrator may, from time to time, grant 102(c) Awards.

 

4.Grant of Awards and Issuance of Shares: 

 

Subject to the provisions of the Tax Ordinance and applicable law all grants of Awards to Israeli employees, directors and Office Holders of the Company, other than to a Controlling Shareholder, shall be of 102 Awards:

 

5.Trust: 

 

5.1        General.

 

a.         In the event Awards are deposited with a Trustee, the Trustee shall hold each such Award and any Exercised Shares in Trust for the benefit of the Beneficial Grantee.

 

b.         In accordance with Section 102, the tax benefits afforded to 102 Awards (and any Exercised Shares) in accordance with the Ordinary Income Route or Capital Gains Route, as applicable, shall be contingent upon the Trustee holding such 102 Awards for the applicable Minimum Trust Period.

 

c.         With respect to 102 Awards granted to the Trustee, the following shall apply:

 

i)       A Grantee granted 102 Awards shall not be entitled to sell the Exercised Shares or to transfer such Exercised Shares (or such 102 Awards) from the Trust prior to the lapse of the Minimum Trust Period; and

 

ii)  Any and all Rights shall be issued to the Trustee and held thereby until the lapse of the Minimum Trust Period, and such Rights shall be subject to the Taxation Route which is applicable to such Exercised Shares.

 

d.         Notwithstanding the aforesaid, Exercised Shares or Rights may be sold or transferred, and the Trustee may release such Exercised Shares or Rights from Trust, prior to the lapse of the Minimum Trust Period, provided however, that tax is paid or withheld in accordance with Section 102 of the Tax Ordinance and Section 7 of the 102 Rules, and any other provision in any other section of the Tax Ordinance and any regulation, ruling, procedure and clarification promulgated thereunder, that will be relevant, from time to time.

  

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e.        The Company shall register the Exercised Shares issued to the Trustee pursuant to the Plan, in the name of the Trustee for the benefit of the Israeli Grantees, in accordance with any applicable laws, rules and regulations, until such time that such Shares are released from the Trust as herein provided.

 

If the Company shall issue any certificates representing Exercised Shares deposited with the Trustee under the Plan, then such certificates shall be deposited with the Trustee, and shall be held by the Trustee until such time that such Exercised Shares are released from the Trust as herein provided.

 

f.          Subject to the terms hereof, at any time after the Awards are exercised or vested, with respect to any Exercised Shares the following shall apply:

 

i)         Upon the written request of any Beneficial Grantee, the Trustee shall release from the Trust the Exercised Shares issued, on behalf of such Beneficial Grantee, by executing and delivering to the Company such instrument(s) as the Company may require, giving due notice of such release to such Beneficial Grantee, provided, however, that the Trustee shall not so release any such Exercised Shares to such Beneficial Grantee unless the latter, prior to, or concurrently with, such release, provides the Trustee with evidence, satisfactory in form and substance to the Trustee, that payment of all taxes, if any, required to be paid upon such release has been secured.

 

 ii)         Alternatively, subject to the terms hereof, provided the Shares are listed on a stock market, upon the written instructions of the Beneficial Grantee to sell any Exercise Shares, the Company and/or the Trustee shall use their reasonable efforts to effect such sale and shall transfer such Shares to the purchaser thereof concurrently with the receipt of, or after having made suitable arrangements to secure, the payment of the proceeds of the purchase price in such transaction. The Company and/or the Trustee, as applicable, shall withhold from such proceeds any and all taxes required to be paid in respect of such sale, shall remit the amount so withheld to the appropriate tax authorities and shall pay the balance thereof directly to the Beneficial Grantee, reporting to such Beneficial Grantee the amount so withheld and paid to said tax authorities.

 

5.2        Voting Rights. Unless determined otherwise by the Administrator, as long as the Trustee holds the Exercised Shares, the voting rights at the Company’s general meeting attached to such Exercised Shares will remain with the Trustee. However, the Trustee shall not be obligated to exercise such voting rights at general meetings nor notify the Grantee of any Shares held in the Trust, of any meeting of the Company’s shareholders.

 

Without derogating from the above, with respect to 102 Awards, such shares shall be voted in accordance with the provisions of Section 102 and any rules, regulations or orders promulgated thereunder.

