ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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US GAAP
x
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International Financial Reporting
Standards as issued by the International
Accounting Standards Board
¨
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Other
¨
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1
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1
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1
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1
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24
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39
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39
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56
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71
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72
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73
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74
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92
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94
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94
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94
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94
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95
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95
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95
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95
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96
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97
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97
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97
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97
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ITEM 16H |
97
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97
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97
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97
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97
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IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
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OFFER STATISTICS AND EXPECTED TIMETABLE
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KEY INFORMATION
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Year Ended December 31,
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||||||||||||||||||||
2013
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2012
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2011
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2010
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2009
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||||||||||||||||
(in thousands, except per share data)
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Statement of Operations Data:
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||||||||||||||||||||
Revenues
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$ | 505,009 | $ | 638,831 | $ | 611,023 | $ | 509,262 | $ | 298,812 | ||||||||||
Cost of revenues
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476,900 | 560,046 | 526,198 | 402,077 | 325,310 | |||||||||||||||
Gross profit (loss)
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28,109 | 78,785 | 84,825 | 107,185 | (26,498 | ) | ||||||||||||||
Research and development
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33,064 | 31,093 | 24,886 | 23,876 | 23,375 | |||||||||||||||
Marketing, general and administrative
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42,916 | 44,413 | 48,239 | 39,986 | 31,943 | |||||||||||||||
Acquisition related and reorganization costs
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-- | 5,789 | 1,493 | -- | -- | |||||||||||||||
Amortization related to a lease agreement early termination
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7,464 | -- | -- | -- | -- | |||||||||||||||
Operating profit (loss)
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(55,335 | ) | (2,510 | ) | 10,207 | 43,323 | (81,816 | ) | ||||||||||||
Interest expenses, net
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(32,971 | ) | (31,808 | ) | (27,797 | ) | (26,406 | ) | (24,205 | ) | ||||||||||
Other finance expenses, net
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(27,838 | ) | (27,583 | ) | (12,505 | ) | (46,519 | ) | (21,505 | ) | ||||||||||
Gain from acquisition
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-- | -- | 19,467 | -- | -- | |||||||||||||||
Other income (expense), net
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(904 | ) | (1,042 | ) | 13,460 | 65 | 2,045 | |||||||||||||
Income (loss) before income tax expenses
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(117,048 | ) | (62,943 | ) | 2,832 | (29,537 | ) | (125,481 | ) | |||||||||||
Income tax benefit (expense)
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(9,388 | ) | (7,326 | ) | (21,362 | ) | (12,830 | ) | 5,022 | |||||||||||
Loss for the year
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$ | (107,660 | ) | $ | (70,269 | ) | $ | (18,530 | ) | $ | (42,367 | ) | $ | (120,459 | ) | |||||
Basic loss per ordinary share
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$ | (2.72 | ) | $ | (3.17 | ) | $ | (0.90 | ) | $ | (2.63 | ) | $ | (10.34 | ) | |||||
Other Financial Data:
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Depreciation and amortization
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$ | 164,824 | $ | 173,585 | $ | 162,679 | $ | 143,023 | $ | 143,404 |
As of December 31,
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2013
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2012
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2011
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2010
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2009
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||||||||||||||||
(in thousands of US dollars, except share data which is in thousands)
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Selected Balance Sheet Data:
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Cash and cash equivalents, short-term interest-bearing deposits and designated deposits
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$ | 122,871 | $ | 133,398 | $ | 101,149 | $ | 198,382 | $ | 81,795 | ||||||||||
Working capital
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150,498 | 128,787 | 35,830 | 72,053 | 70,113 | |||||||||||||||
Total assets
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705,887 | 814,241 | 857,221 | 801,728 | 650,837 | |||||||||||||||
Short-term bank debt and current maturities of debentures and bank loans
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36,441 | 49,923 | 48,255 | 122,179 | 7,000 | |||||||||||||||
Loan from banks, net of current maturities
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108,739 | 94,922 | 103,845 | 111,882 | 187,606 | |||||||||||||||
Debentures, net of current maturities
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208,146 | 193,962 | 197,765 | 247,598 | 241,207 | |||||||||||||||
Shareholders’ equity
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141,248 | 220,025 | 174,703 | 117,782 | 56,014 | |||||||||||||||
Weighted average number of ordinary shares outstanding during any year
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39,633 | 22,173 | 20,649 | 16,086 | 11,653 | |||||||||||||||
Number of shares outstanding as of December 31 of any year
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47,869 | 22,312 | 21,219 | 17,703 | 13,264 |
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·
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requiring the use of a substantial portion of our cash flow from operating activities to service our indebtedness rather than investing our cash flows to fund our growth plans, working capital and capital expenditures;
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increasing our vulnerability to adverse economic and industry conditions;
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limiting our ability to obtain additional financing;
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limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete;
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placing us at a competitive disadvantage with respect to less leveraged competitors and competitors that have better access to capital resources;
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volatility in our non-cash financing expenses due to increases in the fair value of our debt obligations, which may increase our net loss or reduce our net profits; and/or
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enforcement by the banks and other financing entities of their liens against Tower, Jazz or TJP’s respective assets, as applicable at the occurrence of an event of default.
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limiting our ability to fulfill our debt obligations and other liabilities.
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We may fail to identify acquisitions that would enable us to execute our business strategy.
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Other foundries may bid against us to acquire potential targets. This competition may result in decreased availability of, or increased prices for, suitable acquisition candidates.
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We may not be able to obtain the necessary regulatory approvals, or we may not be able to obtain the necessary approvals from our lender banks, and as a result, or for other reasons, we may fail to consummate certain acquisitions.
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Potential acquisitions may divert management’s attention away from our existing business operations, which may have a negative adverse effect on our business.
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We may fail to integrate acquisitions successfully in accordance with our business strategy, achieve expected synergies or attract sufficient business to newly acquired facilities in a timely manner.
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We may not be able to retain experienced management and skilled employees from the businesses we acquire and, if we cannot retain such personnel, we may not be able to attract new skilled employees and experienced management to replace them.
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We may purchase a company with excessive unknown contingent liabilities, including, among others, patent infringement or product liability.
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We may not be able to obtain sufficient financing which could limit our ability to engage in acquisitions or the amount or terms of financing actually required before and after acquisition may vary from our expectations.
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fluctuations in the level of revenues from our operating activities;
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fluctuations in the collection of receivables;
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timing and size of payables;
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the timing and size of capital expenditures;
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the repayment schedules of our debt service obligations under our short-term and long-term liabilities; and
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our ability to fulfill our obligations and meet performance milestones under our facility agreement and foundry agreements.
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Failure to successfully integrate TPSC in accordance with our business strategy;
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Historically, TPSC’s fabs solely manufactured Panasonic Corporation’s and its customers’ products. TPSC intends to bring various process technologies to its fabs to enable the manufacture of a wide range of products at these facilities for a broad range of customers. This requires significant capital expenditures and on-site qualification of technologies. There is no assurance that TPSC will be successful in expanding its customer base in a timely manner in order to cover its manufacturing, operating and technology ramp costs. In the event that TPSC is unable to generate sufficient additional revenues from third party customers, we may not meet our future revenue expectations.
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The establishment of TPSC involves a major change of control event in the fabrication facilities that were transferred by Panasonic Corporation to TPSC including the transfer of employees to a new employer (TPSC) controlled by Tower. There is no assurance that a sufficient number of employees will accept the offer to transfer to TPSC in order for TPSC to possess the required knowledge and experience to carry out its business plan and comply with its manufacturing and service commitments. If TPSC fails to execute its business plan, our financial results may be adversely affected.
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The cyclical nature of the semiconductor industry and the volatility of the markets served by our customers;
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Changes in the economic conditions of geographical regions where our customers and their markets are located;
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Shifts by integrated device manufacturers and customers between internal and outsourced production;
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Inventory and supply chain management of our customers;
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The loss of a key customer, postponement of an order from a key customer or the rescheduling or cancellation of large orders;
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The occurrence of accounts receivable write-offs, failure of a key customer to pay accounts receivable in a timely manner or the financial condition of our customers;
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The rescheduling or cancellation of planned capital expenditures;
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Our ability to satisfy our customers’ demand for quality and timely production;
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The timing and volume of orders relative to our available production capacity;
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Our ability to obtain raw materials and equipment on a timely and cost-effective basis;
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Price erosion in the industry;
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Environmental events or industrial accidents such as fire or explosions;
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Our susceptibility to intellectual property rights disputes;
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Our ability to maintain existing partners and to enter into new partnerships and technology and supply alliances on mutually beneficial terms;
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Interest, price index and currency rate fluctuations that were not hedged;
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Technological changes and short product life cycles;
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Timing for the design and qualification of new products;
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Increase in the fair value of our bank loans, certain of our warrants and debentures; and
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Changes in accounting rules affecting our results.
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If Tower fails to comply with the terms of an agreement under which Tower has to provide a turn-key solution for the upgrade of a fabrication facility, Tower’s financial condition may be affected.
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rapid technological developments;
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evolving industry standards;
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changes in customer and product end user requirements;
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frequent new product introductions and enhancements; and
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short product life cycles with declining prices as products mature.
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greater manufacturing capacity;
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geographically diversified and more advanced manufacturing facilities;
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more advanced technological capabilities;
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a more diverse and established customer base;
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greater financial, marketing, distribution and other resources;
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a better cost structure; and/or
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better operational performance in cycle time and yields.
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difficulties in upgrading or expanding existing facilities;
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unexpected breakdowns in our manufacturing equipment and/or related facility systems;
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difficulties in changing or upgrading our process technologies;
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raw material shortages or impurities;
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delays in delivery or shortages of spare parts; and
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difficulties in maintenance of our equipment.
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negotiating cross-license agreements;
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seeking to acquire licenses to the allegedly infringed patents, which may not be available on commercially reasonable terms, if at all;
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discontinuing use of certain process technologies, architectures, or designs, which could cause us to stop manufacturing certain integrated circuits if we are unable to design around the allegedly infringed patents;
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litigating the matter in court and paying substantial monetary damages in the event we lose; or
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seeking to develop non-infringing technologies, which may not be feasible.
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we price our products primarily in US dollars; if the Euro, Yen or other currencies weaken relative to the US dollar, our products may be relatively more expensive in these regions, which could result in a decrease in our revenue;
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the burdens and costs of compliance with foreign government regulation, as well as compliance with a variety of foreign laws;
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general geopolitical risks such as political and economic instability, international terrorism, potential hostilities and changes in diplomatic and trade relationships;
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natural disasters affecting the countries in which we conduct our business;
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imposition of regulatory requirements, tariffs, import and export restrictions and other trade barriers and restrictions, including the timing and availability of export licenses and permits;
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adverse tax rules and regulations;
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weak protection of our intellectual property rights;
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delays in product shipments due to local customs restrictions;
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laws and business practices favoring local companies;
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difficulties in collecting accounts receivable; and
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difficulties and costs of staffing and managing foreign operations.
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INFORMATION ON THE COMPANY
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A.
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HISTORY AND DEVELOPMENT OF THE COMPANY
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B.
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BUSINESS OVERVIEW
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technical evaluation;
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product design to our specifications, including integration of third party intellectual property;
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photomask - design and third party photomask manufacturing;
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silicon prototyping;
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assembly and test;
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validation and qualification; and
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production.
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Year ended December 31,
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2013
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2012
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2011
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United States
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77 | % | 81 | % | 78 | % | ||||||
Asia
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16 | % | 14 | % | 17 | % | ||||||
Europe
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7 | % | 5 | % | 5 | % | ||||||
Total
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100 | % | 100 | % | 100 | % |
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·
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technical competency;
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production quality;
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time-to-market and manufacturing cycle time;
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available capacity;
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device yields;
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design and customer support services;
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access to intellectual property;
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price;
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management expertise;
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strategic relationships;
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research and development capabilities; and
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stability and reliability of supply in order to be a trusted supplier.
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C.
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ORGANIZATIONAL STRUCTURE
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D.
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PROPERTY, PLANTS AND EQUIPMENT
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UNRESOLVED STAFF COMMENTS
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OPERATING AND FINANCIAL REVIEW AND PROSPECTS
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A.
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OPERATING RESULTS
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(1)
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Changes in AOCI balances by component (e.g., unrealized gains or losses on available-for-sale securities or foreign-currency items). Both before-tax and net-of-tax presentations of the information are acceptable as long as an entity presents the income tax benefit or expense attributed to each component of OCI and reclassification adjustments in either the financial statements or the notes to the financial statements.
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(2)
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Significant items reclassified out of AOCI by component either on the face of the income statement or as a separate footnote to the financial statements.
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Year Ended December 31,
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2013
|
2012
|
2011
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Statement of Operations Data:
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Revenues
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100 | % | 100 | % | 100 | % | ||||||
Cost of revenues
|
94.4 | 87.7 | 86.1 | |||||||||
Gross profit
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5.6 | 12.3 | 13.9 | |||||||||
Research and development expenses, net
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6.5 | 4.9 | 4.1 | |||||||||
Marketing, general and administrative expenses
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8.5 | 7.0 | 7.9 | |||||||||
Acquisition related and Reorganization costs
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-- | 0.9 | 0.2 | |||||||||
Amortization related to a lease agreement early termination
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1.5 | -- | -- | |||||||||
Operating profit (loss)
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(10.9 | ) | (0.4 | ) | 1.7 | |||||||
Interest expenses, net
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(6.5 | ) | (5.0 | ) | (4.5 | ) | ||||||
Other financing expense, net
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(5.5 | ) | (4.3 | ) | (2.0 | ) | ||||||
Gain on acquisition
|
-- | -- | 3.2 | |||||||||
Other income
(expense),
net
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(0.2 | ) | (0.2 | ) | 2.2 | |||||||
Income tax benefit (expense)
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1.9 | (1.1 | ) | (3.5 | ) | |||||||
Loss
for the Period
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(21.2 | )% | (11.0 | )% | (3.0 | )% |
B.
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LIQUIDITY AND CAPITAL RESOURCES
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C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES
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D. TREND INFORMATION
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E. OFF-BALANCE SHEET ARRANGEMENTS
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F. TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
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Payment Due
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||||||||||||||||||||||||||||
Total
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Less than 1 year
|
2 Years
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3 Years
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4 Years
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5 Years
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After 5
years
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||||||||||||||||||||||
(in thousands of dollars)
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||||||||||||||||||||||||||||
Contractual Obligations
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Short term liabilities primarily vendors and accounts payable (1)
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96,359 | 96,359 | -- | -- | -- | -- | -- | |||||||||||||||||||||
Loans from banks (2)
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172,775 | 35,995 | 84,509 | 32,025 | 573 | 19,673 | -- | |||||||||||||||||||||
Debentures (3)
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404,776 | 33,956 | 238,850 | 131,970 | -- | -- | -- | |||||||||||||||||||||
Operating leases
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8,881 | 2,803 | 2,448 | 2,157 | 693 | 372 | 408 | |||||||||||||||||||||
Construction & equipment purchase agreements (4)
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4,712 | 4,712 | -- | -- | -- | -- | -- | |||||||||||||||||||||
Other long-term liabilities
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61,222 | -- | 2,542 | 2,755 | 2,420 | 2,456 | 51,049 | |||||||||||||||||||||
Purchase obligations
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24,725 | 9,967 | 7,729 | 5,669 | 1,360 | -- | -- | |||||||||||||||||||||
Total contractual obligations
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773,450 | 183,792 | 336,078 | 174,576 | 5,046 | 22,501 | 51,457 |
(1)
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Short-term liabilities include primarily our trade accounts payable for equipment and services as well as payroll related commitments.
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(2)
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Loans from banks include principal and interest payments in accordance with the terms of agreements with the banks.
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(3)
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Debentures include total amount of principal and interest payments for the presented periods.
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As of December 31, 2013 approximately 68% of such debentures are convertible with a conversion ratio of; NIS 36.276 par value of debentures into one ordinary share.
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(4)
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Construction & equipment purchase agreements include amounts related to ordered equipment that has not yet been received.
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DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
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A. DIRECTORS AND SENIOR MANAGEMENT
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Senior Management
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Age
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Title
|
||
Tower
|
||||
Russell C. Ellwanger
|
58 |
Chief Executive Officer of Tower, and Chairman of the Board of Directors of its wholly-owned subsidiaries, Tower Semiconductor USA, Inc., Jazz Technologies, Inc. and Jazz Semiconductor, Inc.
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||
Oren Shirazi
|
43 |
Chief Financial Officer, Senior Vice President of Finance
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Dr. Itzhak Edrei
|
54 |
President
|
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Ephie Koltin
|
52 |
Chief Operating Officer
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Dalit Dahan
|
45 |
Senior Vice President of Human Resources and IT
|
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Nati Somekh
|
38 |
Senior Vice President, Chief Legal Officer and Corporate Secretary
|
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Yossi Netzer
|
49 |
Senior Vice President of Corporate Planning
|
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TJP
|
||||
Rafi Mor
|
50 |
Chief Executive Officer of TowerJazz Japan
|
||
Directors
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Age
|
Title
|
||
Amir Elstein
|
58 |
Chairman of the Board
|
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Sagi Kabla
|
37 |
Director
|
||
Yoav Doppelt
|
45 |
Director
|
||
Kalman Kaufman
|
68 |
Independent Director
|
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Alex Kornhauser
|
67 |
Independent and External Director
|
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Dana Gross
|
46 |
Independent Director
|
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Ilan Flato
|
57 |
Independent and External Director
|
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Rami Guzman
|
74 |
Independent Director
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B. COMPENSATION
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C. BOARD PRACTICES
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·
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an employment relationship;
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·
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a business or professional relationship maintained on a regular basis;
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·
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control; and
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·
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service as an office holder.
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·
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relatives of the controlling shareholder may not be appointed as external directors of a company.
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if the company does not have a controlling shareholder or a shareholder who holds company shares entitling him to vote at least 25% of the votes in a shareholders meeting, no person may be appointed as an external director if the person or the person’s relative, partner, employer or any entity under the person’s control, has or had, on or within the two years preceding the date of the person’s appointment to serve as external director, any affiliation on the date of the person's appointment with the chairman of the Board, chief executive officer, substantial shareholder (who holds at least 5% of the issued and outstanding shares of the company or voting rights which entitle him to vote at least 5% of the votes in a shareholders meeting) or chief financial officer.
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·
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No person may serve as an external director if the person, the person’s relative, spouse, employer or any entity controlling or controlled by the person, has a business or professional relationship with someone with whom affiliation is prohibited, even if such relationship is not maintained on a regular basis, except negligible relationships.
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·
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A public company, entity controlling or entity under common control with the company may not grant an external director, his/her spouse or child, any benefit, and may not appoint him/her, his/her spouse or child, to serve as an officer of the company or of an entity under common control with the company, may not employ or receive professional services in consideration from him/her or an entity controlled by him/her unless two years have passed as of the end of service as external director in the company, and regarding a relative who is not a spouse or child – one year as of the end of service as external director.
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·
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the majority of shares voted at the meeting, including more than one-half of the shares held by non-controlling and disinterested shareholders that voted at the meeting, vote in favor of election of the director; or
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·
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the total number of shares held by non-controlling and disinterested shareholders that voted against the election of the director does not exceed two percent of the aggregate voting rights in the company.
|
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1.
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To recommend to the Board of Directors as to a compensation policy for officers, as well as to recommend, once every three years to extend the compensation policy subject to receipt of the required corporate approvals;
|
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2.
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To recommend to the Board of Directors as to any updates to the compensation policy which may be required;
|
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3.
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To review the implementation of the compensation policy by the Company;
|
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4.
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To approve transactions relating to terms of office and employment of certain Company office holders, which require the approval of the Compensation Committee pursuant to the Companies Law; and
|
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5.
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To exempt, under certain circumstances, a transaction relating to terms of office and employment from the requirement of approval of the shareholders meeting.
|
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a.
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advancement of the goals of the Company, its working plan and its long term policy;
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b.
|
the creation of proper incentives for the office holders while taking into consideration, inter alia, the Company’s risk management policies;
|
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c.
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the Company’s size and nature of its operations;
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d.
