Document:

S-8

EXHIBIT 4.1 

TOWER SEMICONDUCTOR LTD.

EMPLOYEE SHARE OPTION PLAN 2005

(as Amended and Restated Effective as of May 12, 2008)

A PLAN UNDER SECTION 102 OF THE INCOME TAX
ORDINANCE AND
THE UNITED STATES INTERNAL REVENUE CODE OF 1986

	
 

	
 

	
 

	
1.

	
Name and
  Purpose:

	
 

	
 

	
 

	
 

	
1.1

	
This plan,
  as amended from time to time, shall be known as the Tower Semiconductor Ltd.
  Employee Share Option Plan 2005 (the “2005
  Plan” or the “Plan”).

	
 

	
 

	
 

	
 

	
1.2

	
The purpose
  and intent of the Plan is to provide incentives to employees of Tower Semiconductor
  Ltd. (the “Company”) and its
  wholly-owned subsidiaries (each, a “Subsidiary”)
  by providing them with options (“Options”)
  to purchase ordinary shares (“Ordinary
  Shares”) in the Company, pursuant to a plan approved by the Board
  of Directors of the Company (the “Board”).
  Options under this Plan will be granted to the Company’s employees pursuant
  to the provisions of Section 102 (“Section
  102”) of the Israeli Income Tax Ordinance (New Version), 1961 as
  amended from time to time, the Law Amending the Income Tax Ordinance (Number
  132) 2002 (as amended, the “Ordinance”)
  and the rules promulgated thereunder (the “Rules”).
  Options under this Plan will be granted to United States residents who are
  employees of the Company’s United States Subsidiaries, Tower Semiconductor
  USA, Inc. (“TSU”) and Jazz
  Technologies Inc. and/or Jazz Semiconductor Inc. (collectively, “Jazz”) pursuant to the United States
  Internal Revenue Code of 1986, as amended (the “Code”). 

	
 

	
 

	
 

	
 

	
1.3

	
The Plan
  shall become effective upon its adoption by the Board and the Company’s
  shareholders (the “Effective Date”).

	
 

	
 

	
 

	
2.

	
Scope:

	
 

	
 

	
 

	
 

	
2.1

	
The total
  number of Options that may be granted under this Plan is 15,104,598. Each
  Option shall be exercisable into one Ordinary Share of the Company (nominal
  value NIS 1.00 per share) (the “Underlying
  Share”). 

	
 

	
 

	
 

	
 

	
2.2

	
The total
  number of ISO (as defined below) Options that may be granted under this Plan
  is 2,390,000 Options. Accordingly, the maximum number of Underlying Shares
  that may be issued as result of the exercise of ISO Options granted under
  this Plan is 2,390,000.

	
 

	
 

	
 

	
3.

	
Options
  granted under Section 102:

	
 

	
 

	
 

	
 

	
Options
  granted pursuant to Section 102(b) shall be either (a) capital gains track
  options under Section 102(b)(2), in which income resulting from the sale of
  Underlying Shares is taxed as capital gain (“102 Capital Gains Track Options”), or (b) ordinary income
  track options under Section 102(b)(1), in which income resulting from the
  sale of Underlying Shares is taxed as ordinary income (“102 Ordinary Income Track Options”;
  together with 102 Capital Gains Track Options, “102 Trustee Options”). Pursuant to the Company’s election
  filed with the Israeli Income Tax Authorities to issue 102 Capital Gains
  Track Options under the Company’s Employee Share Option Plan 2003/1, the
  Company may currently grant only 102 Capital Gains Track Options. The Company
  may change such election not earlier than January 1, 2005, following the
  approval of the Board, all in accordance with the provisions of Section 102(g)
  of the Ordinance.

	
 

	
 

	
 

	
4.

	
Options
  granted under the Code:

	
 

	
 

	
 

	
 

	
Options
  granted to US residents who are employees of TSU or Jazz shall either qualify
  as Incentive Stock Options within the meaning of Section 422 of the Code (“ISOs”), or not qualify as ISOs and be
  classified as Non-qualified Stock Options (“NSOs”)
  as designated in the Option Letter (as defined below). Options granted as
  ISO’s shall comply with the requirements of Section 422 of the Code.

	
 

	
 

	
 

	
5.

	
Eligible
  Grantees:

	
 

	
 

	
 

	
 

	
5.1.