5.3        Dividends. Subject to any applicable law, tax ruling or guidelines of the Israeli Tax Authority, as applicable, for so long as Shares deposited with the Trustee on behalf of a Beneficial Grantee are held in Trust, the cash dividends paid or distributed with respect thereto shall be distributed directly to such Beneficial Grantee, subject further to any applicable taxation on distribution of dividends, and when applicable subject to the provisions of Section 102 of the Tax Ordinance, the 102 Rules and the regulations or orders promulgated thereunder.

 

5.4         Notice of Exercise. With respect to a 102 Award held in the Trust, a copy of any Notice of Exercise shall be provided to the Trustee, in such form and method as may be determined by the Trustee in accordance with the requirements of Section 102 of the Tax Ordinance.

 

6.Notice of grant: 

 

6.1         The Notice of Grant shall state, inter alia, whether the Awards granted to Israeli Grantees are 102 Awards (and in particular whether the 102 Awards are granted under the Ordinary Income Route, the Capital Gains Route or as 102(c) Awards). Each Notice of Grant evidencing a 102 Award shall be subject to the provisions of the Tax Ordinance applicable to such awards.

 

  

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6.2       Furthermore, each Grantee of a 102 Award under a Taxation Route shall be required: (i) to execute a declaration stating that he or she is familiar with the provisions of Section 102 of the Tax Ordinance and the applicable Taxation Route; and (ii) to undertake not to sell or transfer the Awards and/or the Exercised Shares prior to the lapse of the applicable Minimum Trust Period, unless he or she pays all taxes that may arise in connection with such sale and/or transfer.

 

7.Sale: 

 

In the event of a Sale described in Section 12.6 of the Plan, with respect to Shares held in Trust the following procedure will be applied: The Trustee will transfer the Shares held in Trust and sign any document in order to effectuate the transfer of Shares, including share transfer deeds, provided, however, that the Trustee receives a notice from the Administrator, specifying that: (i) all or substantially all of the issued outstanding share capital of the Company is to be sold, and therefore the Trustee is obligated to transfer the Shares held in Trust under the provisions of Section 11.5 of the Plan; and (ii) the Company is obligated to withhold at the source all taxes required to be paid upon release of the Shares from the Trust and to provide the Trustee with evidence, satisfactory to the Trustee, that such taxes indeed have been paid; and (iii) the Company is obligated to transfer the consideration for the Shares (less applicable tax and compulsory payments) directly to the Grantees.

 

8.Limitations of Transfer: 

 

In addition to the provisions of Section 13 of the Plan, as long as Awards and/or Shares are held by the Trustee on behalf of the Grantee, all rights of the Grantee over the Shares are personal, cannot be transferred, assigned, pledged or mortgaged, other than by will or pursuant to the laws of descent and distribution.

 

9.Taxation: 

 

9.1       Without derogating from the provisions of Section 15 of the Plan, the provisions of Section 15.1 of the Plan shall apply also to actions taken by the Trustee. Accordingly, without derogating from the provisions of Section 15.1 of the Plan, the Grantee shall indemnify the Trustee and hold it harmless against and from any and all liability for any such Tax, including without limitation, monetary liabilities relating to the necessity to withhold, or to have withheld, any such Tax from any payment made to the Grantee.

 

9.2       The Trustee shall not be required to release any Share (or Share certificate) to a Grantee until all required Tax payments have been fully made or secured.

 

9.3       With regards to 102 Awards, any provision of Section 102 of the Tax Ordinance, the 102 Rules and the regulations or orders promulgated thereunder, which is necessary in order to receive and/or to preserve any Tax treatment pursuant to Section 102 of the Tax Ordinance, which is not expressly specified in the Plan or in this Addendum, shall be considered binding upon the Company and the Israeli Grantee.

 

9.4         Guarantee. In the event a 102(c) Award is granted to a Grantee, and in the event of Cessation of Service, such Grantee shall provide the Company, to its full satisfaction, with a guarantee or collateral securing the future payment of all Taxes required to be paid upon the sale of the Exercised Shares received upon exercise of such 102(c) Award, all in accordance with the provisions of Section 102 of the Tax Ordinance, the 102 Rules and the regulations or orders promulgated thereunder.

 

  

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APPENDIX “A”

 

TOWER SEMICONDUCTOR LTD.