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with respect to compensation paid to officers which includes variable components - the contributions of the relevant office holders in achieving the goals of the Company and profit in the long term in light of their positions;
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e.
|
the education, skills, expertise and achievements of the relevant office holders;
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f.
|
the role of the office holders, areas of their responsibilities and their previous agreements regarding salary; and
|
|
g.
|
the correlation of the proposed compensation with the compensation of other employees of the Company, and the effect of such differences in compensation on the employment relations in the company.
|
|
(i)
|
the majority of the votes includes at least a majority of all the votes of shareholders who are not controlling shareholders of the company or who do not have a personal interest in the compensation policy and participating in the vote; abstentions shall not be included in the total of the votes of the aforesaid shareholders; or
|
|
(ii)
|
the total of opposing votes from among the shareholders described in subsection (i) above does not exceed 2% of all the voting rights in the company
.
|
·
|
Base salary;
|
·
|
Benefits and perquisites;
|
·
|
Performance-based cash bonuses;
|
·
|
Equity based compensation; and
|
·
|
Retirement, termination and other arrangements.
|
|
D. EMPLOYEES
|
As of December 31,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Process and product engineering, R&D and design
|
848 | 866 | 936 | |||||||||
Manufacturing and operations
|
1,538 | 1,602 | 1,822 | |||||||||
Manufacturing support
|
239 | 209 | 219 | |||||||||
Sales and marketing, finance & administration..
|
194 | 218 | 197 | |||||||||
Total
|
2,819 | 2,895 | 3,174 |
|
E. SHARE OWNERSHIP
|
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|
|
A. MAJOR SHAREHOLDERS
|
Identity of Person or Group
|
Percent of
Class(1)
|
Percent of Class
(Diluted)(2)
|
||||||
Israel Corporation Ltd. (3)
|
38.66 | % | 18.92 | % | ||||
Bank Leumi Le-Israel, B.M (4).
|
7.14 | % | 3.62 | % | ||||
Bank Hapoalim, B.M (5).
|
11.21 | % | 5.86 | % |
(1)
|
Assumes the holder’s beneficial ownership of all Tower ordinary shares and all securities that the holder has a right to purchase within 60 days. Also assumes that no other exercisable or convertible securities held by other shareholders has been exercised or converted into shares of the Company.
|
(2)
|
Assumes that all currently outstanding securities to purchase ordinary shares, other than those which cannot be calculated as of the date of the date referred to above, have been exercised by all holders.
|
(3)
|
Based on information verified with Israel Corp., it had as of March 31, 2014 approximately 18 million shares, as well as warrants exercisable to acquire 1.67 million shares and 4 thousand Ordinary Shares issuable upon the exercise of options.
|
(4)
|
Based on information provided by Bank Leumi, it had as of March 31, 2014 approximately 206 thousand shares, as well as warrants exercisable to acquire approximately 139 thousand shares and capital notes convertible into approximately 3.4 million shares.
|
(5)
|
Based on information provided by Bank Hapoalim, it had as of March 31, 2014 approximately one million shares, as well as warrants exercisable to acquire approximately 608 thousand shares and capital notes convertible into approximately 4.5 million shares.
|
|
B. RELATED PARTY TRANSACTIONS
|
|
C. INTERESTS OF EXPERTS AND COUNSEL
|
FINANCIAL INFORMATION
|
|
A. CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
|
|
B. SIGNIFICANT CHANGES
|
THE OFFER AND LISTING
|
NASDAQ Stock Market
|
Tel Aviv Stock Exchange
|
|||||||||||||||
High ($)
|
Low ($)
|
High (NIS)
|
Low (NIS)
|
|||||||||||||
Period
|
||||||||||||||||
April 2014
|
10.06 | 7.74 | 34.68 | 26.92 | ||||||||||||
March 2014
|
9.64 | 7.45 | 32.88 | 25.78 | ||||||||||||
February 2014
|
7.87 | 5.86 | 27.18 | 20.59 | ||||||||||||
January 2014
|
6.45 | 5.44 | 22.51 | 19.20 | ||||||||||||
December 2013
|
7.53 | 3.85 | 22.70 | 13.40 | ||||||||||||
November 2013
|
4.91 | 4.16 | 17.40 | 14.41 | ||||||||||||
October 2013
|
5.19 | 4.74 | 18.35 | 17.00 | ||||||||||||
First quarter 2014
|
9.64 | 5.44 | 32.88 | 19.20 | ||||||||||||
Fourth quarter 2013
|
7.53 | 3.85 | 22.70 | 13.40 | ||||||||||||
Third quarter 2013
|
5.18 | 4.15 | 18.37 | 14.65 | ||||||||||||
Second quarter 2013
|
7.85 | 4.60 | 28.66 | 15.83 | ||||||||||||
First quarter 2013
|
8.67 | 6.16 | 32.40 | 22.72 | ||||||||||||
Fourth quarter 2012
|
9.11 | 7.30 | 35.50 | 28.30 | ||||||||||||
Third quarter 2012
|
10.77 | 6.75 | 42.50 | 27.58 | ||||||||||||
Second quarter 2012
|
15.30 | 9.75 | 57.90 | 39.30 | ||||||||||||
First quarter 2012
|
14.10 | 9.00 | 52.50 | 34.55 | ||||||||||||
2013
|
8.67 | 3.85 | 32.40 | 13.40 | ||||||||||||
2012
|
15.30 | 6.75 | 57.90 | 27.58 | ||||||||||||
2011
|
23.10 | 9.00 | 82.41 | 34.05 | ||||||||||||
2010
|
28.05 | 14.85 | 105.29 | 55.65 | ||||||||||||
2009
|
22.35 | 1.95 | 76.94 | 7.53 |
ADDITIONAL INFORMATION
|
|
·
|
amendments to our Articles;
|
|
·
|
appointment and termination of our independent auditors;
|
|
·
|
appointment and dismissal of directors (except of external directors);
|
|
·
|
approval of acts and transactions requiring general meeting approval under the Companies Law;
|
|
·
|
increase or reduction of authorized share capital or the rights of shareholders or a class of shareholders;
|
|
·
|
any merger as provided in section 320 of the Companies Law; and
|
|
·
|
the exercise of the Board of Directors’ powers by the general meeting, if the Board of Directors is unable to exercise its powers and the exercise of any of its powers is essential for Tower’s proper management, as provided in section 52(a) of the Companies Law.
|
|
·
|
A private placement that meets all of the following conditions:
|
|
o
|
20 percent or more of the voting rights in the company prior to such issuance are being offered;
|
|
o
|
The private placement will increase the relative holdings of a shareholder that holds five percent or more of the company’s outstanding share capital (assuming the exercise of all of the securities convertible into shares held by that person), or that will cause any person to become, as a result of the issuance, a holder of five percent or more of the company’s outstanding share capital; and
|
|
o
|
All or part of the consideration for the offering is not cash or registered securities, or the private placement is not being offered at market terms.
|
|
·
|
A private placement which results in anyone becoming a controlling shareholder.
|
|
·
|
any amendment to the Articles;
|
|
·
|
an increase of the company’s authorized share capital;
|
|
·
|
a merger; or
|
|
·
|
approval of interested party transactions that require shareholder approval.
|
|
·
|
Code of Corporate Conduct.
A code of recommended corporate governance practices has been attached to the Companies Law. In the explanatory notes to the legislation, the Knesset noted that an "adopt or disclose non-adoption" regulation would be issued by the Israeli Securities Authority with respect to such code. As of the date of this Annual Report, the Israeli Securities Authority has issued reporting instructions with respect to this code which are applicable only to publicly traded companies whose securities are traded solely on the Tel Aviv Stock Exchange and which report solely to the Israeli Securities Authority.
|
|
·
|
Fines.
The Israeli Securities Authority shall be authorized to impose fines on any person or company performing a violation, in connection with a publicly traded company which reports to the Israeli Securities Authority, and specifically designated as a violation under the Companies Law.
|
|
·
|
We do not supply an annual report but make our audited financial statements available to our shareholders prior to our annual general meeting.
|
|
·
|
The majority of our Board of Directors is not comprised of directors who meet the definition of independence contained in the NASDAQ Listing Rules. Under the Companies Law a majority of the Board of Directors is not required to be comprised of independent directors. In keeping with the requirements of the Companies Law two of the members of our Board of Directors are external directors, and are independent as defined under Rule 10A-3 of the Securities Act.
|
|
·
|
Our Board has not adopted a policy of conducting regularly scheduled meetings at which only our independent directors are present. The Companies Law does not require our external directors to conduct regularly scheduled meetings at which only they are present.
|
|
·
|
We follow the provisions of the Israeli Companies Law with respect to matters in connection with the composition and responsibilities of our compensation committee, office holder compensation, and any required approval by the shareholders of such compensation. Israeli law, and our amended and restated articles of association, do not require that a compensation committee composed solely of independent members of our board of directors determine (or recommend to the board of directors for determination) an executive officer’s compensation, as required under NASDAQ’s recently adopted listing standards related to compensation committee independence and responsibilities; nor do they require that the Company adopt and file a compensation committee charter. Instead, our compensation committee has been established and conducts itself in accordance with provisions governing the composition of and the responsibilities of a compensation committee as set forth in the Israeli Companies Law. Furthermore, the compensation of our chief executive officer and all other executive officers is not determined, or recommended to the Board for determination, in the manner required by the NASDAQ Listing Rules. In accord with the Companies Law the compensation of directors, the chief executive officer and all other officers requires the approval of our Compensation Committee and Board of Directors, and under circumstances as detailed in this annual report also requires the approval of our shareholders. Such compensation will either be in consistency with our previously approved Compensation Policy or, in special circumstances in deviation therefrom, taking into account certain considerations set forth in the Israeli Companies Law. Thus, we will seek shareholder approval for all corporate actions with respect to office holder compensation requiring such approval under the requirements of the Israeli Companies Law, including seeking prior approval of the shareholders for the Compensation Policy and for certain office holder compensation, rather than seeking approval for such corporate actions in accordance with NASDAQ Listing Rules.
|
|
·
|
Director nominees are not selected, or recommended for the Board’s selection, as required by the NASDAQ Listing Rules. With the exception of our external directors, our directors are elected for terms of one year or until the following annual meeting, by a general meeting of our shareholders. The nominations for director which are presented to our shareholders are generally made by our board of directors. According to the Companies Law, one or more shareholders of a company holding at least one percent of the voting power of the company may nominate a currently serving external director for an additional three year term.
|
|
·
|
Israeli law does not require the adoption of and our Board of Directors has not adopted a formal written charter or board resolution addressing the nomination process and such related matters as may be required under United States federal securities laws, as required by the NASDAQ Listing Rules.
|
|
·
|
Although we have adopted a formal written audit committee charter, there is no requirement under the Companies Law to do so and the charter as adopted may not specify all the items enumerated in the NASDAQ Listing Rule 5605(c)(1).
|
|
·
|
Although we have adopted a formal written compensation committee charter, there is no requirement under the Companies Law to do so and the charter as adopted may not specify all the items enumerated in the NASDAQ Listing Rule 5605(d)(1).
|
|
·
|
Our audit committee does not meet with all of the requirements of the NASDAQ Marketplace Rules, as permitted by the Companies Law though all members are independent as such term is defined under Rule 10A-3 of the Exchange Act.
|
|
·
|
Under Israeli law a company is entitled to determine in its articles of association the number of shareholders and percentage of holdings required for a quorum at a shareholders meeting. Our articles of association do not provide for a quorum of not less than 33 1/3% of the outstanding shares of our voting ordinary shares for meetings of our ordinary shareholders, as required by the NASDAQ Listing Rules. Our articles of association presently require a quorum consisting of two shareholders holding a combined 33% of our ordinary shares.
|
|
·
|
We review and approve all related party transactions in accordance with the requirements and procedures for approval of interested party acts and transactions, set forth in sections 268 to 275 the Companies Law, which do not fully reflect the requirements of the NASDAQ Listing Rules.
|
|
·
|
We seek shareholder approval for all corporate action requiring such approval, in accordance with the requirements of the Companies Law, which does not fully reflect the requirements of the NASDAQ Listing Rules.
|
|
·
|
We do not necessarily seek shareholder approval for the establishment of, and amendments to, stock option or equity compensation plans (as set forth in NASDAQ Listing Rule 5635(c)), as such matters are not subject to shareholder approval under Israeli law. We will attempt to seek shareholder approval for our stock option or equity compensation plans (and the relevant annexes thereto) to the extent required in order to ensure they are tax qualified for our employees in the United States. However, even if such approval is not received, then the stock option or equity compensation plans will continue to be in effect, but the Company will be unable to grant options to its U.S. employees that qualify as Incentive Stock Options for U.S. federal tax purpose. Our stock option or other equity compensation plans are also available to our non-U.S. employees, and provide features necessary to comply with applicable non-U.S. tax laws.
|
|
a.
|
if the interest and OID are business income in the hands of the recipient,
|
|
b.
|
if the interest is recorded or should be recorded in the individual’s accounting books,
|
|
c.
|
if the recipient is a substantial shareholder of our company,
|
|
d.
|
if financing expenses related to the purchase of the debentures were deducted by the individual in the calculation of the individual’s Israeli taxable income, or
|
|
e.
|
if the individual is an employee, supplier, or service provider of the company and the tax authorities have not been persuaded that the payment of interest was not affected by the relationship between the parties.
|
|
a.
|
if the recipient is a substantial shareholder of the corporation,
|
|
b.
|
if the recipient is an affiliate of the issuer of the debentures, or
|
|
c.
|
if the individual is an employee, supplier, or service provider of the company and the tax authorities have not been persuaded that the Payment was not affected by the relationship between the parties.
|
|
·
|
Industrial companies meeting the criteria set out by the Investment Law for a “Preferred Income” of a “Preferred Enterprise” (as defined below) will be eligible for flat tax rates of 9% or 16% as of 2014, with the actual tax rates determined by the location of the enterprise. The tax incentives offered by the Investment Law are no longer dependant neither on minimum qualified investments nor on foreign ownership.
|
|
·
|
A company can enjoy both government grants and tax benefits concurrently. Governmental grants will not necessarily be dependent on the extent of enterprise’s investment in assets and/or equipment. The approval of “Preferred Enterprise” status by either the Israeli Tax Authorities or the Investment Center will be accepted by the other. Therefore a Preferred Enterprise will be eligible to receive both tax incentives and government grants, under certain conditions.
|
|
·
|
Under the transition provisions, any tax benefits obtained prior to 2011 shall continue to apply until expired, unless the company elects to apply the provisions of the new provisions to its income.
|
●
|
an individual citizen or resident of the United States;
|
●
|
a corporation created or organized in or under the laws of the United States or of any state of the United States or the District of Columbia;
|
●
|
an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
|
●
|
a trust if the trust has elected validly to be treated as a United States person for U.S. federal income tax purposes or if a U.S. court is able to exercise primary supervision over the trust’s administration and one or more United States persons have the authority to control all of the trust’s substantial decisions.
|
●
|
insurance companies;
|
●
|
dealers in stocks, securities or currencies;
|
●
|
financial institutions and financial services entities;
|
●
|
real estate investment trusts;
|
●
|
regulated investment companies;
|
●
|
persons that receive ordinary shares as compensation for the performance of services;
|
●
|
tax-exempt organizations;
|
●
|
persons that hold ordinary shares as a position in a straddle or as part of a hedging, conversion or other integrated instrument;
|
●
|
individual retirement and other tax-deferred accounts;
|
●
|
expatriates of the United States;
|
●
|
persons (other than Non-U.S. Holders) having a functional currency other than the U.S. dollar; and
|
●
|
direct, indirect or constructive owners of 10% or more, by voting power or value, of us.
|
(a)
|
the stock of that corporation with respect to which the dividends are paid is readily tradable on an established securities market in the U.S., or
|
(b)
|
that corporation is eligible for benefits of a comprehensive income tax treaty with the U.S. which includes an information exchange program and is determined to be satisfactory by the U.S. Secretary of the Treasury. The Internal Revenue Service has determined that the U.S.-Israel Tax Treaty is satisfactory for this purpose.
|
●
|
that gain is effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the United States, or
|
●
|
in the case of any gain realized by an individual Non-U.S. Holder, that holder is present in the United States for 183 days or more in the taxable year of the sale or exchange, and other conditions are met.
|
(1)
|
a U.S. person;
|
(2)
|
the government of the U.S. or the government of any state or political subdivision of any state (or any agency or instrumentality of any of these governmental units);
|
(3)
|
a controlled foreign corporation;
|
(4)
|
a foreign partnership that is either engaged in a U.S. trade or business or whose Untied States partners in the aggregate hold more than 50% of the income or capital interests in the partnership;
|
(5)
|
a foreign person that derives 50% or more of its gross income for certain periods from the conduct of a trade or business in the U.S.; or
|
(6)
|
a U.S. branch of a foreign bank or insurance company.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
|
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
|
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|
CONTROLS AND PROCEDURES
|
[RESERVED]
|
AUDIT COMMITTEE FINANCIAL EXPERT
|
CODE OF ETHICS
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
2013
|
2012
|
|||||||
(US Dollars In Thousands)
|
||||||||
Audit fees (1)
|
561 | 600 | ||||||
Audit Related Fees (2)
|
12 | 17 | ||||||
Tax fees (3)
|
53 | 76 | ||||||
626 | 693 |
(1)
|
Audit fees consist of fees for professional services rendered for the audit of our financial statements, services in connection with statutory and regulatory filings and engagements (including review of SEC filings and SOX compliance), and reviews of our unaudited interim consolidated financial statements included in our quarterly reports.
|
(2)
|
Audit-related fees consist of assurance and related services that traditionally are performed by the independent accountant. These services include, among others: due diligence services, accounting consultations and audits in connection with acquisitions, internal control reviews, attest services related to financial reporting that are not required by statute or regulation and consultation concerning financial accounting and reporting standards.
|
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES.
|
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.
|
CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT
|
CORPORATE GOVERNANCE
|
MINE SAFETY DISCLOSURE
|
FINANCIAL STATEMENTS
|
FINANCIAL STATEMENTS
|
EXHIBITS
|
|
(i)
|
Consolidated Balance Sheets at December 31, 2013 and 2012;
|
|
(ii)
|
Consolidated Statements of Operations for the years ended December 31, 2013, 2012 and 2011;
|
|
(iii)
|
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2013, 2012 and 2011;
|
|
(iv)
|
Consolidated Statements of Cash Flows for the years ended December 31, 2013, 2012 and 2011; and
|
|
(v)
|
Notes to Consolidated Financial Statements, tagged as blocks of text.
|
TOWER SEMICONDUCTOR LTD.