	
Options may
  be granted to any employee of the Company or any Subsidiary (“Grantee”). No Option under this Plan may
  be granted to any person serving as a member of the Board. The grant of an
  Option to a Grantee hereunder shall neither entitle such Grantee to participate,
  nor disqualify him/her from participating, in any other grant of Options
  pursuant to this Plan or any other share incentive or share option plan of
  the Company or any Subsidiary.

	
 

	
 

	
 

	
 

	
5.2.

	
Options
  designated as ISOs will be treated as NSOs if (i) a Grantee of ISOs at the
  Date of Grant (as defined in Section 6.2 below) owns shares representing more
  than 10% of the voting power of the Company or its parent or a Subsidiary,
  (ii) at the Date of Grant, the aggregate Fair Market Value (as defined in
  Section 8 below) of the shares underlying ISOs which first become exercisable
  during any calendar year exceeds $100,000 (taking such Options into account
  in the order in which they were granted), (iii) a disposition of Underlying
  Shares is made within two years from the Date of Grant of the Options or
  within one year from the exercise thereof, (iv) the Grantee was not an
  employee of the Company at all times during the period beginning on the Date
  of Grant and ending on the day 3 months before the date of exercise of such
  Grantee’s Options, or (v) such Options otherwise fail to fully comply with
  the requirements for ISOs under the Code. 

2

	
 

	
 

	
 

	
6.

	
Options:

	
 

	
 

	
 

	
 

	
6.1.

	
Options may
  be granted from the later of (i) the Effective Date; or (ii) 30 (thirty) days
  from the filing of this Plan with the Israeli Income Tax Authorities in
  accordance with applicable law. 

	
 

	
 

	
 

	
 

	
6.2.

	
Options may
  be granted until 10 (ten) years from the Effective Date.

	
 

	
 

	
 

	
 

	
6.3.

	
Options
  shall be granted by issuance of an Option letter to the Grantee stating,
  inter alia, the number of Underlying Shares, the dates when the Options may
  be exercised, the Option exercise price and such other terms and conditions
  at the discretion of the Compensation and Options Committee (the “Committee”), provided that they are
  consistent with this Plan and with applicable law (the “Option Letter”). The date of the Option
  Letter shall be the date of grant of the respective Options (the “Date of Grant”).

	
 

	
 

	
 

	
 

	
6.4.

	
The Options
  will not be listed in any stock exchange and are not transferable (except to
  the Grantee’s legal heirs or estate).

	
 

	
 

	
 

	
 

	
6.5.

	
The Grantee
  shall have no right to vote or receive dividends (subject to Section 12.1) or
  any other rights of a shareholder prior to his/her exercise of the Options
  and until the issuance of the stock certificate evidencing the Underlying
  Shares.

	
 

	
 

	
 

	
7.

	
Vesting and
  Exercise of Options:

	
 

	
 

	
 

	
 

	
7.1.

	
Unless
  otherwise explicitly determined by the Board and stated in an individual
  Option Agreement, Options shall vest and become exercisable as follows,
  subject to the terms under which they were awarded: one-quarter (1/4) of the
  Options shall vest and become exercisable 12 months after the Date of Grant,
  one-quarter (1/4) of the Options shall vest and become exercisable 24 months
  after the Date of Grant, one-quarter (1/4) of the Options shall vest and
  become exercisable 36 months after the Date of Grant, and one-quarter (1/4)
  of the Options shall vest and become exercisable 48 months after the Date of
  Grant, all provided that the Grantee is employed by the Company or any
  Subsidiary on such dates. 

	
 

	
 

	
 

	
 

	
7.2.

	
The
  consideration to be paid for the Underlying Shares, including the method of
  payment, shall be determined by the Company and may consist entirely of
  (1) cash, (2) check, or (3) cashless in the case of same day
  sale. The procedure for exercise of the Options shall be provided to each
  Grantee together with the Option Letter. The Company may change the
  procedures for exercise of the Options at its discretion, by giving notice
  thereof to the Grantee.

3

	
 

	
 

	
 

	
 

	
7.3.

	
If any
  Option has not been exercised within ten (10) years after the Date of Grant
  (or any shorter period set forth in the Option Letter), such Option shall
  immediately terminate and all of the Grantee’s interests in and rights to
  such Option shall immediately expire. 

	
 

	
 

	
 

	
8.