 

ADDENDUM TO THE 2013 SHARE INCENTIVE PLAN

FOR GRANTEES WHO ARE CITIZENS OF THE UNITED STATES OR 

RESIDENT ALIENS

 

        Notwithstanding anything to the contrary contained in the Plan, for an Award granted to a Grantee who is subject to federal income tax under the laws of the United States, the following requirements shall apply:

 

1.         Awards granted to US residents will be made as nonqualified options (“NQO”) and/or as Restricted Stock Units (“RSU’s”).

 

2.         The Exercise Price per share under each NQO shall be not less than 100% of the fair market value of a Share on the Date of Grant of such NQO

 

3.         For all purposes of this Appendix A, the term “fair market value”, as used by reference to the Shares on the Date of Grant, shall mean the closing price of the Company’s Shares, as quoted on the NASDAQ market or the principal national securities exchange upon which the Company’s Shares are listed or traded for the last market trading day prior to the Date of Grant, or if a closing sales price is not quoted on such date– the closing Share price as quoted on the NASDAQ market or such other exchange on the first date following such date for which a closing sales price is quoted.  If the Company’s Shares are not listed on NASDAQ or such other exchange, “fair market value” of the Shares on the Date of Grant shall be determined by the Administrator in good faith in a manner consistent with Code Section 409A.

 

4.         Such NQO grant shall be made, construed and administered in all respects to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended. Without limiting the generality of the foregoing, and notwithstanding Section 12.2 of the Plan to the contrary, or otherwise, the Exercise Price per share under any NQO shall not be reduced after such NQO is granted, and no NQO shall be amended, if such reduction or amendment would cause noncompliance with the requirements of Section 409A. For purposes of granting NQOs, an entity may not be considered an Affiliate if it results in noncompliance with Section 409A.  To the extent that the Administrator determines that a Grantee would be subject to the additional 20% tax imposed on certain nonqualified deferred compensation plans pursuant to Section 409A as a result of any provision of any Award granted under this Plan, such provision shall be deemed amended, without consent of the Grantee, to the minimum extent necessary to avoid application of such additional tax. The nature of any such amendment shall be determined by the Administrator.

 

  

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5.         Notwithstanding any other provision of this Plan or of any other agreement, contract, or understanding heretofore or hereafter entered into by a Grantee with the Company or any Affiliate, except an agreement, contract, or understanding that expressly addresses Section 280G or Section 4999 of the Code (an “Other Agreement”), and notwithstanding any formal or informal plan or other arrangement for the direct or indirect provision of compensation to the Grantee (including groups or classes of Grantees or beneficiaries of which the Grantee is a member), whether or not such compensation is deferred, is in cash, or is in the form of a benefit to or for the Grantee (a “Benefit Arrangement”), if the Grantee is a “disqualified individual,” as defined in Section 280G(c) of the Code, any Option or RSU held by that Grantee and any right to receive any payment or other benefit under this Plan shall not become exercisable or vested (i) to the extent that such right to exercise, vesting, payment, or benefit, taking into account all other rights, payments, or benefits to or for the Grantee under this Plan, all Other Agreements, and all Benefit Arrangements, would cause any payment or benefit to the Grantee under this Plan to be considered a “parachute payment” within the meaning of Section 280G(b)(2) of the Code as then in effect (a “Parachute Payment”)  and  (ii) if, as a result of receiving a Parachute Payment, the aggregate after-tax amounts received by the Grantee from the Company under this Plan, all Other Agreements, and all Benefit Arrangements would be less than the maximum after-tax amount that could be received by the Grantee without causing any such payment or benefit to be considered a Parachute Payment. In the event that the receipt of any such right to exercise, vesting, payment, or benefit under this Plan, in conjunction with all other rights, payments, or benefits to or for the Grantee under any Other Agreement or any Benefit Arrangement would cause the Grantee to be considered to have received a Parachute Payment under this Plan that would have the effect of decreasing the after-tax amount received by the Grantee as described in clause (ii) of the preceding sentence, then the Grantee shall have the right, in the Grantee’s sole discretion, to designate those rights, payments, or benefits under this Plan, any Other Agreements, and any Benefit Arrangements that should be reduced or eliminated so as to avoid having the payment or benefit to the Grantee under this Plan be deemed to be a Parachute Payment.

 

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