|
|||
|
By:
|
/s/ Russell C. Ellwanger | |
Russell C. Ellwanger
|
|||
Chief Executive Officer
|
|||
Page
|
|
F - 1
|
|
F - 2
|
|
F - 3
|
|
F - 4
|
|
F - 5
|
|
F - 6 - F - 7
|
|
F - 8 - F - 53
|
Brightman Almagor Zohar
1 Azrieli Center
Tel Aviv 67021
P.O.B. 16593, Tel Aviv 61164
Israel
Tel: +972 (3) 608 5555
Fax: +972 (3) 609 4022
info@deloitte.co.il
www.deloitte.com
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
||||||||||||
(dollars in thousands, except per share data)
|
||||||||||||
Year ended
|
||||||||||||
December 31,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
REVENUES
|
$ | 505,009 | $ | 638,831 | $ | 611,023 | ||||||
COST OF REVENUES
|
476,900 | 560,046 | 526,198 | |||||||||
GROSS PROFIT
|
28,109 | 78,785 | 84,825 | |||||||||
OPERATING COSTS AND EXPENSES
|
||||||||||||
Research and development
|
33,064 | 31,093 | 24,886 | |||||||||
Marketing, general and administrative
|
42,916 | 44,413 | 48,239 | |||||||||
Acquisition related and reorganization costs
|
-- | 5,789 | 1,493 | |||||||||
Amortization related to a lease agreement early termination
|
7,464 | -- | -- | |||||||||
83,444 | 81,295 | 74,618 | ||||||||||
OPERATING PROFIT (LOSS)
|
(55,335 | ) | (2,510 | ) | 10,207 | |||||||
INTEREST EXPENSES, NET
|
(32,971 | ) | (31,808 | ) | (27,797 | ) | ||||||
OTHER FINANCING EXPENSE, NET
|
(27,838 | ) | (27,583 | ) | (12,505 | ) | ||||||
GAIN FROM ACQUISITION
|
-- | -- | 19,467 | |||||||||
OTHER INCOME (EXPENSE), NET
|
(904 | ) | (1,042 | ) | 13,460 | |||||||
PROFIT (LOSS) BEFORE INCOME TAX
|
(117,048 | ) | (62,943 | ) | 2,832 | |||||||
INCOME TAX BENEFIT (EXPENSE)
|
9,388 | (7,326 | ) | (21,362 | ) | |||||||
LOSS FOR THE PERIOD
|
$ | (107,660 | ) | $ | (70,269 | ) | $ | (18,530 | ) | |||
BASIC LOSS PER ORDINARY SHARE
|
||||||||||||
Loss per share
|
$ | (2.72 | ) | $ | (3.17 | ) | $ | (0.90 | ) | |||
Weighted average number of ordinary
|
||||||||||||
shares outstanding - in thousands
|
39,633 | 22,173 | 20,649 |
Year ended
|
||||||||||||
December 31,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Loss for the period
|
$ | (107,660 | ) | $ | (70,269 | ) | $ | (18,530 | ) | |||
Foreign currency translation adjustment
|
(14,242 | ) | (9,097 | ) | 3,729 | |||||||
Change in employees plan assets and benefit obligations, net of taxes
|
||||||||||||
$1,268, $1,591 and $174 for the years ended December 31, 2013, 2012
|
||||||||||||
and 2011, respectively
|
2,350 | 2,440 | 518 | |||||||||
Net unrealized gains (losses) on derivatives
|
(759 | ) | 1,090 | (1,326 | ) | |||||||
Comprehensive loss for the period
|
$ | (120,311 | ) | $ | (75,836 | ) | $ | (15,609 | ) |
Accumulated
Other
comprehensive
income (loss)
|
||||||||||||||||||||||||||||||||||||
Ordinary shares
|
Additional
paid-in
capital
|
Cumulative
stock based
compensation
|
||||||||||||||||||||||||||||||||||
Shares-
|
Capital
notes
|
Treasury
stock
|
Accumulated
deficit
|
|||||||||||||||||||||||||||||||||
in thousands
|
Amount
|
Total
|
||||||||||||||||||||||||||||||||||
BALANCE - DECEMBER 31, 2010
|
17,789 | $ | 68,053 | $ | 770,987 | $ | 311,472 | $ | 28,982 | $ | (9,072 | ) | $ | (829 | ) | $ | (1,051,811 | ) | $ | 117,782 | ||||||||||||||||
Shares issued in consideration
|
||||||||||||||||||||||||||||||||||||
of acquisitionof a subsidiary
|
1,312 | 5,777 | 16,853 | 22,630 | ||||||||||||||||||||||||||||||||
Issuance of shares and warrants
|
1,805 | 7,557 | 27,251 | 34,808 | ||||||||||||||||||||||||||||||||
Conversion of convertible debentures to shares
|
277 | 1,118 | 5,362 | 6,480 | ||||||||||||||||||||||||||||||||
Employee stock-based compensation
|
8,107 | 8,107 | ||||||||||||||||||||||||||||||||||
Tax benefit relating to stock based compensation
|
45 | 45 | ||||||||||||||||||||||||||||||||||
Exercise of options
|
123 | 515 | (55 | ) | 460 | |||||||||||||||||||||||||||||||
Other comprehensive income
|
2,921 | 2,921 | ||||||||||||||||||||||||||||||||||
Loss for the year
|
(18,530 | ) | (18,530 | ) | ||||||||||||||||||||||||||||||||
BALANCE - DECEMBER 31, 2011
|
21,306 | $ | 83,020 | $ | 820,443 | $ | 311,472 | $ | 37,089 | $ | (9,072 | ) | $ | 2,092 | $ | (1,070,341 | ) | $ | 174,703 | |||||||||||||||||
Issuance of shares and warrants
|
200 | 796 | 4,319 | 5,115 | ||||||||||||||||||||||||||||||||
Employee stock-based compensation
|
5,737 | 5,737 | ||||||||||||||||||||||||||||||||||
Exercise of options
|
125 | 486 | 52 | 538 | ||||||||||||||||||||||||||||||||
Beneficial conversion feature
|
109,768 | 109,768 | ||||||||||||||||||||||||||||||||||
Other comprehensive loss
|
(5,567 | ) | (5,567 | ) | ||||||||||||||||||||||||||||||||
Loss for the year
|
(70,269 | ) | (70,269 | ) | ||||||||||||||||||||||||||||||||
Capital notes
|
767 | 2,978 | 3,232 | (6,210 | ) | -- | ||||||||||||||||||||||||||||||
BALANCE - DECEMBER 31, 2012
|
22,398 | $ | 87,280 | $ | 937,814 | $ | 305,262 | $ | 42,826 | $ | (9,072 | ) | $ | (3,475 | ) | $ | (1,140,610 | ) | $ | 220,025 | ||||||||||||||||
Issuance of shares and warrants
|
8,148 | 33,986 | 4,889 | 38,875 | ||||||||||||||||||||||||||||||||
Employee stock-based compensation
|
2,735 | 2,735 | ||||||||||||||||||||||||||||||||||
Tax benefit relating to stock based compensation
|
(181 | ) | (181 | ) | ||||||||||||||||||||||||||||||||
Exercise of options
|
24 | 100 | 5 | 105 | ||||||||||||||||||||||||||||||||
Other comprehensive loss
|
(12,651 | ) | (12,651 | ) | ||||||||||||||||||||||||||||||||
Capital notes
|
17,386 | 71,410 | 141,303 | (212,713 | ) | -- | ||||||||||||||||||||||||||||||
Loss for the year
|
(107,660 | ) | (107,660 | ) | ||||||||||||||||||||||||||||||||
BALANCE - DECEMBER 31, 2013
|
47,956 | $ | 192,776 | $ | 1,084,011 | $ | 92,549 | $ | 45,380 | (9,072 | ) | $ | (16,126 | ) | $ | (1,248,270 | ) | $ | 141,248 | |||||||||||||||||
BALANCE, NET OF TREASURY STOCK - AS OF
DECEMBER 31, 2013
|
47,870 |
Year ended
|
||||||||||||
December 31,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
CASH FLOWS - OPERATING ACTIVITIES
|
||||||||||||
Loss for the period
|
$ | (107,660 | ) | $ | (70,269 | ) | $ | (18,530 | ) | |||
Adjustments to reconcile loss for the period
|
||||||||||||
to net cash provided by operating activities:
|
||||||||||||
Income and expense items not involving cash flows:
|
||||||||||||
Depreciation and amortization
|
164,824 | 173,585 | 162,679 | |||||||||
Effect of indexation, translation and fair value measurement on debt
|
4,091 | 13,544 | (9,312 | ) | ||||||||
Other expense (income), net and reorganization costs
|
904 | 6,831 | (15,899 | ) | ||||||||
Gain from acquisition
|
-- | -- | (19,467 | ) | ||||||||
Changes in assets and liabilities:
|
||||||||||||
Trade accounts receivable
|
(5,194 | ) | (6,857 | ) | (7,686 | ) | ||||||
Other receivables and other current assets
|
(3,647 | ) | (843 | ) | 3,999 | |||||||
Inventories
|
(780 | ) | 2,316 | (3,999 | ) | |||||||
Trade accounts payable
|
25 | (7,603 | ) | 21,733 | ||||||||
Deferred revenue and customers' advances
|
1,202 | (4,475 | ) | (35,858 | ) | |||||||
Other current liabilities
|
(38 | ) | (23,942 | ) | 18,174 | |||||||
Deferred tax liability, net
|
(11,453 | ) | 9,126 | 4,791 | ||||||||
Other long-term liabilities
|
(6 | ) | 3,840 | 7,368 | ||||||||
42,268 | 95,253 | 107,993 | ||||||||||
Reorganization – retirement plan
|
-- | (20,074 | ) | -- | ||||||||
Net cash provided by operating activities
|
42,268 | 75,179 | 107,993 | |||||||||
CASH FLOWS - INVESTING ACTIVITIES
|
||||||||||||
Investments in property and equipment
|
(81,819 | ) | (103,830 | ) | (117,166 | ) | ||||||
Proceeds from investment realization
|
-- | -- | 31,400 | |||||||||
Proceeds related to sale and disposal of property and equipment
|
4,775 | -- | 5,751 | |||||||||
Investments in other assets, intangible assets and others
|
(409 | ) | (4,498 | ) | -- | |||||||
Acquisition of subsidiary consolidated for the first time (a)
|
-- | -- | (40,000 | ) | ||||||||
Investment grants received
|
-- | 2,618 | 33,292 | |||||||||
Interest bearing deposits, including designated deposits
|
-- | (10,000 | ) | 98,007 | ||||||||
Net cash provided by (used in) investing activities
|
(77,453 | ) | (115,710 | ) | 11,284 | |||||||
CASH FLOWS - FINANCING ACTIVITIES
|
||||||||||||
Proceeds on account of shareholders' equity
|
38,956 | 104,690 | 22,653 | |||||||||
Proceeds from long-term loans
|
-- | 14,443 | -- | |||||||||
Short-term bank debt
|
-- | 3,800 | -- | |||||||||
Debts repayment
|
(6,540 | ) | (55,854 | ) | (141,242 | ) | ||||||
Net cash provided by (used in) financing activities
|
32,416 | 67,079 | (118,589 | ) | ||||||||
Effect of foreign exchange rate change
|
(7,758 | ) | (4,299 | ) | 86 | |||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
(10,527 | ) | 22,249 | 774 | ||||||||
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD
|
123,398 | 101,149 | 100,375 | |||||||||
CASH AND CASH EQUIVALENTS - END OF PERIOD
|
$ | 112,871 | $ | 123,398 | $ | 101,149 |
NOTE 1
|
-
|
DESCRIPTION OF BUSINESS AND GENERAL
|
NOTE 1
|
-
|
DESCRIPTION OF BUSINESS AND GENERAL (cont.)
|
NOTE 2
|
-
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
|
A.
|
Use of Estimates in Preparation of Financial Statements
|
|
B.
|
Principles of Consolidation
|
|
C.
|
Cash and Cash - Equivalents
|
|
D.
|
Allowance for Doubtful Accounts
|
NOTE 2
|
-
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
|
|
E.
|
Inventories
|
|
F.
|
Property and Equipment
|
|
(1)
|
Property and equipment are presented at cost, including capitalizable costs. Capitalizable costs include only costs that are identifiable with, and related to, the property and equipment and are incurred prior to their initial operation. Identifiable incremental, direct costs include costs associated with constructing, establishing and installing property and equipment, and costs directly related to pre-production test runs of property and equipment that are necessary to get it ready for its intended use. Maintenance and repairs are charged to expense as incurred.
Cost is presented net of investment grants received, and less accumulated depreciation and amortization.
Depreciation is calculated based on the straight-line method over the estimated economic lives commonly used in the industry of the assets or terms of the related leases, as follows:
|
Buildings and building improvements (including facility infrastructure)
|
10-25 years
|
Machinery and equipment, software and hardware
|
3-7 years
|
|
(2)
|
Impairment examinations and recognition are performed and determined based on the accounting policy outlined in R below.
|
|
G.
|
Intangible Assets
|
NOTE 2
|
-
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
|
|
H.
|
Other Assets
|
|
I.
|
Convertible Debentures
|
|
J.
|
Stock-Based Instruments in Financing Transactions
|
|
K.
|
Revenue Recognition
|
NOTE 2
|
-
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
|
|
K.
|
Revenue Recognition (cont.)
|
|
L.
|
Research and Development
|
NOTE 2
|
-
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
|
|
M.
|
Income Taxes
|
|
N.
|
Earnings (Loss) Per Ordinary Share
|
|
O.
|
Comprehensive Income (Loss)
|
NOTE 2
|
-
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
|
|
P.
|
Functional Currency and Exchange Rate Losses
|
|
Q.
|
Stock-Based Compensation
|
|
R.
|
Impairment of Assets
|
NOTE 2
|
-
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
|
|
R.
|
Impairment of Assets (cont.)
|
|
S.
|
Derivatives
|
|
T.
|
Classification of liabilities and equity
|
|
U.
|
Reclassification and presentation
|
|
V.
|
Initial Adoption of New Standards
|
NOTE 2
|
-
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
|
|
V.
|
Initial Adoption of New Standards (Cont.)
|
|
(1)
|
Changes in AOCI balances by component (e.g., unrealized gains or losses on available-for-sale securities or foreign-currency items). Both before-tax and net-of-tax presentations of the information are acceptable as long as an entity presents the income tax benefit or expense attributed to each component of OCI and reclassification adjustments in either the financial statements or the notes to the financial statements.
|
|
(2)
|
Significant items reclassified out of AOCI by component either on the face of the income statement or as a separate footnote to the financial statements.
|
NOTE 3
|
-
|
ACQUISITION OF NISHIWAKI FAB IN JAPAN
|
As of
June 3, 2011
|
||||
Current assets
|
$ | 25,783 | ||
Property, plant, and equipment, including real estate
|
145,559 | |||
Intangible assets
|
11,156 | |||
Other assets
|
2,900 | |||
Total assets as of acquisition date
|
185,398 | |||
Current liabilities
|
28,317 | |||
Long-term liabilities (mainly employees related termination benefits)
|
74,984 | |||
Total liabilities as of acquisition date
|
103,301 | |||
Net assets as of acquisition date
|
$ | 82,097 |
NOTE 3
|
-
|
ACQUISITION OF NISHIWAKI FAB IN JAPAN (cont.)
|
NOTE 4
|
-
|
JOINT VENTURE WITH PANASONIC IN JAPAN.
|
NOTE 5
|
-
|
OTHER RECEIVABLES
|
As of December 31,
|
||||||||
2013
|
2012
|
|||||||
Government receivables
|
$ | 4,435 | $ | 2,773 | ||||
Others
|
6,508 | 2,606 | ||||||
$ | 10,943 | $ | 5,379 |
NOTE 6
|
-
|
INVENTORIES
|
As of December 31,
|
||||||||
2013
|
2012
|
|||||||
Raw materials
|
$ | 19,647 | $ | 20,487 | ||||
Work in process
|
36,627 | 30,764 | ||||||
Finished goods
|
8,530 | 14,319 | ||||||
$ | 64,804 | $ | 65,570 |
NOTE 7
|
-
|
LONG
-
TERM INVESTMENTS
|
As of December 31,
|
||||||||
2013
|
2012
|
|||||||
Severance pay funds (see Note 15)
|
$ | 12,522 | $ | 11,307 | ||||
Others (see also investment in limited partnership below)
|
1,972 | 1,656 | ||||||
$ | 14,494 | $ | 12,963 |
NOTE 8
|
-
|
PROPERTY AND EQUIPMENT, NET
|
|
A.
|
Composition
|
As of December 31,
|
||||||||
2013
|
2012
|
|||||||
Cost:
|
||||||||
Buildings (including facility infrastructure)
|
$ | 306,674 | $ | 311,089 | ||||
Machinery and equipment
|
1,400,213 | 1,359,395 | ||||||
1,706,887 | 1,670,484 | |||||||
Accumulated depreciation:
|
||||||||
Buildings (including facility infrastructure)
|
(173,696 | ) | (156,662 | ) | ||||
Machinery and equipment
|
(1,183,152 | ) | (1,079,354 | ) | ||||
(1,356,848 | ) | (1,236,016 | ) | |||||
$ | 350,039 | $ | 434,468 |
|
B.
|
Investment Grants
|
NOTE 9
|
-
|
INTANGIBLE ASSETS, NET
|
As of December 31,
|
|||||||||||
Useful Life
|
2013
|
2012
|
|||||||||
Facilities lease rights
|
1,19 | $ | 16,988 | $ | 25,739 | ||||||
Technologies, patents and other rights
|
3.6;4;9 | 11,300 | 17,104 | ||||||||
Trade name
|
9 | 2,146 | 2,723 | ||||||||
Customer relationships
|
15 | 1,684 | 1,995 | ||||||||
Others
|
275 | 375 | |||||||||
$ | 32,393 | $ | 47,936 |
NOTE 10
|
-
|
OTHER ASSETS, NET
|
As of December 31,
|
||||||||
2013
|
2012
|
|||||||
Prepaid long-term land lease, net (see Note 16C)
|
$ | 3,899 | $ | 4,020 | ||||
Debenture issuance expenses and deferred financing charges
|
5,719 | 7,551 | ||||||
Prepaid expenses - long-term and others
|
1,929 | 2,197 | ||||||
$ | 11,547 | $ | 13,768 |
NOTE 11
|
-
|
OTHER CURRENT LIABILITIES
|
As of December 31,
|
||||||||
2013
|
2012
|
|||||||
Employees related liabilities
|
$ | 25,957 | $ | 28,101 | ||||
Interest payable (primarily in relation to debentures)
|
3,727 | 3,914 | ||||||
Other
|
4,267 | 4,225 | ||||||
$ | 33,951 | $ | 36,240 |
NOTE 12
|
-
|
LONG-TERM LOANS FROM BANKS
|
|
A.
|
Composition
|
As of December 31, 2013
|
||||
In U.S. Dollars, see also Notes 12B, 12C
|
$ | 150,155 | ||
In JPY, see also Note 12D
|
10,954 | |||
Total long-term loans from banks-principal amount
|
161,109 | |||
Fair value adjustments
|
(22,370 | ) | ||
Total long-term loans from banks
|
138,739 | |||
Current maturities
|
(30,000 | ) | ||
$ | 108,739 |
As of December 31, 2012
|
||||
In U.S. Dollars, see also Note 12B
|
$ | 131,055 | ||
In JPY, see also Note 12D
|
13,347 | |||
Total long-term loans from banks-principal amount
|
144,402 | |||
Fair value adjustments
|
(24,410 | ) | ||
Total long-term loans from banks
|
119,992 | |||
Current maturities
|
(25,000 | ) | ||
$ | 94,992 |
NOTE 12
|
-
|
LONG-TERM LOANS FROM BANKS (cont.)
|
|
B.
|
Facility Agreement with Tower
|
NOTE 12
|
-
|
LONG
-
TERM LOANS FROM BANKS (cont.)
|
|
C.
|
Wells Fargo Asset-Based Revolving Credit Line
|
|
D.
|
GE Capital Asset-Based Revolving Line
|
NOTE 13
|
-
|
DEBENTURES
|
|
A.
|
Composition by repayment schedule (carrying amount):
|
As of December 31, 2013
|
|||||||||||||||
Interest rate
|
2014
|
2015
|
2016
|
||||||||||||
Debentures Series D
|
8% | $ | 6,441 | $ | 6,441 | $ | 6,441 | ||||||||
Debentures Series F
|
7.8% | -- | 57,041 | 57,041 | |||||||||||
Jazz’s 2010 Notes (as defined in D below)
|
8% | -- | 81,181 | -- | |||||||||||
$ | 6,441 | $ | 144,663 | $ | 63,482 |
|
B.
|
Debentures Series D and E Issued in 2007
|
|
C.
|
Debentures Series F
|
NOTE 13
|
-
|
DEBENTURES (Cont.)
|
|
C.
|
Debentures Series F (cont.)
|
|
D.
|
Notes Issued By Jazz in 2010
|
NOTE 14
|
-
|
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASURMENTS
|
|
A.
|
Exchange Rate Transactions
|
|
B.
|
Concentration of Credit Risks
|
|
C.
|
Fair Value of Financial Instruments
|
NOTE 14
|
-
|
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASURMENTS (Cont.)
|
|
D.
|
Fair Value Measurements
|
NOTE 14
|
-
|
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASURMENTS (Cont.)
|
|
D.
|
Fair Value Measurements (cont.)
|
December 31, 2013
|
Quoted prices in active market for identical liability
(Level 1)
|
Significant other observable inputs
(Level 2)
|
Significant unobservable inputs
(Level 3)
|
|||||||||||||
Tower’s loans (including current maturities)(*)
|
$ | 108,685 | $ | -- | $ | -- | $ | 108,685 | ||||||||
Others
|
(18 | ) | -- | (65 | ) | 47 | ||||||||||
$ | 108,667 | $ | -- | $ | (65 | ) | $ | 108,732 |
Tower’s loans (including current maturities)
|
Others
|
|||||||
As of January 1, 2013 - at fair value
|
$ | 106,645 | $ | 295 | ||||
Total losses (gains) unrealized in earnings
|
2,040 | (248 | ) | |||||
As of December 31, 2013 - at fair value
|
108,685 | 47 | ||||||
Unrealized losses (gains) recognized in earnings from liabilities held at period end
|
$ | 2,040 | $ | (248 | ) |
NOTE 14
|
-
|
FINANCIAL INSTRUMENTS AND FAIR VALUE MEASURMENTS (cont.)
|
|
D.
|
Fair Value Measurements (cont.)
|
December 31, 2012
|
Quoted prices in active market for identical liability
(Level 1)
|
Significant other observable inputs
(Level 2)
|
Significant unobservable inputs
(Level 3)
|
|||||||||||||
Tower’s loans (including current maturities)(*)
|
$ | 106,645 | $ | -- | $ | -- | $ | 106,645 | ||||||||
Others
|
(589 | ) | -- | (884 | ) | 295 | ||||||||||
$ | 106,056 | $ | -- | $ | (884 | ) | $ | 106,940 |
Tower’s loans (including current maturities)
|
Others
|
|||||||
As of January 1, 2012 - at fair value
|
$ | 93,845 | $ | 2,268 | ||||
Total losses (gains) unrealized in earnings
|
12,800 | (1,973 | ) | |||||
As of December 31, 2012 - at fair value
|
$ | 106,645 | $ | 295 | ||||
Unrealized losses (gains) recognized in earnings from liabilities held at period end
|
$ | 12,800 | $ | (1,973 | ) |
NOTE 15
|
-
|
EMPLOYEE RELATED LIABILITIES
|
|
A.
|
Employee Termination Benefits
|
|
B.
|
Jazz Employee Benefit Plans
|
NOTE 15
|
-
|
EMPLOYEE RELATED LIABILITIES (cont.)
|
|
B.
|
Jazz Employee Benefit Plans (cont.)
|
Year ended December 31, 2013
|
Year ended December 31, 2012
|
Year ended December 31, 2011
|
||||||||||
Net periodic benefit cost
|
||||||||||||
Service cost
|
$ | 32 | $ | 146 | $ | 193 | ||||||
Interest cost
|
126 | 399 | 573 | |||||||||
Expected return on the plan’s assets
|
-- | -- | -- | |||||||||
Amortization of transition obligation (asset)
|
-- | -- | -- | |||||||||
Amortization of prior service costs
|
(1,703 | ) | (244 | ) | 114 | |||||||
Amortization of net (gain) or loss
|
(132 | ) | -- | 109 | ||||||||
Total net periodic benefit cost
|
$ | (1,677 | ) | $ | 301 | $ | 989 | |||||
Other changes in plan assets and benefits obligations recognized in other comprehensive income
|
||||||||||||
Prior service cost for the period
|
$ | (91 | ) | $ | (3,851 | ) | $ | (990 | ) | |||
Net (gain) or loss for the period
|
(668 | ) | (1,355 | ) | (1,752 | ) | ||||||
Amortization of transition obligation (asset)
|
-- | -- | -- | |||||||||
Amortization of prior service costs
|
1,703 | 244 | (114 | ) | ||||||||
Amortization of net gain or (loss)
|
132 | -- | (109 | ) | ||||||||
Total recognized in other comprehensive income (expense)
|
$ | 1,076 | $ | (4,962 | ) | $ | (2,965 | ) | ||||
Total recognized in net periodic benefit cost and other comprehensive income
|
$ | (601 | ) | $ | (4,661 | ) | $ | (1,976 | ) |
NOTE 15
|
-
|
EMPLOYEE RELATED LIABILITIES (cont.)
|
|
B.
|
Jazz Employee Benefit Plans (cont.)