	
Options’
  Exercise Price:

	
 

	
 

	
 

	
 

	
Unless
  otherwise explicitly determined by the Board and stated in an individual
  Option Agreement, the purchase price in $US of each share will be the closing
  sales price of the Company’s shares as reported by NASDAQ or the principal
  national securities exchange upon which the Company’s shares are listed or
  traded on the last market trading day (the “Fair
  Market Value”) prior to the Date of Grant. To avoid doubt: (a)
  Options designated as ISOs must be granted with an exercise price equal to
  the Fair Market Value of the Company’s shares on the date of grant in order
  to qualify for ISO treatment under the Code and (b) Options designated as 102
  Capital Gains Track Options whose exercise price is less than the “102 Fair Market Value”, shall be subject
  to Section 102(b)(3) of the Ordinance. 

	
 

	
 

	
 

	
 

	
“102 Fair Market Value” shall mean with
  respect to 102 Capital Gains Track Options only, and for the sole purpose of
  determining tax liability pursuant to Section 102(b)(3) of the Ordinance, the
  average value of the Company’s shares on the thirty (30) trading days
  preceding the date of grant. 

4

	
 

	
 

	
 

	
9.

	
Trustee;
  Required Holding Periods:

	
 

	
 

	
 

	
 

	
9.1.

	
All Options
  and the Underlying Shares will be held in trust by David H. Schapiro Legal
  Services (the “Trustee”) (i) in
  accordance with Section 102 and the regulations, rules, orders and procedures
  promulgated thereunder with respect to Israeli residents; or (ii) pursuant to
  the Company’s instructions and all applicable laws with respect to
  non-Israeli residents (all such Options shall be referred to as the “Trustee Options”). 

	
 

	
 

	
 

	
 

	
9.2.

	
102 Trustee
  Options and the Underlying Shares shall be held by the Trustee for the
  requisite period prescribed by the Ordinance and the Rules, or such other
  period as may be required (the “Required
  Holding Period”).

	
 

	
 

	
 

	
 

	
9.3.

	
The Trustee
  and each Grantee shall comply with the applicable laws and the terms and
  conditions of the Trust Agreement entered into between the Company and the
  Trustee.

	
 

	
 

	
 

	
 

	
9.4.

	
In the event
  that the Company issues securities as bonus shares (מניות
הטבה), such bonus shares on shares which
  derive from Trustee Options shall be subject to the provisions of this
  Section and for bonus shares on shares which derive from 102 Trustee Options,
  the Required Holding Period for such bonus shares shall be measured from the
  commencement of the Required Holding Period for the 102 Trustee Options.

	
 

	
 

	
 

	
 

	
9.5.

	
The Trustee
  shall not exercise the voting rights vested in the Underlying Shares, unless
  the Trustee believes, after consulting with the Committee and the Grantees
  who hold a majority of the issued Options, that said rights should be
  exercised for the protection of the Grantees as a minority among the Company’s
  shareholders.

	
 

	
 

	
 

	
 

	
9.6.

	
The Company
  shall be entitled to replace the Trustee with another appointee from time to
  time and shall notify the Grantees of such replacement.

	
 

	
 

	
 

	
10.

	
Reserved
  Shares: 

	
 

	
 

	
 

	
 

	
10.1.

	
The Company
  has reserved 15,104,598 authorized but unissued Ordinary Shares (nominal
  value NIS 1.00 per share) for purposes of the Plan, subject to adjustments as
  provided in Section 12 below. If any Options granted under the Plan
  terminate, expire or otherwise cease to exist, such Options shall again be
  available for grant under the Plan or any other incentive plan that the
  Company may adopt.

	
 

	
 

	
 

	
 

	
10.2.

	
The Company
  will maintain a sufficient quantity of Ordinary Shares, NIS 1.00 nominal
  value, in its registered capital and shall increase said quantity as
  appropriate to allow for the exercise of the Options under the Plan. 

5

	
 

	
 

	
 

	
11.

	
Termination
  of Employment; Termination of Right to Exercise:

	
 

	
 

	
 

	
 

	
11.1.

	
Subject to
  the provisions of paragraph 11.2 and 11.3 hereof, unless determined otherwise
  by the Board, if a Grantee ceases to be employed by the Company for any
  reason, all of the Grantee’s rights in respect of all Options that are vested
  and exercisable under the Plan on the date of termination shall terminate
  sixty (60) days from the date of termination. Options which are not vested
  and exercisable on the date of termination will become void and unexercisable
  as of such date.

	
 

	
 

	
 

	
 

	
11.2.

