EXHIBIT 4.7
APPENDIX B
Option Grant Letter Agreement
RE: GRANT OF OPTIONS - CEO SHARE OPTION PLAN 2005
Dear : Mr. Russell Ellwanger
Tower Semiconductor Ltd. (the "Company") is pleased to grant you, subject
to the receipt of the requisite corporate approvals, options ("Options") to
purchase up to 662,862 Ordinary Shares, nominal value NIS 1.00 each, of the
Company (the "Shares"), pursuant to the CEO Share Option Plan of the Company,
(the "Plan"), as of July 15, 2005 (the "Date of Grant"). Capitalized terms not
defined in this letter agreement (this "Option Agreement") shall have the
meaning ascribed to them in the Plan.
The grant and issuance of Options pursuant to this Option Agreement is
subject to the receipt of all the approvals required under Section 102 of the
Income Tax Ordinance ("Section 102"). The Options will therefore be issued to
the Trustee, as such term is defined in the Plan. The Options are granted as 102
Capital Gains Track Options.
The exercise price of the Options shall be $1.56 per Share. The terms and
conditions set forth in this Option Agreement are subject to and supplemented by
the terms and conditions set forth in the Plan attached hereto. You are urged to
review the Plan and shall be deemed to be fully aware of all the terms and
conditions governing the Options set forth in the Plan. By your signature below,
you agree to be bound by the terms and conditions of the Plan.
The Options granted pursuant to this Option Agreement will be issued once
you sign and return to the Company: (I) this Option Agreement, (II) the attached
Employee's Declaration, and (III) any other form which is required under Section
102 and which will be provided to you by the Company.
The issuance of the Options is subject to the main terms and conditions set
out below. The full terms and conditions of the Options are set out in the Plan.
1. ISSUANCE OF OPTIONS.
The Options are hereby issued to the Trustee for your benefit, subject to
the terms and conditions hereunder.
The Options will not be listed in any stock exchange and are not
transferable (except to your legal heirs or estate).
2. VESTING; PERIOD OF EXERCISE.
2.1 VESTING SCHEDULE. Subject to the terms and conditions of the Plan and
this Option Agreement, the Options granted pursuant to this Option
Agreement shall become exercisable (vest) over a period of four years
in accordance with the following vesting schedule:
(a) Twenty five percent (25%) of the Options shall vest on May 1,
2006.
(b) Twenty five percent (25%) of the Options shall vest on May 1,
2007.
(c) Twenty five percent (25%) of the Options shall vest on May 1,
2008.
(d) Twenty five percent (25%) of the Options shall vest on May 1,
2009.
2.2 Subject to Section 2.5(i), the above Options will vest and become
exercisable only if on the date of vesting you serve as chief
executive officer of the Company.
2.3 Other than as set forth in applicable law and Section 2.5 below,
vested Options may be exercised in whole or in part, at any time
within a period of ten (10) years from the Date of Grant (the
"Exercise Period"). Any Option not exercised within the Exercise
Period shall lapse and become void and unexercisable.
2.4 The Company will come to an agreement with you as to how to value the
Ordinary Shares of the Company in the event that they are not publicly
traded at the time of an option exercise.
2.5 In the event of the termination of your relationship with the Company
as chief executive officer of the Company (the "Employment")
subsequent to the Date of Grant, the Options will be treated as
follows:
(i) In the event the Company terminates you without cause (as
defined in Section 7(a) of your employment agreement with
the Company (the "Employment Agreement")), all Options that
were to vest over the 12 months from the date of termination
shall become fully vested and exercisable immediately upon
such date of termination. All options that are vested and
exercisable on the date of termination shall lapse and
become unexercisable sixty (60) days from such date. Any
remaining unvested options will terminate immediately upon
termination.
(ii) In the event: (a) the Company terminates you for cause, or
(b) you terminate your employment with the Company pursuant
to Section 7(c) of the Employment Agreement, all of your
Options (including vested Options) will terminate
immediately upon the date of termination.
2.6 Notwithstanding anything to the contrary in the Plan and subject to
any applicable law, upon the Company consummating of any transaction
that results in the sale of all or substantially all of the assets or
shares of the Company, all Options that were to vest over the next 12
months from the date such transaction is consummated shall become
exercisable immediately prior to such date.
2.7 The procedure for exercise of the Options shall be as detailed on the
website of the Company (www.towersemi.com). However, the Company may
change the procedure for exercise of the Options at its discretion.
The Company will notify you of any changes in the procedure.
3. NOTICES.
All notices, consents and other communications under this Option Agreement
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 the Company: Human Resources Department, Tower
Semiconductor, P.O. Box 619, Migdal Ha'emek, Israel;
(c) If with respect to Option exercise procedures: sob@tomfish.com or
facsimile no.: 972-3-6849282.
4. NO WAIVER.
The delay or failure on the part of any party hereto to insist, in any one
instance or more, upon strict performance of any of the terms or conditions
of this Option Agreement, or to exercise any right or privilege herein
conferred shall not be construed as a waiver of any such terms, conditions,
rights or privileges but the same shall continue and remain in full force
and effect.
Sincerely,
Tower Semiconductor Limited
Name of Employee: Mr. Russell Ellwanger Date: ____________
Employee signature: _____________________
Employee Passport Number: ______________
Employee address: _____________________
EMPLOYEE'S DECLARATION
1. I, the undersigned, confirm that the contents of this Option Agreement
are acceptable and agreed to by me.