Postretirement Medical Plan (cont.)
|
Increase
|
Decrease
|
|||||||
Effect on service cost and interest cost
|
$ | 13 | $ | (10 | ) | |||
Effect on postretirement benefit obligation
|
$ | 145 | $ | (116 | ) |
Year ended December 31, 2013
|
Year ended December 31, 2012
|
Year ended December 31, 2011
|
||||||||||
Change in benefit obligation:
|
||||||||||||
Benefit obligation at beginning of period
|
$ | 2,995 | $ | 7,749 | $ | 9,811 | ||||||
Service cost
|
32 | 146 | 193 | |||||||||
Interest cost
|
126 | 399 | 573 | |||||||||
Benefits paid
|
(77 | ) | (93 | ) | (86 | ) | ||||||
Change in plan provisions
|
(91 | ) | (3,851 | ) | (990 | ) | ||||||
Actuarial gain
|
(668 | ) | (1,355 | ) | (1,752 | ) | ||||||
Benefit obligation end of period
|
$ | 2,317 | $ | 2,995 | $ | 7,749 | ||||||
Change in plan assets:
|
||||||||||||
Fair value of plan assets at beginning of period
|
$ | -- | $ | -- | $ | -- | ||||||
Actual return on plan assets
|
-- | -- | -- | |||||||||
Employer contribution
|
77 | 93 | 86 | |||||||||
Benefits paid
|
(77 | ) | (93 | ) | (86 | ) | ||||||
Fair value of plan assets at end of period
|
$ | -- | $ | -- | $ | -- | ||||||
Funded status
|
$ | (2,317 | ) | $ | (2,995 | ) | $ | (7,749 | ) |
NOTE 15
|
-
|
EMPLOYEE RELATED LIABILITIES (cont.)
|
|
B.
|
Jazz Employee Benefit Plans (cont.)
Postretirement Medical Plan (cont.)
|
As of
December 31, 2013
|
As of
December 31, 2012
|
As of
December 31, 2011
|
||||||||||
Amounts recognized in statement of financial position:
|
||||||||||||
Non-current assets
|
$ | -- | $ | -- | $ | -- | ||||||
Current liabilities
|
(89 | ) | (132 | ) | (137 | ) | ||||||
Non-current liabilities
|
(2,228 | ) | (2,863 | ) | (7,612 | ) | ||||||
Net amount recognized
|
$ | (2,317 | ) | $ | (2,995 | ) | $ | (7,749 | ) | |||
Weighted average assumptions used:
|
||||||||||||
Discount rate
|
5.20 | % | 4.30 | % | 5.20 | % | ||||||
Rate of compensation increases
|
N/A | N/A | N/A | |||||||||
Assumed health care cost trend rates:
|
||||||||||||
Health care cost trend rate assumed for next year
(Pre 65/ Post 65)
|
7.75/25.00 | % | 8.25/35.00 | % | 8.25/57.00 | % | ||||||
Ultimate rate (Pre 65/ Post 65)
|
5.00/5.00 | % | 5.00/5.00 | % | 5.00/5.00 | % | ||||||
Year the ultimate rate is reached (Pre 65/ Post 65)
|
2022/2022 | 2022/2022 | 2021/2019 |
Fiscal Year
|
Other Benefits
|
|||
2014
|
$ | 89 | ||
2015
|
83 | |||
2016
|
182 | |||
2017
|
101 | |||
2018
|
116 | |||
2019 - 2023
|
$ | 678 |
NOTE 15
|
-
|
EMPLOYEE RELATED LIABILITIES (cont.)
|
|
B.
|
Jazz Employee Benefit Plans (cont.)
Jazz Pension Plan (cont.)
|
Year ended December 31, 2013
|
Year ended December 31, 2012
|
Year ended December 31, 2011
|
||||||||||
Net periodic benefit cost
|
||||||||||||
Service cost
|
$ | -- | $ | -- | $ | -- | ||||||
Interest cost
|
732 | 761 | 736 | |||||||||
Expected return on plan assets
|
(948 | ) | (817 | ) | (810 | ) | ||||||
Amortization of transition obligation(asset)
|
-- | -- | -- | |||||||||
Amortization of prior service costs
|
-- | -- | -- | |||||||||
Amortization of net (gain) or loss
|
97 | 70 | -- | |||||||||
Total net periodic benefit cost
|
$ | (119 | ) | $ | 14 | $ | (74 | ) | ||||
Other changes in plan assets and benefits obligations recognized in other comprehensive income
|
||||||||||||
Prior service cost for the period
|
$ | 93 | $ | -- | $ | -- | ||||||
Net (gain) or loss for the period
|
(4,696 | ) | 1,000 | 2,468 | ||||||||
Amortization of transition obligation (asset)
|
-- | -- | -- | |||||||||
Amortization of prior service costs
|
-- | -- | -- | |||||||||
Amortization of net gain or (loss)
|
(97 | ) | (70 | ) | -- | |||||||
Total recognized in other comprehensive income (expense)
|
$ | (4,700 | ) | $ | 930 | $ | 2,468 | |||||
Total recognized in net periodic benefit cost and other comprehensive income (expense)
|
$ | (4,819 | ) | $ | 944 | $ | 2,394 | |||||
Weighted average assumptions used:
|
||||||||||||
Discount rate
|
4.30 | % | 5.10 | % | 5.70 | % | ||||||
Expected return on plan assets
|
7.50 | % | 7.50 | % | 7.50 | % | ||||||
Rate of compensation increases
|
N/A | N/A | N/A |
Year ended December 31, 2013
|
Year ended December 31, 2012
|
Year ended December 31, 2011
|
||||||||||
Estimated amounts that will be amortized from accumulated other comprehensive
income in the next fiscal year ending :
|
||||||||||||
Transition obligation (asset)
|
$ | -- | $ | -- | $ | -- | ||||||
Prior service cost
|
3 | -- | -- | |||||||||
Net actuarial (gain) or loss
|
$ | -- | $ | 97 | $ | -- |
NOTE 15
|
-
|
EMPLOYEE RELATED LIABILITIES (Cont.)
|
|
B.
|
Jazz Employee Benefit Plans (Cont.)
Jazz Pension Plan (cont.)
|
Year ended December 31, 2013
|
Year ended December 31, 2012
|
Year ended December 31, 2011
|
||||||||||
Change in benefit obligation:
|
||||||||||||
Benefit obligation at beginning of period
|
$ | 17,272 | $ | 15,134 | $ | 13,105 | ||||||
Service cost
|
-- | -- | -- | |||||||||
Interest cost
|
732 | 761 | 736 | |||||||||
Benefits paid
|
(437 | ) | (293 | ) | (273 | ) | ||||||
Change in plan provisions
|
93 | -- | -- | |||||||||
Actuarial loss (gain)
|
(1,787 | ) | 1,670 | 1,566 | ||||||||
Benefit obligation end of period
|
$ | 15,873 | $ | 17,272 | $ | 15,134 | ||||||
Change in plan assets
|
||||||||||||
Fair value of plan assets at beginning of period
|
$ | 12,543 | $ | 10,842 | $ | 10,742 | ||||||
Actual return on plan assets
|
3,857 | 1,488 | (92 | ) | ||||||||
Employer contribution
|
689 | 506 | 465 | |||||||||
Benefits paid
|
(437 | ) | (293 | ) | (273 | ) | ||||||
Fair value of plan assets at end of period
|
$ | 16,652 | $ | 12,543 | $ | 10,842 | ||||||
Funded status
|
$ | 779 | $ | (4,729 | ) | $ | (4,292 | ) | ||||
Accumulated benefit obligation
|
$ | 15,873 | $ | 17,272 | $ | 15,134 | ||||||
Amounts recognized in statement of financial position
|
||||||||||||
Non-current assets
|
$ | 779 | $ | -- | $ | -- | ||||||
Current liabilities
|
-- | -- | -- | |||||||||
Non-current liabilities
|
-- | (4,729 | ) | (4,292 | ) | |||||||
Net amount recognized
|
$ | 779 | $ | (4,729 | ) | $ | (4,292 | ) | ||||
Weighted average assumptions used
|
||||||||||||
Discount rate
|
5.10 | % | 4.30 | % | 5.10 | % | ||||||
Expected return on plan assets
|
7.50 | % | 7.50 | % | 7.50 | % | ||||||
Rate of compensation increases
|
N/A | N/A | N/A |
NOTE 15
|
-
|
EMPLOYEE RELATED LIABILITIES (cont.)
|
|
B.
|
Jazz Employee Benefit Plans (cont.)
Jazz Pension Plan (cont.)
|
Fiscal Year
|
Other Benefits
|
|||
2014
|
$ | 540 | ||
2015
|
615 | |||
2016
|
684 | |||
2017
|
748 | |||
2018
|
806 | |||
2019 - 2023
|
$ | 4,829 |
Level 1
|
Level 2
|
Level 3
|
||||||||||
Investments in Mutual Funds
|
$ | -- | $ | 16,652 | $ | -- | ||||||
Total plan assets at fair value
|
$ | -- | $ | 16,652 | $ | -- |
Level 1
|
Level 2
|
Level 3
|
||||||||||
Investments in Mutual Funds
|
$ | -- | $ | 12,543 | $ | -- | ||||||
Total plan assets at fair value
|
$ | -- | $ | 12,543 | $ | -- |
Asset Category:
|
December 31, 2013
|
Target allocation 2014
|
||||||
Equity securities
|
86 | % | 65%-75 | % | ||||
Debt securities
|
14 | % | 25%-35 | % | ||||
Real estate
|
0 | % | 0 | % | ||||
Other
|
0 | % | 0 | % | ||||
Total
|
100 | % | 100 | % |
NOTE 16
|
-
|
COMMITMENTS AND CONTINGENCIES
|
|
A.
|
Commitments and Contingencies Relating to Fab 2
|
|
(1)
|
Facility Agreement
Liens
The Company has liens on its assets. For Liens regarding Tower's Facility Agreement, see Note 12B, for liens relating to Jazz Credit Line Agreement, see Note 12C and for TJP GE credit line see Note 12D.
Offer by the Israeli Banks
If one or more certain bankruptcy related events occur, the Israeli Banks are entitled to bring a firm offer made by a potential investor to purchase Tower’s ordinary shares (“the Offer”) at a price provided in the Offer. In such case, Tower shall be required thereafter to procure a rights offering to invest up to 60% of the amount of the Offer on the same terms. If the Offer is conditioned on the offeror purchasing a majority of Tower’s outstanding share capital, the rights offering will be limited to allow for this, unless TIC and the principal shareholders existing at the time that Tower entered into the Facility Agreement with the Israeli Banks (SanDisk Corporation, Macronix International Co. Ltd., and Alliance Semiconductor Corporation) agree to exercise in a rights offering rights applicable to their shareholdings and agree to purchase in a private placement enough shares to ensure that the full amount of the Offer is invested.
For further details in regard to the Facility Agreement, see Note 12B.
|
|
(2)
|
Approved Enterprise Status
For details regarding Approved Enterprise Status relating to Fab 2, see Note 21A, 8B.
|
|
B.
|
License Agreements
|
NOTE 16
|
-
|
COMMITMENTS AND CONTINGENCIES (cont.)
|
|
C.
|
Leases
|
2014
|
2015
|
2016
|
2017
|
2018
|
Thereafter
|
Total
|
||||||||||||||||||||||
Operating leases
|
$ | 1,898 | $ | 2,096 | $ | 2,108 | $ | 693 | $ | 372 | $ | 408 | $ | 7,575 |
NOTE 16
|
-
|
COMMITMENTS AND CONTINGENCIES (cont.)
|
|
D.
|
Other Principal Agreements
|
|
(1)
|
Siliconix
In 2004, Tower and Siliconix incorporated (“Siliconix”), a subsidiary of Vishay Intertechnology Inc., entered into a definitive long-term foundry agreement for semiconductor manufacturing. During recent years, the parties amended the agreement several times to revise the terms of the purchase of wafers and transfer additional product platforms to Tower for the manufacturing of new products.
|
|
(2)
|
An agreement with an Asian entity
In November 2009, Tower entered into a definitive agreement with an Asian entity for the capacity ramp-up and upgrade of the entity’s current installed and commissioned eight inch refurbished wafer fabrication facility with 0.18 micron Complementary Metal Oxide Semiconductor (CMOS) technology. Said facility has 0.25 micron and lower geometries.
Under said agreement, Tower provides, on a turn-key basis, technical consultation, know-how, training and turn-key manufacturing solutions, including arranging for the required manufacturing and the transfer of certain equipment required for the fab ramp-up and upgrade. The project is divided into several phases of implementation: (i) supply of documents of the offered 0.18 micron CMOS technology; (ii) project planning; (iii) supply process equipment; (iv) installation and acceptance of process equipment; (v) process set-up and integration; and (vi) technology qualification and production. The total agreement value is approximately $130,000, of which approximately $123,000 was paid as of December 31, 2013.
Payments are based on performance of milestones derived from the phases above and delivery of the deliverables. As of December 31, 2013, the Company substantially completed the project. The following are the major payment milestones: shipment of process equipment; delivery of process flow document of the 0.18 micron technology; delivery of detailed working plans; design of clean room; delivery of process equipment; training and integration; and performance of qualification tests and analyses.
During the years ended December 31, 2013, 2012 and 2011, Tower recorded approximately $3,400, $15,400 and $36,200 revenues, respectively relating to said agreement.
|
NOTE 16
|
-
|
COMMITMENTS AND CONTINGENCIES (cont.)
|
|
E.
|
Environmental Affairs
|
|
F.
|
Special Security Agreement
|
|
G.
|
Other Commitments
|
NOTE 17
|
-
|
SHAREHOLDERS’ EQUITY
|
|
A.
|
Description of Ordinary Shares
|
|
B.
|
Share Option Plans
|
(1)
|
General
The Company has granted to its employees and directors options to purchase ordinary shares under several option plans adopted by the Company. The particular provisions of each plan and grant vary as to vesting period, exercise price, exercise period and other terms. Generally, the options are granted at an exercise price which equals either the closing market price of the ordinary shares immediately prior to the date of grant, or, an average of the closing price in the thirty trading days immediately prior to the date of grant, vest over up to a three or four year period according to various vesting schedules, and are not exercisable beyond seven or ten years from the grant date.
As of December 31, 2013, 446 thousand options outstanding under the Company’s option plans except for those plans described below (the "Old Plans").
No further options may be granted under Old Plans.
|
(2)
|
Tower’s 2009 Share Incentive Plans (the "2009 Plans")
In 2009 the Company adopted new share incentive Plans to directors officers, employees and its subsidiaries. The options granted at an exercise price which equals the closing market price of the ordinary shares immediately prior to the date of grant, vest over up to a three, and are not exercisable beyond seven years from the grant date.
As of December 31, 2013, 2,110 thousand options outstanding under the 2009 Plans. No further grants may be made under these plans.
|
NOTE 17
|
-
|
SHAREHOLDERS’ EQUITY (cont.)
|
|
B.
|
Share Option Plans (cont.)
|
|
(3)
|
Tower’s 2013 Share Incentive Plan (the "2013 Plan")
|
|
(4)
|
Independent Directors’ Option Plan
|
NOTE 17
|
-
|
SHAREHOLDERS’ EQUITY (cont.
|
|
B.
|
Share Option Plans (cont.)
|
|
(5)
|
Summary of the Status of all the Company’s Employee and Director Share Options
|
2013
|
2012
|
2011
|
||||||||||||||||||||||
Number
of share options
|
Weighted average exercise price
|
Number
of share options
|
Weighted average exercise price
|
Number
of share options
|
Weighted average exercise price
|
|||||||||||||||||||
Outstanding as of beginning of year
|
4,351,487 | $ | 15.21 | 4,483,793 | $ | 14.97 | 3,946,484 | $ | 14.82 | |||||||||||||||
Granted
|
5,402,961 | 4.54 | 30,336 | 12.64 | 787,717 | 19.29 | ||||||||||||||||||
Exercised
|
23,932 | 4.35 | 125,260 | 4.36 | 87,887 | 5.70 | ||||||||||||||||||
Terminated
|
4,273 | 52.79 | 411 | 63.57 | 14,738 | 168.97 | ||||||||||||||||||
Forfeited
|
1,659,494 | 23.76 | 36,971 | 20.23 | 147,783 | 24.19 | ||||||||||||||||||
Outstanding as of end of year
|
8,066,749 | 6.31 | 4,351,487 | 15.21 | 4,483,793 | 14.97 | ||||||||||||||||||
Options exercisable as of end of year
|
2,419,180 | $ | 9.03 | 3,553,662 | $ | 14.28 | 2,678,946 | $ | 17.23 |
|
(6)
|
Summary of Information about Employee Share Options Outstanding
|
Outstanding as of December 31, 2013
|
Exercisable as of December 31, 2013
|
|||||||||||||||||||||
Range of exercise
Prices
|
Number outstanding
|
Weighted average remaining contractual life
(in years)
|
Weighted average exercise price
|
Number exercisable
|
Weighted average exercise price
|
|||||||||||||||||
$ | 2.70-4.95 | 7,039,294 | 5.82 | $ | 4.49 | 1,652,333 | $ | 4.34 | ||||||||||||||
6.00-15.90 | 306,762 | 5.11 | 13.35 | 270,060 | 13.60 | |||||||||||||||||
17.25-20.85 | 290,581 | 4.48 | 17.30 | 154,073 | 17.33 | |||||||||||||||||
21.00-28.20 | 397,769 | 3.33 | 22.75 | 310,371 | 23.16 | |||||||||||||||||
$ | 32.25-48.75 | 32,343 | 0.89 | $ | 35.87 | 32,343 | $ | 35.87 | ||||||||||||||
8,066,749 | 2,419,180 |
NOTE 17
|
-
|
SHAREHOLDERS’ EQUITY (cont.)
|
|
B.
|
Share Option Plans (cont.)
|
|
(6)
|
Summary of Information about Employee Share Options Outstanding (cont.)
|
Year Ended December 31,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
The intrinsic value of options exercised
|
$ | 42 | $ | 927 | $ | 845 | ||||||
The original fair value of options exercised
|
$ | 158 | $ | 819 | $ | 512 |
|
(7)
|
Weighted Average Grant-Date Fair Value of Options Granted to Employees
The weighted average grant-date fair value of the options granted during 2013, 2012 and 2011 to employees and directors amounted to $2.10, $6.00 and $8.70 per option, respectively. The Company utilizes the Black-Scholes model. The Company estimated the fair value, utilizing the following assumptions for the years 2013, 2012 and 2011 (all in weighted averages):
|
2013
|
2012
|
2011
|
|||||||
Risk-free interest rate
|
0.77%-1.77% | 0.65%-1.04% | 0.94%-2.3% | ||||||
Expected life of options
|
4.75 years
|
4.75 years
|
4.75 years
|
||||||
Expected annual volatility
|
51.16%-64.52% | 51.76%-55.04% | 49.42%-54.45% | ||||||
Expected dividend yield
|
None
|
None
|
None
|
|
Risk free interest rate - is based on yield curve rates published by the US Department of Treasury.
Expected life of options - is based upon historical experience and represents the period of time that options granted are expected to be outstanding.
Expected annual volatility - is based on the volatility of the Company’s ordinary share prior to the options award for the term identical to expected life.
|
NOTE 17
|
-
|
SHAREHOLDERS’ EQUITY (cont.)
|
|
B.
|
Share Option Plans (cont.)
|
|
(8)
|
Non-Employee Warrants - Israeli Banks Warrants
As of December 31, 2013, 309.4 thousand Israeli Banks’ warrants to purchase ordinary shares of Tower were outstanding and exercisable, at a weighted average exercise price of $37.40 per share. All of the warrants are exercisable until December 2016.