	
Notwithstanding
  paragraph 11.1, in the event the Company terminates the employment of a
  Grantee under circumstances that entitle the Company (1) to withhold
  severance pay, in whole or in part, pursuant to the provisions of the
  Severance Pay Law, 5723-1963, or (2) to terminate the Grantee for Cause as
  such term is defined in such Grantee’s employment agreement, all of the
  Grantee’s exercisable Options shall become void and unexercisable on the last
  day of the Grantee’s employment, unless otherwise set forth in the Grantee’s
  employment agreement.

	
 

	
 

	
 

	
 

	
11.3.

	
If a Grantee
  dies, becomes unable to continue to be employed by the Company due to
  incapacitation from an accident, illness or other cause approved by the
  Committee, or retires at the legal retirement age, all of the Grantee’s
  exercisable Options as of such date can be exercised by the Grantee or the
  Grantee’s estate or legal representative, as the case may be, within one (1)
  year after the Grantee’s last day of employment with the Company. Thereafter,
  such Options shall become void and unexercisable. In the case of an ISO, if
  the Grantee’s disability is not a “disability”
  as such term is defined in Section 22(e)(3) of the Code, such ISO shall be
  treated for tax purposes as an NSO as of three months and one day from the
  Grantee’s last day of employment.

	
 

	
 

	
 

	
12.

	
Adjustments:

	
 

	
 

	
 

	
 

	
12.1.

	
In the event
  that the Company shall issue any of its Ordinary Shares or other securities
  as bonus shares (מניות
  הטבה),
  each Grantee who has been granted Options as of such date shall, upon
  exercising his/her Options, be entitled to receive, for the purchase price
  payable upon such exercise, bonus shares at no additional cost, in an amount
  and of such class, as the Grantee would have received had he been the holder
  of the Underlying Shares at the time the Company issued such bonus shares. No
  fractional shares will be issued under this Section. The Company may
  aggregate and sell all fractional shares and will be entitled to the proceeds
  of the sale thereof. 

6

	
 

	
 

	
 

	
 

	
12.2.

	
If
  securities of any kind are offered to the Company’s shareholders by means of
  a rights offering, the exercise price of the Options will not be adjusted,
  however, the number of Underlying Shares will be increased to take into
  account the element of economic benefit of the rights issue (“מרכיב
  ההטבה”), as is represented by the ratio between
  the price per share of the Company’s Ordinary Shares on the effective date of
  the future rights offering and the base price per share of the Company’s
  Ordinary Shares that is established by the Tel-Aviv Stock Exchange (the “TASE”) on the following trading day. If
  the TASE does not establish a base price per share of the Company’s Ordinary
  Shares, no adjustment in the number of Underlying Shares issuable upon
  exercise of the Options will be made with respect to such future rights
  offering. 

	
 

	
 

	
 

	
 

	
12.3.

	
If the
  Company consolidates its Ordinary Shares, NIS 1.00 nominal value, into shares
  with a higher nominal value, or if it splits them into a larger number of
  shares having a lower nominal value, the number of Underlying Shares issued
  upon exercise of the Options will be adjusted as appropriate.

	
 

	
 

	
 

	
 

	
12.4.

	
In the event
  that the Company is a party to any agreement or arrangement in which the
  holders of the Company’s ordinary shares are offered the opportunity to
  exchange their shares for the securities of any other corporation, such as a
  merger or reorganization (the “Exchange
  Transaction”), the Company will endeavor to cause such other
  corporation to issue such securities as those offered to the Company’s
  ordinary shareholders to any Grantee who exercises his/her Options, as if
  said Grantee was the holder of the Underlying Shares on the determining date
  in connection with the Exchange Transaction.

	
 

	
 

	
 

	
 

	
12.5.

	
Voluntary
Liquidation: In the event of a decision to voluntarily liquidate the Company,
each Grantee will be (i) deemed to have exercised his/her vested and
exercisable Options immediately prior to such decision; and (ii) entitled to
payment equal to the amount that he/she would receive in liquidation if
he/she were a holder of the Underlying Shares immediately prior to the
decision to voluntarily liquidate less the exercise price.  

	
 

	
 

	
 

	
 

	
12.6.

	
The
  Committee is authorized to implement all adjustments and execute the required
  calculations, pursuant to the principles in this Section 12. 

	
 

	
 

	
 

	
13.