2. Any tax consequences arising from (i) the grant or exercise of any
Option, (ii) the issuance of Underlying Shares and payment therefor, (iii) the
sale, transfer or exchange of Underlying Shares, or (iv) any other event or act
of mine or of the Company hereunder, and any commissions and other expenses
related thereto, shall be borne solely by me. The Company, any of its
Subsidiaries and/or the Trustee may withhold any taxes, expenses and commissions
as required. I agree to indemnify the Company, any of its Subsidiaries and/or
the Trustee and hold them harmless from and against any and all liability for
any such tax consequences, commissions, expenses or interest or penalty thereon,
including without limitation, liabilities relating to the necessity to withhold,
or to have withheld, any such tax from any payment made to me.
3. I acknowledge and agree that in the event the Company issues securities
as bonus shares or performs a share split or a similar dissolution, such bonus
shares or other similar rights on the shares granted to me pursuant to this
Option Agreement, shall be transferred by the Company to the Trustee, and the
terms and provisions of the Ordinance and the Rules (as such terms are defined
below) shall apply to the bonus shares and/or other similar rights, as shall the
Trustee's undertakings under the Agreement between the Trustee and the Company.
4. Without derogating from the former provisions, I acknowledge that the
ultimate liability for income tax, social insurance or other tax-related
withholding in connection with this grant or its exercise is my responsibility.
I specifically acknowledge that any and all applicable laws and regulations in
Israel pertaining to the granting of options including but not limited to the
provisions set forth in Section 102 of the Income Tax Ordinance [New Version] -
1961 (the "Ordinance") and any rules promulgated thereunder including any
amendment thereto, any interpretation published by the Israeli tax authorities
in their official guidelines and any judicial interpretation of the Israeli
courts, shall each apply with respect to my options and may affect the terms of
my options. Any exercise of an option and sale of shares received upon the
exercise of my options (the "Shares"), which deviates from the rules set forth
in Section 102 of the Ordinance or in regulations promulgated thereunder may
result in adverse tax consequences for me. I further acknowledge that each of
the Company, brokers effecting transactions relating to my options and the
Trustee (as defined in the Plan) is under no obligation to inform me as to
whether a particular transaction I may consider effecting complies with the
provisions of Section 102 of the Ordinance or the rules promulgated thereunder.
I further acknowledge that the Company has not, nor does it intend to, provide
tax advice with respect to the tax ramifications of an option grant under the
laws of any jurisdiction, including Section 102 of the Ordinance or any rules
promulgated thereunder, and that I am urged to seek my own personal tax advice.
5. APPOINTMENT OF A TRUSTEE. I acknowledge that the Trustee has been
appointed to administer my options in accordance with Section 102 of the
Ordinance and the Income Tax Rules (Tax Benefits Regarding the Grant of Options
to Employees), 2003 (the "Rules") and pursuant to an agreement between the
Company and the Trustee that may be amended from time to time (the "Trust
Agreement"). In accordance with the terms of this Option Agreement, the Company
and/or the Trustee are responsible, among other things, to: (a) withhold and pay
any applicable taxes owed to the tax authorities in Israel in connection with my
options, including as a result of an exercise of my options and sale of the
Shares by me, prior to releasing any funds owed to me, (b) provide the tax
authorities in Israel with an annual report in accordance with the Rules, and
(c) provide the Israeli tax authorities with a report regarding the grant of
Options under the Plan, within ninety (90) days from the Grant Date in
accordance with the Rules. Any fees associated with the exercise of my options
as specified in the Trust Agreement will be borne solely by me. In accordance
with the approval granted by the Israel tax authorities in connection with the
Plan, certain of the functions related to the administration of my options may
be performed by the Company.
6. REQUIRED HOLDING PERIOD. In accepting this grant, I acknowledge that
unless otherwise permitted by the Income Tax Authorities, the Rules as of the
Option Date, prohibit me from selling my Shares during a period of twenty-four
months from the end of the tax year in which the grant took place as my options
are subject to the "capital gains track" as set forth in Section 102(b)(2) of
the Ordinance (the "Capital Gains Track"). Notwithstanding the above, if I elect
to sell my Shares during the Required Holding Period, I hereby acknowledge that
the sale of the Shares will be taxed in accordance with the relevant provisions
of Section 102 of the Ordinance and the Rules regarding a breach of the terms of
the Required Holding Period. For the avoidance of doubt, a sale of the Shares
during the Required Holding Period will forfeit my right to receive the tax
benefits of the Capital Gains Track and the income derived from the exercise of
the Options and the sale of the Shares will be taxed as regular employment
income (and not at the reduced capital gains tax rate, if applicable) and will
be generally subject to National Insurance and Health Tax.
7. I am aware that: (i) the Company intends to issue additional shares and
options in the future to various entities and individuals, as the Company in its
sole discretion shall determine; and (ii) the Company may increase its share
capital by new securities in such amount as it finds expedient; and I hereby
waive any claim I might or may have regarding such issuance or increase other
than any claim or right I may have pursuant to any written agreement between
myself and the Company or its subsidiary Tower Semiconductor USA, Inc.
8. I am aware that pursuant to Section 102(b)(3) if my options are issued
with an exercise price lower than the average closing price of the Company's
shares on the 30 (thirty) trading days preceding the issuance of the options, a
part of any benefit ultimately derived from the exercise of the Options and the
sale of the Shares, generally up to the amount equivalent to the difference
between these prices, will be taxed as regular employment income and not at the
reduced capital gains tax rate and generally will be subject to National
Insurance and Health Tax.
9. TRANSFER OF INFORMATION. I hereby consent to the transfer of information
that the Company is required to report to the tax authorities and to the Trustee
relating to the Options in accordance with the provisions of Section 102 of the
Ordinance and the Rules.
Name of Employee: Mr. Russell Ellwanger Signature: ___________
Passport Number: _______________ Date: _______________