In lieu of paying the exercise price in cash, the Israeli Banks are entitled to exercise their warrants on a “cashless” basis, i.e. by forfeiting part of the warrants in exchange for ordinary shares equal to the aggregate fair market value of the ordinary shares underlying the warrants forfeited less the aggregate exercise price.
|
|
C.
|
Equity-Equivalent Capital Notes
|
|
D.
|
Treasury Stock
|
|
E.
|
Dividend Restriction
|
|
F.
|
Warrants J and Warrants 7
|
NOTE 17
|
-
|
SHAREHOLDERS’ EQUITY (cont.)
|
|
G.
|
Securities Issuance Pursuant to the Acquisition of TJP
|
|
H.
|
Rights Offering
|
NOTE 18
|
-
|
INFORMATION ON GEOGRAPHIC AREAS AND MAJOR CUSTOMERS
|
|
A.
|
Revenues by Geographic Area - as percentage of total sales
|
Year ended December 31,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
USA
|
77 | % | 81 | % | 78 | % | ||||||
Asia *
|
16 | 14 | 17 | |||||||||
Europe *
|
7 | 5 | 5 | |||||||||
Total
|
100 | % | 100 | % | 100 | % |
|
B.
|
Property and equipment, net - by Geographic Area
|
As of December 31,
|
||||||||
2013
|
2012
|
|||||||
Israel
|
$ | 180,976 | $ | 217,402 | ||||
United States
|
75,040 | 87,366 | ||||||
Japan
|
94,023 | 129,700 | ||||||
Total
|
$ | 350,039 | $ | 434,468 |
NOTE 18
|
-
|
INFORMATION ON GEOGRAPHIC AREAS AND MAJOR CUSTOMERS (cont.)
|
|
C.
|
Major Customers - as percentage of net accounts receivable balance
|
As of December 31,
|
||||||||
2013
|
2012
|
|||||||
Customer 1
|
20 | % | 30 | % | ||||
Customer 2
|
9 | % | 12 | % |
|
D.
|
Major Customers - as percentage of total sales
|
Year ended December 31,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Customer A
|
27 | % | 43 | % | 32 | % | ||||||
Other customers (*)
|
16 | 10 | 23 |
|
(*)
|
Represents sales to two different customers accounted for between 7% and 9% of sales during 2013; to three different customers accounted for between 3% and 6% of sales during 2012 and to four different customers accounted for between 4% and 7% of sales during 2011.
|
NOTE 19
|
-
|
INTEREST EXPENSES, NET AND OTHER FINANCING EXPENSES, NET
|
|
A.
|
Interest Expenses, Net
|
|
B.
|
Other Financing Expenses, Net
|
Year ended
December 31, 2013
|
Year ended
December 31, 2012
|
Year ended
December 31, 2011
|
||||||||||
Amortization on debt
|
$ | 20,860 | $ | 11,939 | $ | 19,073 | ||||||
Changes in fair value, (total level 3 changes in fair value as reported in Note 14D)
|
1,792 | 10,827 | (2,053 | ) | ||||||||
Changes in fair value on debentures, derivatives and warrants - other than level 3 as reported in Note 14D
|
-- | 1,284 | (5,624 | ) | ||||||||
Exchange rate difference (mainly due to the effect of the NIS/USD exchange rate changes on our NIS denominated debentures)
|
4,038 | 2,707 | (1,327 | ) | ||||||||
Others
|
1,148 | 826 | 2,436 | |||||||||
Other financing expenses, net
|
$ | 27,838 | $ | 27,583 | $ | 12,505 |
NOTE 20
|
-
|
OTHER INCOME, NET
|
NOTE 21
|
-
|
INCOME TAXES
|
|
A.
|
Approved Enterprise Status
|
|
B.
|
The company’s Income Tax provision is as follows:
|
Year Ended
|
||||||||||||
December 31, 2013
|
December 31, 2012
|
December 31, 2011
|
||||||||||
Current tax expense (benefit):
|
||||||||||||
Foreign
|
$ | (534 | ) | $ | (1,800 | ) | $ | 16,645 | ||||
Total current
|
(534 | ) | (1,800 | ) | 16,645 | |||||||
Deferred tax expense (benefit):
|
||||||||||||
Foreign
|
(8,854 | ) | 9,126 | 4,717 | ||||||||
Total deferred
|
(8,854 | ) | 9,126 | 4,717 | ||||||||
Income tax provision (benefit)
|
$ | (9,388 | ) | $ | 7,326 | $ | 21,362 |
NOTE 21
|
-
|
INCOME TAXES (cont.)
|
|
B.
|
The company’s Income Tax provision is as follows (cont.)
|
Year Ended
|
||||||||||||
December 31, 2013
|
December 31, 2012
|
December 31, 2011
|
||||||||||
Profit (loss) before taxes
|
||||||||||||
Domestic
|
$ | (90,497 | ) | $ | (83,049 | ) | $ | (47,541 | ) | |||
Foreign
|
(26,551 | ) | 20,106 | 50,373 | ||||||||
Total income (loss) before taxes
|
$ | (117,048 | ) | $ | (62,943 | ) | $ | 2,832 |
|
C.
|
Components of Deferred Tax Asset/Liability
|
As of December 31,
|
||||||||
2013
|
2012
|
|||||||
Net deferred tax benefit - current
|
||||||||
Net operating loss carryforwards
|
$ | 2,026 | $ | 758 | ||||
Employees benefits and compensation
|
4,003 | 4,409 | ||||||
Accruals, reserves and others
|
2,760 | 5,435 | ||||||
8,789 | 10,602 | |||||||
Valuation allowance
|
(2,779 | ) | (1,745 | ) | ||||
Total net current deferred tax benefit
|
$ | 6,010 | $ | 8,857 |
As of December 31,
|
||||||||
2013
|
2012
|
|||||||
Net deferred tax benefit - long-term
|
||||||||
Deferred tax assets -
|
||||||||
Net operating loss carryforwards
|
$ | 284,446 | $ | 271,631 | ||||
Employees benefits and compensation
|
4,605 | 5,756 | ||||||
Research and development
|
2,005 | 1,879 | ||||||
Others
|
1,212 | 664 | ||||||
292,268 | 279,930 | |||||||
Valuation allowance
|
(255,899 | ) | (238,320 | ) | ||||
$ | 36,369 | $ | 41,610 | |||||
Deferred tax liability - depreciation and amortization
|
(41,255 | ) | (55,099 | ) | ||||
Intangible assets
|
(6,929 | ) | (10,434 | ) | ||||
Debt discount
|
(884 | ) | (1,203 | ) | ||||
Others
|
(912 | ) | (1,279 | ) | ||||
Total net long-term deferred tax liability
|
$ | (13,611 | ) | $ | (26,405 | ) |
NOTE 21
|
-
|
INCOME TAXES (cont.)
|
|
C.
|
Components of Deferred Tax Asset/Liability (cont.)
|
Unrecognized tax benefits
|
||||
Balance at January 1, 2013
|
$ | 27,414 | ||
Additions for tax positions of current year
|
12 | |||
Reductions for tax positions of prior year
|
(371 | ) | ||
Translation differences
|
(1,379 | ) | ||
Balance at December 31, 2013
|
$ | 25,676 |
Unrecognized tax benefits
|
||||
Balance at January 1, 2012
|
$ | 32,377 | ||
Reductions for tax positions of prior year
|
(275 | ) | ||
Translation differences
|
(719 | ) | ||
Settlements
|
(3,969 | ) | ||
Balance at December 31, 2012
|
$ | 27,414 |
Unrecognized tax benefits
|
||||
Balance at January 1, 2011
|
$ | 14,908 | ||
Additions for tax positions of current year
|
8,462 | |||
Additions for tax positions of prior year
|
9,730 | |||
Reductions for tax positions of prior year
|
(723 | ) | ||
Balance at December 31, 2011
|
$ | 32,377 |
NOTE 21
|
-
|
INCOME TAXES (cont.)
|
|
D.
|
Effective Income Tax Rates
|
Year ended December 31,
|
||||||||||||
2013
|
2012
|
2011
|
||||||||||
Tax expense (benefit)
computed at statutory rates
|
$ | (29,262 | ) | $ | (15,736 | ) | $ | 680 | ||||
Effect of different tax rates in different jurisdictions
|
1,408 | 7,514 | 10,683 | |||||||||
Tax benefits for which deferred taxes were not recorded
|
20,139 | 15,955 | 7,300 | |||||||||
Permanent differences and other, net
|
(1,673 | ) | (407 | ) | 2,699 | |||||||
Income tax provision (benefit)
|
$ | (9,388 | ) | $ | 7,326 | $ | 21,362 |
|
E.
|
Net Operating Loss Carry forward
|
NOTE 21
|
-
|
INCOME TAXES (cont.)
|
|
F.
|
Final Tax Assessments
|
NOTE 22
|
-
|
RELATED PARTIES BALANCES AND TRANSACTIONS
|
|
A.
|
Balances
|
The nature of the relationships involved
|
As of December 31,
|
||||||||
2013
|
2012
|
||||||||
Trade accounts receivable
|
Trade accounts receivable
|
$ | -- | $ | 148 | ||||
Long-term investment
|
Equity investment in a limited partnership
|
$ | 60 | $ | 204 | ||||
Trade accounts payable
|
Trade accounts payable
|
$ | 90 | $ | 125 |
|
B.
|
Transactions
|
Description of the transactions
|
Year Ended December 31,
|
||||||||||||
2013
|
2012
|
2011
|
|||||||||||
Sales
|
Sales to a limited partnership
|
$ | 59 | $ | 431 | $ | 268 | ||||||
Cost of revenues
|
Purchase of services and goods from related parties of TIC
|
$ | 3,379 | $ | 2,853 | $ | 2,658 | ||||||
Financing expenses
|
Interest on Debentures Series B held by TIC
|
$ | -- | $ | -- | $ | 180 | ||||||
General and Administrative expenses
|
Mainly directors fees and reimbursement to directors
|
$ | 311 | $ | 238 | $ | 165 | ||||||
Other expense (income), net
|
Equity loss (profit) in a limited partnership
|
$ | 144 | $ | (184 | ) | $ | 214 |
|
EQUITY EQUIVALENT CONVERTIBLE CAPITAL NOTE
|
|
(Principal Amount of US $62,883,812.80)
|
1.
|
DEFINITIONS
|
|
In this Capital Note, the following terms have the meanings given to them in this clause 1:
|
1.1.
|
“Company”
includes any person that shall succeed to or assume the obligations of the Company under this Capital Note.
|
1.2.
|
“Holder”
shall mean any person who at the time shall be the registered holder of this Capital Note or any part thereof.
|
1.3.
|
“Ordinary Shares”
means the ordinary shares, nominal value NIS 15.00 (fifteen New Israel Sheqels) per share, of the Company (and any shares of capital stock substituted for the ordinary shares as a result of any stock split, stock dividend, recapitalisation, rights offering, exchange, merger or similar event or otherwise, including as described in this Capital Note).
|
2.
|
TERMS
|
|
The Principal Amount shall neither bear interest nor be linked to any index and shall be subordinated to all liabilities of the Company having priority over the Ordinary Shares.
|
|
The Principal Amount shall only be payable by the Company to the Holder out of distributions made upon the winding-up (whether solvent or insolvent), liquidation or dissolution of the Company and, in such event, on a
pari passu
and pro rata basis with the Ordinary Shares after payment of all liabilities of the Company having priority over the Ordinary Shares. For the purposes only of calculation of the allocation of such distributions between holders of the Capital Note and holders of Ordinary Shares, the holder of this Capital Note shall be deemed to own the number of Ordinary Shares into which this Capital Note may then be converted. The Company shall not be entitled to prepay or redeem this Capital Note.
|
|
This Capital Note shall be convertible into Ordinary Shares as set forth below and, for the removal of doubt, no such conversion shall be deemed a redemption or prepayment of this Capital Note.
|
3.
|
CONVERSION
|
3.1.
|
Conversion Right
|
|
The Holder of this Capital Note has the right, at the Holder’s option, at any time and from time to time, to convert this Capital Note, without payment of any additional consideration, in accordance with the provisions of this clause 3, in whole or in part, into fully-paid and non-assessable Ordinary Shares. The number of Ordinary Shares into which this Capital Note may be converted (
“the Conversion Shares”
) shall be determined by dividing the aggregate Principal Amount of this Capital Note by the conversion price in effect at the time of such conversion (
“the Conversion Price”
). The Conversion Price as previously adjusted shall be US $21.30, as adjusted further at any time and from time to time in accordance with clause 7 below.
|
3.2.
|
Conversion Procedure
|
|
This
Capital Note may be converted in whole or in part at any time and from time to time by the surrender of this Capital Note to the Company at its principal office together with written notice of the election to convert all or any portion of the Principal Amount thereof, duly signed on behalf of the Holder. The Company shall, on such surrender date or as soon as practicable thereafter, issue irrevocable instructions to its stock transfer agent to deliver the number of Conversion Shares to which the Holder shall be entitled as a result of such conversion as aforesaid, which Conversion Shares shall be issued in any of (i) unrestricted "street" name form, (ii) "book entry" form at the Company's stock transfer agent or (iii) certificated form without Securities Act restrictive legend, as shall be so instructed in writing by the Holder converting such Conversion Shares, in each case without stop transfer instructions being placed against such Conversion Shares. Such conversion, the issue and allotment of such Conversion Shares and the registration of the Holder in the register of members of the Company as the holder of such Conversion Shares shall be deemed to have been made immediately prior to the close of business on the date of such surrender of this Capital Note or portion thereof and the person or persons entitled to receive the Conversion Shares issuable upon such conversion shall be treated for all purposes as the record holder or holders as of such date of such number of Conversion Shares to which the Holder shall be entitled as a result of such conversion as aforesaid. In the event of a partial conversion, the Company shall concurrently issue to the Holder a replacement Capital Note of like tenor as this Capital Note, but representing the Principal Amount remaining after such partial conversion. For the avoidance of doubt, the Company confirms that the terms of this Capital Note, including, without limitation, this clause 3, constitute the issue terms of the Conversion Shares and that, accordingly, the right of the Company pursuant to clauses 16.1 and 16.2 of the Company's Articles of Association to delay the issuance of stock certificates for up to 6 (six) months after the allotment and registration of transfer is inapplicable. For the further removal of doubt, nothing herein shall derogate from the second sentence of clause 16.1 of the Company's Articles of Association.
|
4.
|
FRACTIONAL INTEREST
|
|
No fractional shares will be issued in connection with any conversion hereunder. The Company shall round-down, to the nearest whole number, the number of Conversion Shares issuable in connection with any conversion hereunder.
|
5.
|
CAPITAL NOTE CONFERS NO RIGHTS OF SHAREHOLDER
|
|
The Holder shall not, by virtue of this Capital Note, have any rights as a shareholder of the Company prior to actual conversion into Conversion Shares in accordance with clause 3.2 above.
|
6.
|
[INTENTIONALLY OMITTED]
|
7.
|
ADJUSTMENT OF CONVERSION PRICE AND NUMBER OF CONVERSION SHARES
|
|
The number and kind of securities issuable initially upon the conversion of this Capital Note and the Conversion Price shall be subject to adjustment at any time and from time to time upon the occurrence of certain events, as follows:
|
7.1.
|
Adjustment for Shares Splits and Combinations
|
|
If the Company at any time or from time to time effects a subdivision of the outstanding Ordinary Shares, the number of Conversion Shares issuable upon conversion of this Capital Note immediately before the subdivision shall be proportionately increased, and conversely, if the Company at any time or from time to time combines the outstanding Ordinary Shares, the number of Conversion Shares issuable upon conversion of this Capital Note immediately before the combination shall be proportionately decreased. Any adjustment under this clause 7.1 shall become effective at the close of business on the date the subdivision or combination becomes effective.
|
7.2.
|
Adjustment for Certain Dividends and Distributions
|
|
In the event the Company at any time, or from time to time, makes or fixes a record date for the determination of holders of Ordinary Shares entitled to receive a dividend or other distribution payable in additional Ordinary Shares, then and in each such event, the number of Ordinary Shares issuable upon conversion of this Capital Note shall be increased as of the time of such issuance or, in the event such a record date is fixed, as of the close of business on such record date, by multiplying the number of Ordinary Shares issuable upon conversion of this Capital Note by a fraction: (i) the numerator of which shall be the total number of Ordinary Shares issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, as applicable, plus the number of Ordinary Shares issuable in payment of such dividend or distribution; and (ii) the denominator of which is the total number of Ordinary Shares issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, as applicable; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the number of Ordinary Shares issuable upon conversion of this Capital Note shall be recomputed accordingly as of the close of business on such record date and thereafter the number of Ordinary Shares issuable upon conversion of this Capital Note shall be adjusted pursuant to this clause 7.2 as of the time of the actual payment of such dividends or distribution.
|
7.3.
|
Adjustments for Other Dividends and Distributions
|
|
In the event the Company at any time or from time to time makes, or fixes a record date for the determination of holders of Ordinary Shares entitled to receive a dividend or other distribution payable in securities of the Company other than Ordinary Shares (for the avoidance of doubt, other than in a rights offering as to which clause 7.7 shall be applicable), then in each such event provision shall be made so that the Holder shall receive upon conversion of this Capital Note and for no additional consideration, in addition to the number of Ordinary Shares receivable thereupon, the amount of securities of the Company that the Holder would have received had this Capital Note been converted immediately prior to such event, or the record date for such event, as applicable.
|
7.4.
|
Adjustment for Reclassification, Exchange and Substitution
|
|
If the Ordinary Shares issuable upon conversion of this Capital Note are changed into the same or a different number of shares of any class or classes of shares, whether by recapitalization, reclassification, exchange, substitution or otherwise (other than a subdivision or combination of shares, dividends payable in Ordinary Shares or other securities of the Company or a reorganization, merger, consolidation or sale of assets, provided for elsewhere in this clause 7), then and in any such event the Holder shall have the right thereafter to exercise this Capital Note into the kind and amount of shares and other securities receivable upon such recapitalization, reclassification, exchange, substitution or other change, by holders of the number of Ordinary Shares for which this Capital Note might have been converted immediately prior to such recapitalization, reclassification, exchange, substitution or other change (or the record date for such event), all subject to further adjustment as provided herein and under the Company’s Articles of Association.
|
7.5.
|
Reorganization, Mergers, Consolidations or Sales of Assets
|
|
If at any time or from time to time there is a capital reorganization of the Ordinary Shares (other than a recapitalization, subdivision, combination, reclassification, exchange or substitution of shares as provided for elsewhere in this clause 7), or a merger or consolidation of the Company with or into another corporation, or the sale of all or substantially all of the Company’s properties and assets to any other person, then, as a part of such reorganization, merger, consolidation or sale, provision shall be made so that the Holder shall thereafter be entitled to receive upon conversion of this Capital Note and for no additional consideration, the number of shares or other securities or property (including, without limitation, cash) of the Company, or of the successor corporation resulting from such merger or consolidation or sale, to which a holder of the number of Ordinary Shares issuable upon conversion of this Capital Note would have been entitled on such capital reorganization, merger, consolidation or sale.
|
7.6.
|
Other Transactions
|
|
In the event that the Company shall issue shares to its shareholders as a result of a split-off, spin-off or the like, then the Company shall only complete such issuance or other action if, as part thereof, allowance is made to protect the economic interest of the Holder either by increasing the number of Conversion Shares or by procuring that the Holder shall be entitled, on terms economically proportionate to those provided to its shareholders, to acquire additional shares of the spun-off or split-off entities.
|
7.7.
|
Rights Offerings
|
|
If the Company, at any time and from time to time, shall fix a record date for, or shall make a distribution to, its shareholders of rights or warrants to subscribe for or purchase any security (collectively,
“Rights”
), then, in each such event, the Company will provide the Holder, concurrently with the distribution of the Rights to its shareholders, identical rights, having terms and conditions identical to the Rights (for the avoidance of doubt, exercisable at the same time as the Rights), in such number to which the Holder would be entitled had the Holder converted this Capital Note into Conversion Shares immediately prior to the record date for such distribution, or if no record date shall be fixed, then immediately prior to such distribution , as applicable. Nothing in this clause 7.7 shall require the Company to complete any such distribution of Rights to its shareholders, including following the record date thereof, unless required pursuant to the terms of such distribution and, if such distribution of Rights to its shareholders is not completed in conformity with the terms of such distribution, then the Company shall be entitled not to complete the provision of rights to the Holder pursuant to this clause 7.7 above.
|
7.8.
|
Adjustment for Cash Dividends and Distributions
|
|
In the event the Company, at any time or from time to time until September 28, 2023, makes or fixes a record date for the determination of holders of Ordinary Shares entitled to receive a cash dividend or distribution, then and in each such event, the number of Ordinary Shares issuable upon conversion of this Capital Note shall be adjusted (for the avoidance of doubt, never decreased but either shall remain the same or increased), as of the close of business on such record date, by multiplying the number of Ordinary Shares issuable upon conversion of this Capital Note by a fraction: (i) the numerator of which shall be the closing price per share of the Ordinary Shares on the TASE on the determining date ("
Hayom Hakovaya
") for such dividend or distribution; and (ii) the denominator of which shall be the adjusted "ex-dividend" price of the Ordinary Shares as such prices set out in (i) and (ii) are determined in each case by the TASE in accordance with its rules.
|
7.9.
|
General Protection
|
|
The Company will not, by amendment of its Articles of Association or other charter document or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder, or impair the economic interest of the Holder, but will at all times in good faith assist in the carrying out of all the provisions hereof and in taking of all such actions and making all such adjustments as may be necessary or appropriate in order to protect the rights and the economic interests of the Holder against impairment.
|
7.10.
|
Notice of Capital Changes
|
|
If at any time the Company shall declare any dividend or distribution of any kind, or offer for subscription pro rata to the holders of Ordinary Shares any additional shares of any class, other rights or any security of any kind, or there shall be any capital reorganization or reclassification of the capital shares of the Company, or consolidation or merger of the Company with, or sale of all or substantially all of its assets to another company or there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company, or other transaction described in this clause 7, then, in any one or more of the said cases, the Company shall give the Holder prior written notice, by registered or certified mail, postage prepaid, of the date on which: (i) a record shall be taken for such dividend, distribution or subscription rights; or (ii) such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up shall take place, as the case may be. Such notice shall also specify the date as of which the holders of record of Ordinary Shares shall participate in such dividend or distribution, subscription rights, or shall be entitled to exchange their Ordinary Shares for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, as the case may be. Such written notice shall be given at least 14 (fourteen) days prior to the action in question and not less than 14 (fourteen) days prior to the record date in respect thereto.
|
7.11.
|
Adjustment of Conversion Price
|
|
Upon each adjustment in the number of Ordinary Shares purchasable hereunder, the Conversion Price shall be proportionately increased or decreased, as the case may be, in a manner that is the inverse of the manner in which the number of Ordinary Shares purchasable hereunder shall be adjusted.
|
7.12.