	
Continuation
  of Employment: 

	
 

	
 

	
 

	
 

	
Neither the
  Plan nor the Option Letter shall impose any obligation on the Company or any
  Subsidiary to continue employing any Grantee.

7

	
 

	
 

	
 

	
14.

	
Application
  of Funds: 

	
 

	
 

	
 

	
 

	
The proceeds
  received by the Company from the sale of Underlying Shares will be used for
  general corporate purposes of the Company or any Subsidiary.

	
 

	
 

	
 

	
15.

	
Tax Consequences:

	
 

	
 

	
 

	
 

	
15.1.

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

	
 

	
 

	
 

	
 

	
15.2.

	
The Grantee
  will confirm in writing that he/she (1) understands that the Options are
  granted pursuant to the Plan under Section 102, (2) is aware of the taxation
  track that applies thereto, and (3) undertakes not to exercise the Options
  prior to the end of the Required Holding Period, unless otherwise permitted.

	
 

	
 

	
 

	
16.

	
Administration:

	
 

	
 

	
 

	
 

	
16.1.

	
The Plan
  will be administered by the Board, taking into account the recommendations of
  the Committee.

	
 

	
 

	
 

	
 

	
16.2.

	
No member of
  the Board shall be liable for any action or determination made in good faith
  with respect to the Plan or any Option granted hereunder.

	
 

	
 

	
 

	
17.

	
Amendment and
  Termination of the Plan:

	
 

	
 

	
 

	
 

	
The Board
  may, at any time, terminate or amend the Plan in any respect, subject to the
  Company’s shareholders’ approval, if required.

	
 

	
 

	
 

	
18.

	
Governing
  Law:

	
 

	
 

	
 

	
 

	
18.1.

	
The Plan and
  all instruments issued hereunder in connection with Options granted pursuant
  to Section 102 shall be governed by, and interpreted in accordance with, the
  laws of the State of Israel.

	
 

	
 

	
 

	
 

	
18.2.

	
The Plan and
  all instruments issued hereunder in connection with Options granted pursuant
  to the Code shall be governed by, and interpreted in accordance with, the
  laws of the State of California.

8S-8

EXHIBIT 4.4

Re: Grant of Options
under the Internal Revenue Code of 1986 – 2005 Plan

	
 

	
 

	
Grant
  Number:

	
 _________

	
 

	
 

	
Dear:

	
__________

          We are
pleased to grant you options (“Options”) to purchase Ordinary Shares, nominal
value NIS 1.00 each (the “Shares”), of Tower Semiconductor Ltd. “Tower”),
pursuant to the Employee Share Option Plan 2005 of Tower (the “Plan”), as of
XX, (the “Date of Grant”), as follows: 

	
 

	
 

	
 

	
 

	
 

	
 

	
1.

	
Total Number
  of Options Granted: ______

	
 

	
 

	
 

	
 

	
 

	
 

	
2.

	
Type of
  Option:

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
o

	
Option
  intended to qualify as an incentive stock option (“ISO”) within the meaning
  of Section 422 of the Internal Revenue Code of 1986, as amended (“Code”).

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
x

	
Option not
  intended to qualify as an Incentive Stock Option (“NSO”).

	
 

	
 

	
 

	
 

	
 

	
 

	
3.

	
The exercise
  price of the Options shall be $xx per Share.

	
 

	
 

	
 

	
 

	
 

	
 

	
4.

	
The Options
  are hereby issued (the “Option Award”) to the Trustee (as defined in the
  Plan) for your benefit, subject to the terms and conditions hereunder and the
  Plan which we have posted on the Jazz Technologies Intranet at
  ________________. You are urged to review the Plan and shall be deemed to be
  fully aware of all the terms and conditions governing the Options set forth
  in the Plan. By your signature below, you agree to be bound by the terms and
  conditions of the Plan.

	
 

	
 

	
 

	
 

	
 

	
 

	
5.

	
Subject to
  the terms and conditions of the Plan and this letter, the Options granted
  pursuant to this letter shall become exercisable (vest) in accordance with
  the following schedule:

	
 

	
 

	
 

	
 

	
(a) xxx of
  the Options shall vest 12 months from the Date of Grant;

	
 

	
 

	
 

	
 

	
(b) xxx of
  the Options shall vest 24 months from the Date of Grant;

	
 

	
 

	
 

	
 

	
(c) xxx of
  the Options shall vest 36 months from the Date of Grant; and

	
 

	
 

	
 

	
(d) xxx of
  the Options shall vest 48 months from the Date of Grant.

