EXHIBIT 4.3
TOWER SEMICONDUCTOR LTD.
EMPLOYEE SHARE OPTION PLAN 2005
(AS AMENDED AND RESTATED EFFECTIVE AS OF MAY 17, 2006)
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 Subsidiary, Tower Semiconductor USA, Inc.
("TSU") 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
9,824,660. 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 1,000,000 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 1,000,000.
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 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.
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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.
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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.
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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 (ioeau
aeaa), 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 9,824,660 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.
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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 (ioeau aeaa), 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.
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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 ("i0eea aaeaa"), 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.
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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.
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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.
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