|
Notice of Adjustments
|
|
Whenever the Conversion Price or the number of Ordinary Shares issuable upon conversion of this Capital Note shall be adjusted pursuant to this clause 7, the Company shall prepare a certificate signed by the chief financial officer of the Company setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Conversion Price and the number of Conversion Shares issuable upon conversion of this Capital Note after giving effect to such adjustment, and shall cause copies of such certificate to be mailed (by first class mail, postage prepaid) to the Holder.
|
8.
|
OTHER TRANSACTIONS
|
|
In the event that the Company or its shareholders receive an offer to transfer all or substantially all of the shares in the Company, or to effect a merger or acquisition or sale of all or substantially all of the assets of the Company, then the Company shall promptly inform the Holder in writing of such offer.
|
9.
|
TRANSFER OF THIS CAPITAL NOTE BY THE HOLDER
|
|
This Capital Note shall be freely transferable or assignable by the Holder in whole or in part, at any time and from time to time, subject to the provisions of this clause 9. With respect to any transfer of this Capital Note, in whole or in part, the Holder shall surrender the Capital Note, together with a written request to transfer all or a portion of the Principal Amount of this Capital Note to the transferee, as well as, if reasonably requested by the Company, a written opinion of such Holder's counsel, to the effect that such offer, sale or other distribution may be effected without registration under the Securities Act. Upon surrender of such Capital Note (and delivery of such opinion, if so requested) by the Holder, the Company shall immediately register such transferee as the Holder of this Capital Note, or the portion thereof, transferred to such transferee, such registration shall be deemed to have been made immediately prior to the close of business on the date of such surrender and delivery (if applicable), and such transferee or transferees shall be treated for all purposes as the record holder or holders as of such date of a Capital Note in that portion of the Principal Amount of this Capital Note so transferred. The Company shall, as promptly as practicable, deliver to the Holder one or more Capital Notes, of like tenor as this Capital Note, except that the Principal Amount thereof shall be the amount transferred to such transferee, for delivery to the transferee or transferees (or, if the Holder requests, deliver such Capital Note directly to such transferee or transferees) and shall, if only a portion of the Principal Amount of this Capital Note is being transferred, concurrently deliver to the Holder one or more replacement Capital Notes to represent the portion of the Principal Amount of this Capital Note not so transferred. For the avoidance of doubt, the Company confirms that no approval by the Board of Directors of the Company of any transfer of this Capital Note or the Conversion Shares is required.
|
10.
|
REPRESENTATIONS, WARRANTIES AND COVENANTS
|
|
The Company represents, warrants and covenants to the Holder as follows:
|
10.1.
|
this Capital Note has been duly authorized and executed by the Company and is a valid and binding obligation of the Company enforceable in accordance with its terms;
|
10.2.
|
the Conversion Shares are duly authorized and are, and will be, reserved (for the avoidance of doubt, without the need for further corporate action by the Company) for issuance by the Company and, when issued in accordance with the terms hereof, will be validly issued, fully paid and non-assessable and not subject to any pre-emptive rights;
|
10.3.
|
the execution and delivery of this Capital Note are not, and the issuance of the Conversion Shares upon conversion of this Capital Note in accordance with the terms hereof will not be, inconsistent with the Company’s Certificate of Incorporation, Memorandum of Association or Articles of Association, do not and will not contravene any law, governmental or regulatory rule or regulation, including NASDAQ and TASE rules and regulations, judgment or order applicable to the Company, do not and will not conflict with or contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument of which the Company is a party or by which it is bound or, except for consents that have already been obtained and filings already made, require the consent or approval of, the giving of notice to, the registration with or the taking of any action in respect of or by, any Israeli or foreign governmental authority or agency or other person; and
|
10.4.
|
the Conversion Shares have been approved for listing and trading on TASE.
|
11.
|
LOSS, THEFT, DESTRUCTION OR MUTILATION OF CAPITAL NOTE
|
|
Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of any Capital Note or Conversion Shares certificate, and in case of loss, theft or destruction, of indemnity, or security reasonably satisfactory to it, and upon reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of such Capital Note or Conversion Shares certificate, if mutilated, the Company will make and deliver a new Capital Note or Conversion Shares certificate of like tenor and dated as of such cancellation, in lieu of such Capital Note or Conversion Shares certificate.
|
12.
|
NOTICES
|
|
All notices and other communications required or permitted hereunder to be given to a party to this Agreement shall be in writing and shall be faxed or mailed by registered or certified mail, postage prepaid, or otherwise delivered by hand or by messenger, addressed to such party's address as set forth below:
|
If to the Holder: |
Bank Leumi le-Israel B.M.
Special Credits Division
13 Ahad Haam Street
Tel Aviv
Israel
|
|||
Attention: | Head of Special | |||
Credits Division
|
||||
Facsimile: | (03) 514 9278 |
with a copy to (which
|
||||
shall not constitute notice): |
Leumi Partners
5 Azrieli Center (Square Tower)
36th Floor
Tel Aviv
Israel
|
|||
Attention: | Deputy CEO and | |||
General Counsel
|
||||
Facsimile: | (03) 514 1255 |
If to the Company: |
Tower Semiconductor Ltd.
P.O. Box 619
Ramat Gabriel Industrial Zone
Migdal Haemek 23105
|
|||
Attention: | Oren Shirazi, Acting | |||
Chief Financial Officer
|
||||
Facsimile: | (04) 604 7242 |
with a copy to: |
Yigal Arnon & Co.
1 Azrieli Center
Tel Aviv
Israel
|
|||
A ttention: | David H. Schapiro, Adv. | |||
Facsimile: | (03) 608 7714 |
|
or such other address with respect to a party as such party shall notify each other party in writing as above provided. Any notice sent in accordance with this clause 12 shall be effective: (a) if mailed, 5 (five) business days after mailing; (b) if sent by messenger, upon delivery; and (c) if sent via facsimile, 1 (one) business day following transmission and electronic confirmation of receipt.
|
13.
|
APPLICABLE LAW; JURISDICTION
|
|
This Capital Note shall be governed by and construed in accordance with the laws of the State of Israel as applicable to contracts between two residents of the State of Israel entered into and to be performed entirely within the State of Israel. Any dispute arising under or in relation to this Capital Note shall be resolved in the competent court for Tel Aviv-Jaffa district, and the Company and the Holder hereby submits irrevocably to the jurisdiction of such court.
|
Dated:
|
April 13, 2014
|
|
EQUITY EQUIVALENT CONVERTIBLE CAPITAL NOTE
|
|
(Principal Amount of US $15,974,992.90)
|
1.
|
DEFINITIONS
|
|
In this Capital Note, the following terms have the meanings given to them in this clause 1:
|
1.1.
|
“Company”
includes any person that shall succeed to or assume the obligations of the Company under this Capital Note.
|
1.2.
|
“Holder”
shall mean any person who at the time shall be the registered holder of this Capital Note or any part thereof.
|
1.3.
|
“Ordinary Shares”
means the ordinary shares, nominal value NIS 15.00 (fifteen New Israel Sheqels) per share, of the Company (and any shares of capital stock substituted for the ordinary shares as a result of any stock split, stock dividend, recapitalisation, rights offering, exchange, merger or similar event or otherwise, including as described in this Capital Note).
|
2.
|
TERMS
|
|
The Principal Amount shall neither bear interest nor be linked to any index and shall be subordinated to all liabilities of the Company having priority over the Ordinary Shares.
|
|
The Principal Amount shall only be payable by the Company to the Holder out of distributions made upon the winding-up (whether solvent or insolvent), liquidation or dissolution of the Company and, in such event, on a
pari passu
and pro rata basis with the Ordinary Shares after payment of all liabilities of the Company having priority over the Ordinary Shares. For the purposes only of calculation of the allocation of such distributions between holders of the Capital Note and holders of Ordinary Shares, the holder of this Capital Note shall be deemed to own the number of Ordinary Shares into which this Capital Note may then be converted. The Company shall not be entitled to prepay or redeem this Capital Note.
|
|
This Capital Note shall be convertible into Ordinary Shares as set forth below and, for the removal of doubt, no such conversion shall be deemed a redemption or prepayment of this Capital Note.
|
3.
|
CONVERSION
|
3.1.
|
Conversion Right
|
|
The Holder of this Capital Note has the right, at the Holder’s option, at any time and from time to time, to convert this Capital Note, without payment of any additional consideration, in accordance with the provisions of this clause 3, in whole or in part, into fully-paid and non-assessable Ordinary Shares. The number of Ordinary Shares into which this Capital Note may be converted (
“the Conversion Shares”
) shall be determined by dividing the aggregate Principal Amount of this Capital Note by the conversion price in effect at the time of such conversion (
“the Conversion Price”
). The Conversion Price as previously adjusted shall be US $21.30, as adjusted further at any time and from time to time in accordance with clause 7 below.
|
3.2.
|
Conversion Procedure
|
|
This Capital Note may be converted in whole or in part at any time and from time to time by the surrender of this Capital Note to the Company at its principal office together with written notice of the election to convert all or any portion of the Principal Amount thereof, duly signed on behalf of the Holder. The Company shall, on such surrender date or as soon as practicable thereafter, issue irrevocable instructions to its stock transfer agent to deliver to the Holder a certificate or certificates for the number of Conversion Shares to which the Holder shall be entitled as a result of such conversion as aforesaid. Such conversion, the issue and allotment of such Conversion Shares and the registration of the Holder in the register of members of the Company as the holder of such Conversion Shares shall be deemed to have been made immediately prior to the close of business on the date of such surrender of this Capital Note or portion thereof and the person or persons entitled to receive the Conversion Shares issuable upon such conversion shall be treated for all purposes as the record holder or holders as of such date of such number of Conversion Shares to which the Holder shall be entitled as a result of such conversion as aforesaid. In the event of a partial conversion, the Company shall concurrently issue to the Holder a replacement Capital Note of like tenor as this Capital Note, but representing the Principal Amount remaining after such partial conversion. For the avoidance of doubt, the Company confirms that the terms of this Capital Note, including, without limitation, this clause 3, constitute the issue terms of the Conversion Shares and that, accordingly, the right of the Company pursuant to clauses 16.1 and 16.2 of the Company's Articles of Association to delay the issuance of stock certificates for up to 6 (six) months after the allotment and registration of transfer is inapplicable. For the further removal of doubt, nothing herein shall derogate from the second sentence of clause 16.1 of the Company's Articles of Association.
|
4.
|
FRACTIONAL INTEREST
|
|
No fractional shares will be issued in connection with any conversion hereunder. The Company shall round-down, to the nearest whole number, the number of Conversion Shares issuable in connection with any conversion hereunder.
|
5.
|
CAPITAL NOTE CONFERS NO RIGHTS OF SHAREHOLDER
|
|
The Holder shall not, by virtue of this Capital Note, have any rights as a shareholder of the Company prior to actual conversion into Conversion Shares in accordance with clause 3.2 above.
|
6.
|
ACQUISITION FOR
INVESTMENT
|
|
This Capital Note has not been registered under the Securities Act of 1933, as amended (
“the Securities Act”
), or any other securities laws. The Holder acknowledges by acceptance of this Capital Note that it has acquired this Capital Note for investment and not with a view to distribution. The Conversion Shares have been registered under the Securities Act on Form F-3 Registration Statement No. 333-181805. The Holder, by acceptance hereof, consents to the placement of legend(s) on this Capital Note as to the applicable restrictions on transferability in order to ensure compliance with the Securities Act, unless in the reasonable opinion of counsel for the Company such legend is not required in order to ensure compliance with the Securities Act. The Company may issue stop transfer instructions to its transfer agent in connection with such restrictions.
|
|
Nothing in this clause 6 shall derogate from any obligations of the Company under any Registration Rights Agreement to which the Company and the Holder are parties.
|
7.
|
ADJUSTMENT OF CONVERSION PRICE
|
|
AND NUMBER OF CONVERSION SHARES
|
|
The number and kind of securities issuable initially upon the conversion of this Capital Note and the Conversion Price shall be subject to adjustment at any time and from time to time upon the occurrence of certain events, as follows:
|
7.1.
|
Adjustment for Shares Splits and Combinations
|
|
If the Company at any time or from time to time effects a subdivision of the outstanding Ordinary Shares, the number of Conversion Shares issuable upon conversion of this Capital Note immediately before the subdivision shall be proportionately increased, and conversely, if the Company at any time or from time to time combines the outstanding Ordinary Shares, the number of Conversion Shares issuable upon conversion of this Capital Note immediately before the combination shall be proportionately decreased. Any adjustment under this clause 7.1 shall become effective at the close of business on the date the subdivision or combination becomes effective.
|
7.2.
|
Adjustment for Certain Dividends and Distributions
|
|
In the event the Company at any time, or from time to time, makes or fixes a record date for the determination of holders of Ordinary Shares entitled to receive a dividend or other distribution payable in additional Ordinary Shares, then and in each such event, the number of Ordinary Shares issuable upon conversion of this Capital Note shall be increased as of the time of such issuance or, in the event such a record date is fixed, as of the close of business on such record date, by multiplying the number of Ordinary Shares issuable upon conversion of this Capital Note by a fraction: (i) the numerator of which shall be the total number of Ordinary Shares issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, as applicable, plus the number of Ordinary Shares issuable in payment of such dividend or distribution; and (ii) the denominator of which is the total number of Ordinary Shares issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, as applicable; provided, however, that if such record date is fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the number of Ordinary Shares issuable upon conversion of this Capital Note shall be recomputed accordingly as of the close of business on such record date and thereafter the number of Ordinary Shares issuable upon conversion of this Capital Note shall be adjusted pursuant to this clause 7.2 as of the time of the actual payment of such dividends or distribution.
|
7.3.
|
Adjustments for Other Dividends and Distributions
|
|
In the event the Company at any time or from time to time makes, or fixes a record date for the determination of holders of Ordinary Shares entitled to receive a dividend or other distribution payable in securities of the Company other than Ordinary Shares (for the avoidance of doubt, other than in a rights offering as to which clause 7.7 shall be applicable), then in each such event provision shall be made so that the Holder shall receive upon conversion of this Capital Note and for no additional consideration, in addition to the number of Ordinary Shares receivable thereupon, the amount of securities of the Company that the Holder would have received had this Capital Note been converted immediately prior to such event, or the record date for such event, as applicable.
|
7.4.
|
Adjustment for Reclassification, Exchange and Substitution
|
|
If the Ordinary Shares issuable upon conversion of this Capital Note are changed into the same or a different number of shares of any class or classes of shares, whether by recapitalization, reclassification, exchange, substitution or otherwise (other than a subdivision or combination of shares, dividends payable in Ordinary Shares or other securities of the Company or a reorganization, merger, consolidation or sale of assets, provided for elsewhere in this clause 7), then and in any such event the Holder shall have the right thereafter to exercise this Capital Note into the kind and amount of shares and other securities receivable upon such recapitalization, reclassification, exchange, substitution or other change, by holders of the number of Ordinary Shares for which this Capital Note might have been converted immediately prior to such recapitalization, reclassification, exchange, substitution or other change (or the record date for such event), all subject to further adjustment as provided herein and under the Company’s Articles of Association.
|
7.5.
|
Reorganization, Mergers, Consolidations or Sales of Assets
|
|
If at any time or from time to time there is a capital reorganization of the Ordinary Shares (other than a recapitalization, subdivision, combination, reclassification, exchange or substitution of shares as provided for elsewhere in this clause 7), or a merger or consolidation of the Company with or into another corporation, or the sale of all or substantially all of the Company’s properties and assets to any other person, then, as a part of such reorganization, merger, consolidation or sale, provision shall be made so that the Holder shall thereafter be entitled to receive upon conversion of this Capital Note and for no additional consideration, the number of shares or other securities or property (including, without limitation, cash) of the Company, or of the successor corporation resulting from such merger or consolidation or sale, to which a holder of the number of Ordinary Shares issuable upon conversion of this Capital Note would have been entitled on such capital reorganization, merger, consolidation or sale.
|
7.6.
|
Other Transactions
|
|
In the event that the Company shall issue shares to its shareholders as a result of a split-off, spin-off or the like, then the Company shall only complete such issuance or other action if, as part thereof, allowance is made to protect the economic interest of the Holder either by increasing the number of Conversion Shares or by procuring that the Holder shall be entitled, on terms economically proportionate to those provided to its shareholders, to acquire additional shares of the spun-off or split-off entities.
|
7.7.
|
Rights Offerings
|
|
If the Company, at any time and from time to time, shall fix a record date for, or shall make a distribution to, its shareholders of rights or warrants to subscribe for or purchase any security (collectively,
“Rights”
), then, in each such event, the Company will provide the Holder, concurrently with the distribution of the Rights to its shareholders, identical rights, having terms and conditions identical to the Rights (for the avoidance of doubt, exercisable at the same time as the Rights), in such number to which the Holder would be entitled had the Holder converted this Capital Note into Conversion Shares immediately prior to the record date for such distribution, or if no record date shall be fixed, then immediately prior to such distribution , as applicable. Nothing in this clause 7.7 shall require the Company to complete any such distribution of Rights to its shareholders, including following the record date thereof, unless required pursuant to the terms of such distribution and, if such distribution of Rights to its shareholders is not completed in conformity with the terms of such distribution, then the Company shall be entitled not to complete the provision of rights to the Holder pursuant to this clause 7.7 above.
|
7.8.
|
Adjustment for Cash Dividends and Distributions
|
|
In the event the Company, at any time or from time to time until September 28, 2023, makes or fixes a record date for the determination of holders of Ordinary Shares entitled to receive a cash dividend or distribution, then and in each such event, the number of Ordinary Shares issuable upon conversion of this Capital Note shall be adjusted (for the avoidance of doubt, never decreased but either shall remain the same or increased), as of the close of business on such record date, by multiplying the number of Ordinary Shares issuable upon conversion of this Capital Note by a fraction: (i) the numerator of which shall be the closing price per share of the Ordinary Shares on the TASE on the determining date ("
Hayom Hakovaya
") for such dividend or distribution; and (ii) the denominator of which shall be the adjusted "ex-dividend" price of the Ordinary Shares as such prices set out in (i) and (ii) are determined in each case by the TASE in accordance with its rules.
|
7.9.
|
General Protection
|
|
The Company will not, by amendment of its Articles of Association or other charter document or through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder, or impair the economic interest of the Holder, but will at all times in good faith assist in the carrying out of all the provisions hereof and in taking of all such actions and making all such adjustments as may be necessary or appropriate in order to protect the rights and the economic interests of the Holder against impairment.
|
7.10.
|
Notice of Capital Changes
|
|
If at any time the Company shall declare any dividend or distribution of any kind, or offer for subscription pro rata to the holders of Ordinary Shares any additional shares of any class, other rights or any security of any kind, or there shall be any capital reorganization or reclassification of the capital shares of the Company, or consolidation or merger of the Company with, or sale of all or substantially all of its assets to another company or there shall be a voluntary or involuntary dissolution, liquidation or winding-up of the Company, or other transaction described in this clause 7, then, in any one or more of the said cases, the Company shall give the Holder prior written notice, by registered or certified mail, postage prepaid, of the date on which: (i) a record shall be taken for such dividend, distribution or subscription rights; or (ii) such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up shall take place, as the case may be. Such notice shall also specify the date as of which the holders of record of Ordinary Shares shall participate in such dividend or distribution, subscription rights, or shall be entitled to exchange their Ordinary Shares for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation or winding-up, as the case may be. Such written notice shall be given at least 14 (fourteen) days prior to the action in question and not less than 14 (fourteen) days prior to the record date in respect thereto.
|
7.11.
|
Adjustment of Conversion Price
|
|
Upon each adjustment in the number of Ordinary Shares purchasable hereunder, the Conversion Price shall be proportionately increased or decreased, as the case may be, in a manner that is the inverse of the manner in which the number of Ordinary Shares purchasable hereunder shall be adjusted.
|
7.12.
|
Notice of Adjustments
|
|
Whenever the Conversion Price or the number of Ordinary Shares issuable upon conversion of this Capital Note shall be adjusted pursuant to this clause 7, the Company shall prepare a certificate signed by the chief financial officer of the Company setting forth, in reasonable detail, the event requiring the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the Conversion Price and the number of Conversion Shares issuable upon conversion of this Capital Note after giving effect to such adjustment, and shall cause copies of such certificate to be mailed (by first class mail, postage prepaid) to the Holder.
|
8.
|
OTHER TRANSACTIONS
|
|
In the event that the Company or its shareholders receive an offer to transfer all or substantially all of the shares in the Company, or to effect a merger or acquisition or sale of all or substantially all of the assets of the Company, then the Company shall promptly inform the Holder in writing of such offer.
|
9.
|
TRANSFER OF THIS CAPITAL NOTE BY THE HOLDER
|
|
This Capital Note shall be freely transferable or assignable by the Holder in whole or in part, at any time and from time to time, subject to the provisions of this clause 9. With respect to any transfer of this Capital Note, in whole or in part, the Holder shall surrender the Capital Note, together with a written request to transfer all or a portion of the Principal Amount of this Capital Note to the transferee, as well as, if reasonably requested by the Company, a written opinion of such Holder's counsel, to the effect that such offer, sale or other distribution may be effected without registration under the Securities Act. Upon surrender of such Capital Note (and delivery of such opinion, if so requested) by the Holder, the Company shall immediately register such transferee as the Holder of this Capital Note, or the portion thereof, transferred to such transferee, such registration shall be deemed to have been made immediately prior to the close of business on the date of such surrender and delivery (if applicable), and such transferee or transferees shall be treated for all purposes as the record holder or holders as of such date of a Capital Note in that portion of the Principal Amount of this Capital Note so transferred. The Company shall, as promptly as practicable, deliver to the Holder one or more Capital Notes, of like tenor as this Capital Note, except that the Principal Amount thereof shall be the amount transferred to such transferee, for delivery to the transferee or transferees (or, if the Holder requests, deliver such Capital Note directly to such transferee or transferees) and shall, if only a portion of the Principal Amount of this Capital Note is being transferred, concurrently deliver to the Holder one or more replacement Capital Notes to represent the portion of the Principal Amount of this Capital Note not so transferred. For the avoidance of doubt, the Company confirms that no approval by the Board of Directors of the Company of any transfer of this Capital Note or the Conversion Shares is required.
|
10.
|
REPRESENTATIONS, WARRANTIES AND COVENANTS
|
|
The Company represents, warrants and covenants to the Holder as follows:
|
10.1.
|
this Capital Note has been duly authorized and executed by the Company and is a valid and binding obligation of the Company enforceable in accordance with its terms;
|
10.2.
|
the Conversion Shares are duly authorized and are, and will be, reserved (for the avoidance of doubt, without the need for further corporate action by the Company) for issuance by the Company and, when issued in accordance with the terms hereof, will be validly issued, fully paid and non-assessable and not subject to any pre-emptive rights;
|
10.3.
|
the execution and delivery of this Capital Note are not, and the issuance of the Conversion Shares upon conversion of this Capital Note in accordance with the terms hereof will not be, inconsistent with the Company’s Certificate of Incorporation, Memorandum of Association or Articles of Association, do not and will not contravene any law, governmental or regulatory rule or regulation, including NASDAQ and TASE rules and regulations, judgment or order applicable to the Company, do not and will not conflict with or contravene any provision of, or constitute a default under, any indenture, mortgage, contract or other instrument of which the Company is a party or by which it is bound or, except for consents that have already been obtained and filings already made, require the consent or approval of, the giving of notice to, the registration with or the taking of any action in respect of or by, any Israeli or foreign governmental authority or agency or other person; and
|
10.4.
|
the Conversion Shares have been approved for listing and trading on TASE.
|
11.
|
LOSS, THEFT, DESTRUCTION OR
|
|
MUTILATION OF CAPITAL NOTE
|
|
Upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of any Capital Note or Conversion Shares certificate, and in case of loss, theft or destruction, of indemnity, or security reasonably satisfactory to it, and upon reimbursement to the Company of all reasonable expenses incidental thereto, and upon surrender and cancellation of such Capital Note or Conversion Shares certificate, if mutilated, the Company will make and deliver a new Capital Note or Conversion Shares certificate of like tenor and dated as of such cancellation, in lieu of such Capital Note or Conversion Shares certificate.
|
12.
|
NOTICES
|
|
All notices and other communications required or permitted hereunder to be given to a party to this Agreement shall be in writing and shall be faxed or mailed by registered or certified mail, postage prepaid, or otherwise delivered by hand or by messenger, addressed to such party's address as set forth below:
|
If to the Holder: |
Bank Hapoalim B.M.