	
 

	
 

	
 

	
 

	
6.

	
The above
  Options will vest and become exercisable only if on the date of exercise you
  are still employed by Jazz, Tower or another Tower subsidiary (together, the
  “Tower Group”). Vested Options may be exercised in whole or in part, at any
  time within a period of ten (10) years from the Date of Grant (the “Exercise
  Period”). Any Option not exercised within the Exercise Period shall lapse and
  become void and unexercisable. In addition, Options which are unvested at the
  time of termination of your employment with the Tower Group will become void
  and unexercisable at the time of such termination. In addition, if your
  employment with the Tower Group is terminated voluntarily by you or is
  terminated by the Tower Group for any reason (other than as set forth in the
  Plan), vested Options can be exercised by you within sixty (60) days after
  your last day of employment with the Tower Group. Thereafter, such options
  shall lapse and become void and unexercisable.

	
 

	
 

	
 

	
 

	
7.

	
The
  procedure for exercise of the Options shall be as detailed in the Intranet.
  However, Tower may change the procedures for exercise of the Options at its
  discretion. Jazz or Tower will notify you of any changes in the procedure.

	
 

	
 

	
 

	
 

	
8.

	
The applicable registration statement on Form S-8 with respect to the
Options was filed in the U.S. and is available for retrieval on the SEC’s
website at www.sec.gov or from the Tower website. 

	
 

	
 

	
 

	
 

	
9.

	
Any tax
  consequences arising from the grant or exercise of any Option Award, from the
  payment for Shares covered thereby or from any other event or act (of Jazz,
  Tower, any Tower Group company or you) hereunder, and commissions and other
  expenses relating thereto shall be borne solely by you. Furthermore, you
  shall agree to indemnify Jazz, Tower, the Tower Group and/or the Trustee and
  hold them harmless against and from any and all liability for any such tax or
  interest or penalty thereon, including without limitation, liabilities
  relating to the necessity to withhold, or to have withheld, any such tax from
  any payment made to you. Jazz, Tower, the Tower Group and/or the Trustee may
  withhold any taxes, expenses and commissions from the exercise of the Options
  and/or the sale of the underlying Shares.

	
 

	
 

	
 

	
 

	
10. 

	
While we are
  not providing you any tax advice with respect to the grant of Options, we
  understand that:

	
 

	
 

	
 

	
 

	
 

	
          a.
  In the case of an ISO, the exercise of the Option, under current applicable
  law that is subject to change, will not be subject to U.S. federal income
  tax, although the excess, if any, of the Fair Market Value (as defined below)
  of the Shares on the date of exercise over the Fair Market Value of the
  Shares on the date of grant will be included in computing the alternative
  minimum tax for federal income tax purposes and may subject you to the
  alternative minimum tax in the year of exercise.

	
 

	
 

	
 

	
 

	
 

	
          b.
  The exercise of an NSO will be subject to U.S. federal income tax liability
  (at ordinary tax rates) upon the excess, if any, of the fair market value of
  the Shares on the date of exercise over their exercise price. If you are an
  employee or a former employee, we will be required to treat such excess as
  compensation income and withhold from your compensation or collect from you
  and pay to the applicable taxing authorities an amount in cash equal to a
  percentage of this compensation income at the time of exercise. We may refuse
  to honor the exercise and refuse to deliver Shares if such withholding
  amounts are not delivered at the time of exercise.

	
 

	
 

	
 

	
 

	
 

	
          c.
  In the case of an NSO, if Shares are held for at least one year after
  exercise, any gain realized on disposition of the Shares, i.e. the excess of
  the sale proceeds over the basis in the Shares (which will generally be equal
  to the Fair Market Value of the Shares on the date of exercise), will be
  treated as long-term capital gain for U.S. federal income tax purposes. In
  the case of an ISO, if Shares transferred pursuant to the Option are held for
  at least one year after exercise and for at least two years after the Date of
  Grant, any gain realized on disposition of the Shares will also be treated as
  long-term capital gain for U.S. federal income tax purposes. If Shares
  purchased under an ISO are disposed of within one year after exercise or
  within two years after the Date of Grant, any gain realized on such
  disposition will be treated as compensation income (taxable at ordinary
  income rates) to the extent of the difference between the lesser of (1) the
  Fair Market Value of the Shares on the date of exercise, or (2) the sale
  price of the Shares and the exercise price. Any additional gain will be taxed
  as capital gain.