Corporate Division
Migdal Levenstein
23 Menachem Begin Road
Tel Aviv, Israel
|
|||
Attention: |
Head of
Special Credits Division
|
|||
Facsimile: | (03) 567 4719 | |||
If to the Company: |
Tower Semiconductor Ltd.
P.O. Box 619
Ramat Gabriel Industrial Zone
Migdal Haemek 23105
|
|||
Attention: | Oren Shirazi, Acting | |||
Chief Financial Officer
|
||||
Facsimile: | ( 04) 604 7242 |
with a copy to: |
Yigal Arnon & Co.
1 Azrieli Center
Tel Aviv
Israel
|
|||
A
ttention:
|
David H. Schapiro, Adv.
|
|||
Facsimile: | ( 03) 608 7714 |
|
or such other address with respect to a party as such party shall notify each other party in writing as above provided. Any notice sent in accordance with this clause 12 shall be effective: (a) if mailed, 5 (five) business days after mailing; (b) if sent by messenger, upon delivery; and (c) if sent via facsimile, 1 (one) business day following transmission and electronic confirmation of receipt.
|
13.
|
APPLICABLE LAW; JURISDICTION
|
|
This Capital Note shall be governed by and construed in accordance with the laws of the State of Israel as applicable to contracts between two residents of the State of Israel entered into and to be performed entirely within the State of Israel. Any dispute arising under or in relation to this Capital Note shall be resolved in the competent court for Tel Aviv-Jaffa district, and the Company and the Holder hereby submits irrevocably to the jurisdiction of such court.
|
Dated:
|
July 30, 2013
|
1.
|
Name:
This plan, as amended from time to time, shall be known as the “2013 Share Incentive Plan” or the “Plan”.
|
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.
|
4.
|
Administration
:
|
5.
|
Eligible Grantees
:
|
6.
|
Date of Grant and Shareholder Rights
:
|
7.
|
Reserved Shares
:
|
8.
|
Required Approvals; Notice of Grant; Vesting
:
|
9.
|
Options
:
|
10.
|
Restricted Share Units
:
|
11.
|
Performance Based Awards
:
|
12.
|
Adjustments, Liquidation and Corporate Transaction
:
|
13.
|
Limitations on Transfer
.
|
14.
|
Term and Amendment of the Plan
:
|
15.
|
Withholding and Tax Consequences:
|
16.
|
Miscellaneous
:
|
1.
|
Definitions
. Unless the context otherwise requires, the following terms shall have the following meanings for all purposes of this Agreement:
|
|
“
Participating Holders
” has the meaning set forth in the preamble to this Agreement.
|
2.
|
The Exchange
.
|
6.
|
Representations and Warranties of the Holder
. Each Holder hereby, for itself and no other Holder, represents and warrants to the Company and Tower as follows:
|
JAZZ TECHNOLOGIES, INC.
|
|||||
By:
|
|||||
Name:
|
|||||
Title:
|
TOWER SEMICONDUCTOR LTD.
|
|||||
By:
|
|||||
Name:
|
|||||
Title:
|
NEWPORT FAB, LLC
|
|||||
By:
|
|||||
Name:
|
|||||
Title:
|
JAZZ SEMICONDUCTOR, INC.
|
|||||
By:
|
|||||
Name:
|
|||||
Title:
|
By:
|
Principal Global Investors, LLC,
|
|
a Delaware limited liability company,
|
|
its authorized signatory
|
By:
|
Principal Global Investors, LLC,
|
|
a Delaware limited liability company,
|
|
its authorized signatory
|
By:
|
Principal Global Investors, LLC,
|
|
a Delaware limited liability company,
|
|
its authorized signatory
|
By:
|
Principal Global Investors, LLC,
|
|
a Delaware limited liability company,
|
|
its authorized signatory
|
By:
|
Principal Global Investors, LLC,
|
|
a Delaware limited liability company,
|
|
its authorized signatory
|
By:
|
Principal Global Investors, LLC,
|
|
a Delaware limited liability company,
|
|
its authorized signatory
|
By:
|
Principal Global Investors, LLC,
|
|
a Delaware limited liability company,
|
|
its authorized signatory
|
By:
|
Principal Global Investors, LLC,
|
|
a Delaware limited liability company,
|
|
its authorized signatory
|
By:
|
Principal Global Investors, LLC,
|
|
a Delaware limited liability company,
|
|
its authorized signatory
|
By:
|
Principal Global Investors, LLC,
|
|
a Delaware limited liability company,
|
|
its authorized signatory
|
By:
|
Principal Global Investors, LLC,
|
|
a Delaware limited liability company,
|
|
its authorized signatory
|
By:
|
Principal Global Investors, LLC,
|
|
a Delaware limited liability company,
|
|
its authorized signatory
|
By:
|
Principal Global Investors, LLC,
|
|
a Delaware limited liability company,
|
|
its authorized signatory
|
By:
|
Principal Global Investors, LLC,
|
|
a Delaware limited liability company,
|
|
its authorized signatory
|
By:
|
Principal Global Investors, LLC,
|
|
a Delaware limited liability company,
|
|
its authorized signatory
|
By:
|
Principal Global Investors, LLC,
|
|
a Delaware limited liability company,
|
|
its authorized signatory
|
By:
|
Principal Global Investors, LLC,
|
|
a Delaware limited liability company,
|
|
its authorized signatory
|
|
Each by:
|
|
Putnam Investment Management, LLC
|
By: _________________________________________________
Name:
Title:
|
|
By: Putnam Investment Management, LLC
|
By: _________________________________________________
Name:
Title:
|
By: _________________________________________________
Name:
Title:
|
|
Each by:
|
|
The Putnam Advisory Company, LLC
|
By: _________________________________________________
Name:
Title:
|
Name of Holder
|
DTC Direction
|
Principal Global Opportunities Series Plc – Principal Short Duration High Yield
|
Existing Notes Principal Amount: $1,125,000
New Notes Principal Amount: $1,218,000
Exchange Note Cash Payment: $375
CUSIP: Reg S
DTC Participant: Bank of New York
DTC #901
For Credit to Account #: 298118
Contact: Monique Brown
(718) 315-3546
monique.brown@bnymellon.com
|
PGI CIT Global Credit Opportunities Fund
|
Existing Notes Principal Amount: $350,000
New Notes Principal Amount: $379,000
Exchange Note Cash Payment: $50
CUSIP: 144A
DTC Participant: State Street
DTC #997
For Credit to Account #: AAHU
Contact: Melissa Curlanis
(617) 985-3289
CTMGBoston5@statestreet.com
|
Principal Global Credit Opportunities Fund
|
Existing Notes Principal Amount: $560,000
New Notes Principal Amount: $606,000
Exchange Note Cash Payment: $480
CUSIP: 144A
DTC Participant: State Street Sydney
DTC #997
For Credit to Account #: SDME
Contact: Renee Sainsbury-Bester
612 9323 7105
PGI-SSAL@statestreet.com
|
Expert Investor SICAB-SIF – Astrum Fixed Income Global Credit Opportunities Fund
|
Existing Notes Principal Amount: $150,000
New Notes Principal Amount: $162,000
Exchange Note Cash Payment: $450
CUSIP: 144A
DTC Participant: Credit Suisse
DTC #10
For Credit to Account #: 9054842
Contact: Operations
352 26 20 26 43
Dlux.am@credit-suisse.com
|
Principal Global Investors Collective Investment Trust – Multi-Sector Fixed Income Fund
|
Existing Notes Principal Amount: $66,000
New Notes Principal Amount: $71,000
Exchange Note Cash Payment: $478
CUSIP: 144A
DTC Participant: State Street
DTC #997
For Credit to Account #: AAHU
Contact: Melissa Curlanis
(617) 985-3289
CTMGBoston5@statestreet.com
|
Principal Global Opportunities Series Plc – Global Credit Alpha Fund
|
Existing Notes Principal Amount: $170,000
New Notes Principal Amount: $184,000
Exchange Note Cash Payment: $110
CUSIP: 144A
DTC Participant: Bank of New York
DTC #901
For Credit to Account #: 399783
Contact: Monique Brown
(718) 315-3546
monique.brown@bnymellon.com
|
Daiwa Premium Trust – Daiwa /Principal US Short Duration High Yield Fund
|
Existing Notes Principal Amount: $55,000
New Notes Principal Amount: $59,000
Exchange Note Cash Payment: $565
CUSIP: 144A
DTC Participant: Brown Brothers Harriman
DTC #10
For Credit to Account #: 2638021
Contact: Kevin Carnes
(617) 772-1084
team.pacific@bbh.com
|
Iowa Judicial Retirement System
|
Existing Notes Principal Amount: $829
New Notes Principal Amount: $0
Exchange Note Cash Payment: $898
CUSIP: 144A
DTC Participant: Bank of New York Mellon
DTC #954
For Credit to Account #: JR7F3000002
Contact: Tom Frankenberg
(412) 234-5457
PITIMSTEAM1@bnymellon.com
|
Meijer
|
Existing Notes Principal Amount: $658
New Notes Principal Amount: $0
Principal portion of Exchange Note Cash Payment: $713
CUSIP: 144A
DTC Participant: Wells Fargo
DTC #2027
For Credit to Account #: 5800422
Contact: Joan Jackson
(704) 590-0745
joan.a.jackson@wellsfargo.com
|
Painting Industry Annuity Fund
|
Existing Notes Principal Amount: $35,829
New Notes Principal Amount: $38,000
Principal portion of Exchange Note Cash Payment: $803
CUSIP: 144A
DTC Participant: Wells Fargo
DTC #2027
For Credit to Account #: 9546001262
Contact: Joan Jackson
(704) 590-0745
joan.a.jackson@wellsfargo.com
|
Principal Funds, Inc. – Bond & Mortgage Securities Fund
|
Existing Notes Principal Amount: $1,926,082
New Notes Principal Amount: $2,085,000
Exchange Note Cash Payment: $947
CUSIP: 144A
DTC Participant: Bank of New York
DTC #901
For Credit to Account #: 394373
Contact: Monique Brown
(718) 315-3546
monique.brown@bnymellon.com
|
Principal Global Investors Fund – High Yield Fund
|
Existing Notes Principal Amount: $413,145
New Notes Principal Amount: $447,000
Exchange Note Cash Payment: $437
CUSIP: Reg S
DTC Participant: Bank of New York
DTC #901
For Credit to Account #: 397775
Contact: Monique Brown
(718) 315-3546
monique.brown@bnymellon.com
|
Principal Global Investors Trust – High Yield Fixed Income Fund
|
Existing Notes Principal Amount: $238,974
New Notes Principal Amount: $258,000
Exchange Note Cash Payment: $809
CUSIP: 144A
DTC Participant: Bank of New York
DTC #901
For Credit to Account #: 394967
Contact: Monique Brown
(718) 315-3546
monique.brown@bnymellon.com
|
Principal Life Insurance Company on behalf of One or More Separate Accounts (Principal Life Insurance Company, DBA Bond & Mortgage Separate Account)
|
Existing Notes Principal Amount: $3,823,480
New Notes Principal Amount: $4,140,000
Exchange Note Cash Payment: $829
CUSIP: 144A
DTC Participant: State Street
DTC #997
For Credit to Account #: PRPJ
Contact: Melissa Curlanis
(617) 985-3289
CTMGBoston5@statestreet.com
|
Principal Life Insurance Company on Behalf of One or More Separate Accounts (Principal Life Insurance Company, d/b/a Principal LDI Long Duration Separate Account)
|
Existing Notes Principal Amount: $146,829
New Notes Principal Amount: $159,000
Exchange Note Cash Payment: $16
CUSIP: 144A
DTC Participant: State Street
DTC #997
For Credit to Account #: PRIW
Contact: Melissa Curlanis
(617) 985-3289
CTMGBoston5@statestreet.com
|
Principal Variable Contract Funds, Inc. Balanced
|
Existing Notes Principal Amount: $10,000
New Notes Principal Amount: $10,000
Exchange Note Cash Payment: $830
CUSIP: 144A
DTC Participant: Bank of New York
DTC #901
For Credit to Account #: 294321
Contact: Monique Brown
(718) 315-3546
monique.brown@bnymellon.com
|
Principal Variable Contracts Funds, Inc. – Bond & Mortgage Securities Account
|
Existing Notes Principal Amount: $212,461
New Notes Principal Amount: $230,000
Exchange Note Cash Payment: $96
CUSIP: 144A
DTC Participant: Bank of New York
DTC #901
For Credit to Account #: 294315
Contact: Monique Brown
(718) 315-3546
monique.brown@bnymellon.com
|
Principal Funds, Inc. – High Yield Fund
|
Existing Notes Principal Amount: $21,517,713
New Notes Principal Amount: $23,303,000
Exchange Note Cash Payment: $684
CUSIP: 144A
DTC Participant: Bank of New York
DTC #901
For Credit to Account #: 394959
Contact: Monique Brown
(718) 315-3546
monique.brown@bnymellon.com
|
Putnam Variable Trust – Putnam VT High Yield Fund
|
Existing Notes Principal Amount: $517,000
New Notes Principal Amount: $559,000
Exchange Note Cash Payment: $911
CUSIP: 144A
DTC Participant: State Street Bank
DTC #997
For Credit to Account #: 38MN
Contact: Robert Tulipani
(617) 760-0959
robert_j_tulipani@putnam.com
|
Putnam High Yield Trust
|
Existing Notes Principal Amount: $1,803,000
New Notes Principal Amount: $1,952,000
Exchange Note Cash Payment: $649
CUSIP: 144A
DTC Participant: State Street Bank
DTC #997
For Credit to Account #: 38PD
Contact: Robert Tulipani
(617) 760-0959
robert_j_tulipani@putnam.com
|
Putnam High Yield Advantage Fund
|
Existing Notes Principal Amount: $717,000
New Notes Principal Amount: $776,000
Exchange Note Cash Payment: $511
CUSIP: 144A
DTC Participant: State Street Bank
DTC #997
For Credit to Account #: 38MI
Contact: Robert Tulipani
(617) 760-0959
robert_j_tulipani@putnam.com
|
Seasons Series Trust (Sun America) – Asset Allocation: Diversified Growth Portfolio
|
Existing Notes Principal Amount: $18,000
New Notes Principal Amount: $19,000
Exchange Note Cash Payment: $494
CUSIP: 144A
DTC Participant: State Street Bank
DTC #997
For Credit to Account #: JUQA
Contact: Robert Tulipani
(617) 760-0959
robert_j_tulipani@putnam.com
|
Putnam Dynamic Asset Allocation Growth Fund
|
Existing Notes Principal Amount: $133,000
New Notes Principal Amount: $144,000
Exchange Note Cash Payment: $39
CUSIP: Rule 144A
DTC Participant: State Street Bank
DTC #997
For Credit to Account #: 38MX
Contact: Robert Tulipani
(617) 760-0959
robert_j_tulipani@putnam.com
|
Putnam Dynamic Asset Allocation Balanced Fund
|
Existing Notes Principal Amount: $138,000
New Notes Principal Amount: $149,000
Exchange Note Cash Payment: $454
CUSIP: Rule 144A
DTC Participant: State Street Bank
DTC #997
For Credit to Account #: 38MY
Contact: Robert Tulipani
(617) 760-0959
robert_j_tulipani@putnam.com
|
Putnam Variable Trust – Putnam VT Global Asset Allocation Fund
|
Existing Notes Principal Amount: $19,000
New Notes Principal Amount: $20,000
Exchange Note Cash Payment: $577
CUSIP: 144A
DTC Participant: State Street Bank
DTC #997
For Credit to Account #: 38MO
Contact: Robert Tulipani
(617) 760-0959
robert_j_tulipani@putnam.com
|
Putnam Dynamic Asset Allocation Conservative Fund
|
Existing Notes Principal Amount: $95,000
New Notes Principal Amount: $102,000
Exchange Note Cash Payment: $885
CUSIP: 144A
DTC Participant: State Street Bank
DTC #997
For Credit to Account #: 38MZ
Contact: Robert Tulipani
(617) 760-0959
robert_j_tulipani@putnam.com
|
Putnam Convertible Securities Fund
|
Existing Notes Principal Amount: $2,278,000
New Notes Principal Amount: $2,467,000
Exchange Note Cash Payment: $74
CUSIP: 144A
DTC Participant: State Street Bank
DTC #997
For Credit to Account #: 38QG
Contact: Robert Tulipani
(617) 760-0959
robert_j_tulipani@putnam.com
|
Putnam High Income Securities Fund
|
Existing Notes Principal Amount: $356,000
New Notes Principal Amount: $385,000
Exchange Note Cash Payment: $548
CUSIP: 144A
DTC Participant: State Street Bank
DTC #997
For Credit to Account #: 38MU
Contact: Robert Tulipani
(617) 760-0959
robert_j_tulipani@putnam.com
|
Putnam Retirement Income Fund Lifestyle 3
|
Existing Notes Principal Amount: $13,000
New Notes Principal Amount: $14,000
Exchange Note Cash Payment: $79
CUSIP: 144A
DTC Participant: State Street Bank
DTC #997
For Credit to Account #: 38PL
Contact: Robert Tulipani
(617) 760-0959
robert_j_tulipani@putnam.com
|
RockView Trading Ltd.
|
Existing Notes Principal Amount: $251,000
New Notes Principal Amount: $271,000
Exchange Note Cash Payment: $833
CUSIP: 144A
DTC Participant: JPMorgan Chase
DTC # 352
For Credit to Account #: 102-31112
Contact: Alan Bluestine
(203) 388-4920
alanb@rvcap.com
|
Northern Lights Fund Trust – Altegris Fixed Income Long Short Fund
|
Existing Notes Principal Amount: $500,000
New Notes Principal Amount: $541,000
Exchange Note Cash Payment: $500
CUSIP: 144A
DTC Participant: JPMorgan Chase
DTC # 902
For Credit to Account #: P18855
Contact: Alan Bluestine
(203) 388-4920
alanb@rvcap.com
|
BulwarkBay Credit Opportunities Master Fund Ltd
|
Existing Notes Principal Amount: $5,065,000
New Notes Principal Amount: $5,485,000
Exchange Note Cash Payment: $395
CUSIP: 144A
DTC Participant: Goldman Sachs &Co.