	
 

	
 

	
 

	
 

	
 

	
          d.
  In the case of an ISO, if a Grantee sells or otherwise disposes of any of the
  Shares acquired pursuant to the ISO on or before the later of (1) the
  date two years after the Date of Grant, or (2) the date one year after
  the date of exercise, such Grantee shall immediately notify Jazz in writing
  of such disposition. You agree that you may be subject to income tax withholding
  by Jazz, Tower, the Tower Group and/or the Trustee on the compensation income
  recognized by you.

	
 

	
 

	
 

	
 

	
 

	
          e.
  In the case of an
  ISO, the Option shall not be considered an ISO to the extent that the
  aggregate Fair Market Value (determined at the time each ISO is
  granted) of the Shares with respect to
  which Options designated as ISOs are exercisable for the first time by you
  during any calendar year exceeds $100,000 or if you own shares
  representing more than 10% of the voting power of Tower at the time of the
  Option Award; such Options shall be
  treated as NSOs. Options shall be taken into account in the order in which
  they were granted, and the Fair Market Value of the Shares shall be
  determined as of the time the Option with respect to such Shares is granted.
  For the purposes of this letter, “Fair Market Value” means the last
  reported sales price of Tower’s Shares as reported by NASDAQ or the principal
  national securities exchange upon which Tower’s Shares are listed or traded.

	
 

	
 

	
 

	
 

	
 

	
          f.
  You are hereby informed that other and/or additional tax consequences may be
  applicable to you with respect to the particular circumstances relating to
  the grant or exercise of any Option Award or from the payment for Shares
  covered thereby or from a change in your residence or from any other event or
  act under applicable law, and the above provisions are not a comprehensive
  description of all tax law provisions which may apply to you and do not
  replace professional tax advice in these matters.

	
 

	
 

	
 

	
 

	
11.

	
The Options
  pursuant to this letter will be issued once you sign and return to Jazz: (I)
  this letter and (II) any other form which is required under applicable law
  and which will be provided to you by Jazz or Tower. The forms referred to
  above must reach the Human Resources Manager of Jazz no later than 3:00 p.m.
  Pacific time on xxx.. No options will be granted to you if the forms are not
  returned by such date. If you are unable to return the forms by such date,
  you may contact the CFO or VP, Human Resources of Tower, who is authorized,
  at his/her discretion, to extend such date, but in any event no later than
  xxx.

	
 

	
 

	
 

	
 

	
12.

	
All notices,
  consents and other communications under this Grant or the Plan shall be sent
  in writing and shall be deemed to have been given when (a) delivered by hand,
  (b) mailed by certified or registered mail, return receipt requested or
  express delivery service, or (c) when received by the addressee, if sent by
  Express Mail, Federal Express or other express service, in each case to the
  appropriate addresses set forth below (or to such other addresses as a party
  may designate as to itself by notice to the other parties).

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
(a) If to you,
  at your address listed beneath your signature below;

	
 

	
 

	
 

	
 

	
 

	
 

	
 

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

	
 

	
 

	
 

	
 

	
 

	
 

	
 

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

	
 

	
 

	
 

	
 

	
 

	
Sincerely,

	
 

	
 

	
 

	
 

	
 

	
Tower
  Semiconductor Ltd.

          I hereby acknowledge that a copy of the Plan has been
posted on the Jazz Intranet and represent that I am familiar with the terms and
provisions thereof, and hereby accept this Option subject to all of the terms
and provisions thereof. I further acknowledge that I am aware that (i) Tower
intends to issue additional shares and options in the future to various
entities and individuals, as Tower in its sole discretion shall determine; and
(ii) Tower may from time to time increase its authorized and/or issued share
capital by authorization and/or issuance of new securities in such amount as it
finds expedient; and I hereby waive any claim I might or may have regarding
such increase issuance or increase. I have reviewed the Plan and this Option in
their entirety, have had an opportunity to obtain the advice of counsel prior
to executing this Option and fully understand all provisions of the Option. I
hereby agree to accept as binding, conclusive and final all decisions or interpretations
of the Board of Directors of Tower Semiconductor Ltd. upon any questions
arising under the Plan or this Option. I further agree to notify Jazz upon any
change in the address indicated below.

Name of Employee: ___________   

Date: _____________

Employee signature: _____________________

Employee Social Security number: ___________________

Employee
address: _____________________

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