DTC #0005
For Credit to Account #: 002484012
BulwarkBay Credit Opportunities Master Fund Ltd
Contact: Joe Canavan
(617) 904-9883
jcanavan@bulwarkbay.com
operations@bulwarkbay.com
|
By:
|
Principal Global Investors, LLC,
|
|
a Delaware limited liabilty company,
|
|
its authorized signatory
|
Page
|
|
|
|
|
|
SECTION 1.01. Definitions.
|
1
|
SECTION 1.02. Other Definitions.
|
21
|
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
|
22
|
SECTION 1.04. Rules of Construction.
|
22
|
SECTION 1.05. Acts of Holders; Record Dates.
|
23
|
|
|
|
|
SECTION 2.01. Form and Dating.
|
23
|
SECTION 2.02. Form of Execution and Authentication.
|
26
|
SECTION 2.03. Registrar and Paying Agent.
|
27
|
SECTION 2.04. Paying Agent To Hold Money in Trust.
|
27
|
SECTION 2.05. Lists of Holders of the Notes.
|
27
|
SECTION 2.06. Transfer and Exchange.
|
28
|
SECTION 2.07. Replacement Notes.
|
36
|
SECTION 2.08. Outstanding Notes.
|
37
|
SECTION 2.09. Treasury Notes.
|
37
|
SECTION 2.10. Temporary Notes.
|
37
|
SECTION 2.11. Cancellation.
|
37
|
SECTION 2.12. Defaulted Interest.
|
38
|
SECTION 2.13. Record Date.
|
38
|
SECTION 2.14. CUSIP Number.
|
38
|
|
|
|
|
SECTION 3.01. Notices to Trustee.
|
38
|
SECTION 3.02. Selection of Notes To Be Purchased.
|
38
|
SECTION 3.03. [Reserved].
|
39
|
SECTION 3.04. [Reserved].
|
39
|
SECTION 3.05. Deposit of Purchase Price.
|
39
|
SECTION 3.06. Notes Purchased in Part.
|
39
|
SECTION 3.07. No Optional Redemption.
|
39
|
SECTION 3.08. Excess Proceeds Offer.
|
39
|
|
|
|
|
SECTION 4.01. Payment of Notes.
|
41
|
SECTION 4.02. Maintenance of Office or Agency.
|
42
|
SECTION 4.03. Reports.
|
42
|
SECTION 4.04. Compliance Certificate.
|
43
|
SECTION 4.05. Taxes.
|
43
|
SECTION 4.06. Stay, Extension and Usury Laws.
|
43
|
SECTION 4.07. Limitation on Restricted Payments.
|
43
|
SECTION 4.08. Limitation on Dividend and Other Payment Restrictions Affecting Restricted Subsidiaries.
|
47
|
SECTION 4.09. Limitation on Incurrence of Indebtedness.
|
48
|
SECTION 4.10. Limitation on Asset Sales.
|
51
|
SECTION 4.11. Limitation on Transactions with Affiliates.
|
52
|
SECTION 4.12. Limitation on Liens.
|
54
|
SECTION 4.13. Additional Subsidiary Guarantees.
|
54
|
SECTION 4.14. Organizational Existence.
|
54
|
SECTION 4.15. Change of Control.
|
54
|
SECTION 4.16. Payments for Consent.
|
56
|
SECTION 4.17. Limitation on Repayment and Exchanges of Existing Notes.
|
56
|
SECTION 4.18. Designation of Unrestricted Subsidiaries.
|
56
|
|
|
|
|
SECTION 5.01. Merger, Consolidation or Sale of Assets.
|
57
|
SECTION 5.02. Successor Corporation Substituted.
|
59
|
|
|
|
|
SECTION 6.01. Events of Default.
|
59
|
SECTION 6.02. Acceleration.
|
60
|
SECTION 6.03. Other Remedies.
|
61
|
SECTION 6.04. Waiver of Past Defaults.
|
61
|
SECTION 6.05. Control by Majority.
|
61
|
SECTION 6.06. Limitation on Suits.
|
61
|
SECTION 6.07. Rights of Holders of Notes To Receive Payment.
|
62
|
SECTION 6.08. Collection Suit by Trustee.
|
62
|
SECTION 6.09. Trustee May File Proofs of Claim.
|
62
|
SECTION 6.10. Priorities.
|
63
|
SECTION 6.11. Undertaking for Costs.
|
63
|
|
|
|
|
SECTION 7.01. Duties of Trustee.
|
63
|
SECTION 7.02. Rights of Trustee.
|
64
|
SECTION 7.03. Individual Rights of Trustee.
|
65
|
SECTION 7.04. Trustee’s Disclaimer.
|
66
|
SECTION 7.05. Notice of Defaults.
|
66
|
SECTION 7.06. Reports by Trustee to Holders of the Notes.
|
66
|
SECTION 7.07. Compensation and Indemnity.
|
66
|
SECTION 7.08. Replacement of Trustee.
|
67
|
SECTION 7.09. Successor Trustee by Merger, Etc.
|
68
|
SECTION 7.10. Eligibility; Disqualification.
|
68
|
SECTION 7.11. Preferential Collection of Claims Against Company.
|
68
|
|
|
|
|
SECTION 8.01. Termination of the Company’s Obligations.
|
68
|
SECTION 8.02. Option To Effect Legal Defeasance or Covenant Defeasance.
|
69
|
SECTION 8.03. Legal Defeasance and Covenant Discharge.
|
69
|
SECTION 8.04. Covenant Defeasance.
|
70
|
SECTION 8.05. Conditions to Legal or Covenant Defeasance.
|
70
|
SECTION 8.06. Deposited Money and Government Securities To Be Held in Trust; Other Miscellaneous Provisions.
|
71
|
SECTION 8.07. Repayment to Company.
|
71
|
SECTION 8.08. Reinstatement.
|
72
|
|
|
|
|
SECTION 9.01. Without Consent of Holders of Notes.
|
72
|
SECTION 9.02. With Consent of Holders of Notes.
|
73
|
SECTION 9.03. Compliance with Trust Indenture Act.
|
74
|
SECTION 9.04. Revocation and Effect of Consents.
|
74
|
SECTION 9.05. Notation on or Exchange of Notes.
|
75
|
SECTION 9.06. Trustee to Sign Amendments, Etc.
|
75
|
|
|
|
|
SECTION 10.01. Guarantee.
|
75
|
SECTION 10.02. Execution and Delivery of Guarantees.
|
76
|
SECTION 10.03. Releases from Guarantees.
|
77
|
|
|
|
|
SECTION 11.01. Conversion Privilege.
|
77
|
SECTION 11.02. Conversion Procedures; Conversion Settlement.
|
77
|
SECTION 11.03. Settlement Upon Conversion.
|
79
|
SECTION 11.04. Fractional Share.
|
81
|
SECTION 11.05. Taxes on Conversion.
|
81
|
SECTION 11.06. Parent to Provide Ordinary Shares.
|
81
|
SECTION 11.07. Adjustment to Conversion Rate.
|
81
|
SECTION 11.08. Provisions Governing Adjustment to Conversion Rate.
|
86
|
SECTION 11.09. Merger Events.
|
87
|
SECTION 11.10. When Adjustment May Be Deferred.
|
88
|
SECTION 11.11. When No Adjustment Required.
|
88
|
SECTION 11.12. Notice of Adjustment.
|
89
|
SECTION 11.13. Notice of Certain Transactions.
|
89
|
SECTION 11.14. Right of Holders to Convert.
|
90
|
SECTION 11.15. Company Determination Final.
|
90
|
SECTION 11.16. Trustee’s Adjustment Disclaimer.
|
90
|
SECTION 11.17. Simultaneous Adjustments.
|
90
|
SECTION 11.18. Successive Adjustments.
|
90
|
SECTION 11.19. Rights Issued in Respect of Ordinary Shares Issued Upon Conversion.
|
90
|
SECTION 11.20. Withholding Taxes for Adjustments in Conversion Rate.
|
91
|
|
|
|
|
SECTION 12.01. Trust Indenture Act Controls.
|
91
|
SECTION 12.02. Notices.
|
91
|
SECTION 12.03. Communication by Holders of Notes with Other Holders of Notes.
|
92
|
SECTION 12.04. Certificate and Opinion as to Conditions Precedent.
|
92
|
SECTION 12.05. Statements Required in Certificate or Opinion.
|
93
|
SECTION 12.06. Rules by Trustee and Agents.
|
93
|
SECTION 12.07. No Personal Liability of Directors, Owners, Employees, Incorporators and Stockholders.
|
93
|
SECTION 12.08. Governing Law.
|
93
|
SECTION 12.09. No Adverse Interpretation of Other Agreements.
|
94
|
SECTION 12.10. Successors.
|
94
|
SECTION 12.11. Severability.
|
94
|
SECTION 12.12. Counterpart Originals.
|
94
|
SECTION 12.13. Table of Contents, Headings, Etc.
|
94
|
SECTION 12.14. Force Majeure.
|
94
|
SECTION 12.15. Waiver of Jury Trial.
|
94
|
SECTION 12.16. U.S.A. Patriot Act.
|
95
|
SECTION 12.17. Consent to Jurisdiction; Appointment of Agent for Service of Process.
|
95
|
EXHIBITS
|
|
Term
|
Defined
in Section
|
“Affiliate Transaction”
|
4.11(a)
|
“Additional Shares”
|
11.21(a)
|
“Cash Percentage”
|
11.03(d)
|
“Cash Settlement”
|
11.03(a)
|
“Change of Control Offer”
|
4.15(a)
|
“Change of Control Payment”
|
4.15(a)
|
“Change of Control Payment Date”
|
4.15(a)
|
“Combination Settlement”
|
11.03(a)
|
“Company”
|
Preamble
|
“Conversion Consideration”
|
11.01
|
“Conversion Date”
|
11.02(a)
|
“Conversion Obligation”
|
11.01
|
“Conversion Rate”
|
11.01
|
“Covenant Defeasance”
|
8.04
|
“Disposition”
|
“Change of Control”
|
“Distributed Assets”
|
11.07(c)
|
“DTC”
|
2.01(b)
|
“Effective Date”
|
11.21(c)
|
“Event of Default”
|
6.01
|
“Excess Proceeds”
|
4.10(c)
|
“Excess Proceeds Offer”
|
3.08(a)
|
“Expiration Date”
|
11.07(e)
|
“incur”
|
4.09
|
“Initial Lien”
|
4.12
|
“Legal Defeasance”
|
8.03
|
“Merger Event”
|
11.09
|
“Net Share Settlement”
|
11.03(e)
|
“Net Share Settlement Election”
|
11.03(e)
|
“Offer Amount”
|
3.08(b)
|
“Offer Period”
|
3.08(b)
|
“Parent”
|
Preamble
|
“Paying Agent”
|
2.03
|
“Payment Default”
|
6.01(f)
|
“Physical Settlement”
|
11.03(a)
|
“Purchase Date”
|
3.08(b)
|
“Reference Period”
|
11.07(c)
|
“Reference Property”
|
11.09
|
“Refinancing Indebtedness”
|
4.09(b)(10)
|
“Registrar”
|
2.03
|
“Restricted Payments”
|
4.07(a)
|
“Rights”
|
11.19
|
“Settlement Method”
|
11.03(a)
|
“Settlement Notice”
|
11.03(c)
|
“Shareholders Rights Plan”
|
11.19
|
“Spin-Off”
|
11.07(c)
|
“Trigger Event”
|
11.08
|
“Unit of Reference Property”
|
11.09
|
CR
1
= CR
0
×
|
OS
1
|
||
OS
0
|
CR
0
=
|
the Conversion Rate in effect immediately prior to the opening of business on the Ex-Date for such dividend or distribution, or immediately prior to the opening of business on the effective date for such subdivision, combination or reclassification, as applicable;
|
CR
1
=
|
the Conversion Rate in effect immediately after the opening of business on such Ex-Date or effective date, as applicable;
|
OS
0
=
|
the number of Ordinary Shares outstanding immediately prior to the opening of business on the Ex-Date for such dividend or distribution, or immediately prior to the opening of business on the effective date for such subdivision, combination or reclassification, as applicable; and
|
OS
1
=
|
the number of Ordinary Shares outstanding immediately after giving effect to such dividend, distribution, subdivision, combination or reclassification.
|
CR
1
= CR
0
×
|
OS
0
+ X
|
|||
OS
0
+ Y
|
CR
0
=
|
the Conversion Rate in effect immediately prior to the opening of business on the Ex-Date for such distribution or issuance;
|
CR
1
=
|
the Conversion Rate in effect immediately after the opening of business on such Ex-Date;
|
OS
0
=
|
the number of Ordinary Shares outstanding immediately prior to the opening of business on the Ex-Date for such distribution or issuance;
|
X =
|
the total number of additional Ordinary Shares so offered for purchase pursuant to such rights, options or warrants; and
|
Y =
|
the number of Ordinary Shares equal to the aggregate price payable to exercise such rights, options or warrants
divided
by the average of the Closing Sale Price of the Ordinary Shares over the 10 consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the date of announcement of the issuance of such rights, options or warrants.
|
CR
1
= CR
0
×
|
CMP
0
|
||
CMP
0
- FMV
|
CR
0
=
|
the Conversion Rate in effect immediately prior to the opening of business on the Ex-Date for such distribution;
|
CR
1
=
|
the Conversion Rate in effect immediately after the opening of business on such Ex-Date for such distribution;
|
CMP
0
=
|
the average of the Closing Sale Prices of the Ordinary Shares over the 10 consecutive Trading Day period ending on, and including, the Trading Day immediately preceding the Ex-Date for such distribution; and
|
FMV =
|
the fair market value, as determined by the Board of Directors of the Parent, of the portion of Distributed Assets applicable to one Ordinary Share on the Ex-Date for such Distribution.
|
CR
1
= CR
0
×
|
FMV
0
+ MP
0
|
|||
MP
0
|
CR
0
=
|
the Conversion Rate in effect immediately prior to the opening of business on the 15th Trading Day immediately following the Ex-Date for such Spin-Off;
|
CR
1
=
|
the Conversion Rate in effect immediately after the opening of business on the Ex-Date for such Spin-Off;
|
FMV
0
=
|
the average of the Closing Sale Prices of the Capital Stock or similar equity interest distributed to holders of Ordinary Shares applicable to one share of Common Stock over the ten consecutive Trading Day period immediately following, and including, the fifth Trading Day after the Ex-Date for such Spin-Off; and
|
MP
0
=
|
the average of the Closing Sale Prices of Ordinary Shares over the ten consecutive Trading Day period immediately following, and including, the fifth Trading Day after the Ex-Date for such Spin-Off.
|
CR
1
= CR
0
×
|
CMP
0
|
||
CMP
0
- C
|
CR
0
=
|
the Conversion Rate in effect immediately prior to the opening of business on the Ex-Date for such dividend or distribution;
|
CR
1
=
|
the Conversion Rate in effect immediately after the opening of business on such Ex-Date for such dividend or distribution;
|
CMP
0
=
|
the Closing Sale Price of the Ordinary Shares on the Trading Day immediately preceding the Ex-Date for such dividend or distribution; and
|
C =
|
the amount in cash per share of such dividend or distribution.
|
CR
1
= CR
0
×
|
FMV + (OS
1
x CP
1
)
|
|
OS
0
x CP
1
|
CR
0
=
|
the Conversion Rate in effect immediately prior to the opening of business on the Business Day immediately following the Trading Day immediately following the Expiration Date;
|
CR
1
=
|
the Conversion Rate in effect immediately prior to the opening of business on the second Trading Day immediately following the Expiration Date;
|
FMV =
|
the fair market value, as determined by the Board of Directors of Parent, of the aggregate consideration payable for all Ordinary Shares that the Parent purchases in such tender or exchange offer;
|
OS
0
=
|
the number of Ordinary Shares outstanding immediately prior to giving effect to the purchase of all shares accepted for purchase or exchange in such tender offer or exchange offer;
|
OS
1
=
|
the number of Ordinary Shares outstanding immediately after giving effect to the purchase of all shares accepted for purchase or exchange in such tender offer or exchange offer; and
|
CP
1
=
|
the Closing Sale Price of Ordinary Shares on the Trading Day immediately following the Expiration Date.
|
|
Jazz Technologies, Inc.
|
|
Tower Semiconductor, Ltd.
|
|
U.S. Bank National Association
|
JAZZ TECHNOLOGIES, INC., as the Company
|
|||
By:
|
|||
Name:
|
|||
Title:
|
|||
JAZZ SEMICONDUCTOR, INC., as Guarantor
|
|||
By:
|
|||
Name:
|
|||
Title:
|
|||
NEWPORT FAB, LLC, as Guarantor
|
|||
By:
|
Jazz Semiconductor, Inc.
|
||
Its:
|
Sole member
|
||
By:
|
|||
Name:
|
|||
Title:
|
|||
FOR PURPOSES OF ARTICLE 1, SECTION 4.03
AND ARTICLES 11 AND 12 ONLY:
|
|||
TOWER SEMICONDUCTOR, LTD.
|
|||
By:
|
|||
Name:
|
|||
Title:
|
U.S. BANK NATIONAL ASSOCIATION, as Trustee
|
|||
By:
|
|||
Name:
|
|||
Title:
|
a
|
At such time as the Issuer notifies the Trustee to remove the Private Placement Legend pursuant to the terms of the Indenture, the CUSIP number for this Note shall be deemed to be CUSIP No. 47214G AF4
|
JAZZ TECHNOLOGIES, INC.
|
|||
By:
|
|||
Name:
|
|||
Title:
|
(Form of Trustee’s Certificate of Authentication)
|
By:
|
||
Authorized Signatory
|
Your Signature:
|
_____________________________________________________________ | ||
(Sign exactly as your name appears on the face of
this Note)
|
Your Signature:
|
_____________________________________________________________ | ||
(Sign exactly as your name appears on the face of
this Note)
|
Date of Exchange
|
Amount of
decrease in
Principal Amount of this Global Note
|
Amount of Increase Principal Amount of this Global Note
|
Principal Amount
of this Global Note following such
Decrease (or Increase)
|
Signature of
authorized signatory
of Trustee or
Note Custodian
|
||||||||||||||
|
1.
|
o |
Check if Transferee will take delivery of a beneficial interest in the 144A Global Note or a Definitive Note pursuant to Rule 144A
. The Transfer is being effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended (the “
Securities Act
”), and, accordingly, the Transferor hereby further certifies that the beneficial interest or Definitive Note is being transferred to a Person that the Transferor reasonably believed and believes is purchasing the beneficial interest or Definitive Note for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a “qualified institutional buyer” within the meaning of Rule 144A in a transaction meeting the requirements of Rule 144A and such Transfer is in compliance with any applicable blue sky securities laws of any state of the United States. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the 144A Global Note and/or the Definitive Note and in the Indenture and the Securities Act.
|
|
2.
|
o |
Check if Transferee will take delivery of a beneficial interest in the Regulation S Global Note or a Definitive Note pursuant to Regulation S
. The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly, the Transferor hereby further certifies that (i) the Transfer is not being made to a Person in the United States and (x) at the time the buy order was originated, the Transferee was outside the United States or such Transferor and any Person acting on its behalf reasonably believed and believes that the Transferee was outside the United States or (y) the transaction was executed in, on or through the facilities of a designated offshore securities market and neither such Transferor nor any Person acting on its behalf knows that the transaction was prearranged with a buyer in the United States, (ii) no directed selling efforts have been made in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities Act, (iii) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act and (iv) if the proposed transfer is being made prior to the expiration of the Restricted Period, the transfer is not being made to a U.S. Person or for the account or benefit of a U.S. Person. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the Regulation S Global Note and/or the Definitive Note and in the Indenture and the Securities Act.
|
|
3.
|
o |
Check if Transferee will take delivery of a beneficial interest in the IAI Global Note or a Definitive Note and Transferee is an Institutional “Accredited Investor”
. (i) The Transfer is being effected to an institutional “accredited investor” within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities Act, (ii) the Transferee is acquiring the beneficial interest or Definitive Note for its own account or for the account of such an institutional “accredited investor”, (iii) the Transfer is for a beneficial interest or Definitive Note in a minimum amount of $250,000, (iv) the beneficial interest or Definitive Note is being acquired for investment purposes and not with a view to or for offer or sale in connection with any distribution in violation of the Securities Act and (v) the Transfer is in compliance with the Securities Act. Upon consummation of the proposed transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will be subject to the restrictions on Transfer enumerated in the Private Placement Legend printed on the IAI Global Note and/or the Definitive Note and in the Indenture and the Securities Act.
|
|
4.
|
o |
Check and complete if Transferee will take delivery of a beneficial interest in a Definitive Note pursuant to any provision of the Securities Act other than Rule 144A or Regulation S
. The Transfer is being effected in compliance with the transfer restrictions applicable to beneficial interests in Restricted Global Notes and Restricted Definitive Notes and pursuant to and in accordance with the Securities Act and any applicable blue sky securities laws of any state of the United States, and accordingly the Transferor hereby further certifies that (check one):
|
|
(a)
|
o |
such Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act;
|
|
(b)
|
o |
or such Transfer is being effected to the Company or a subsidiary thereof;
|
|
(c)
|
o |
such Transfer is being effected pursuant to an effective registration statement under the Securities Act and in compliance with the prospectus delivery requirements of the Securities Act.
|
|
5.
|
o |
Check if Transferee will take delivery of a beneficial interest in an Unrestricted Global Note or of an Unrestricted Definitive Note
.
|
|
(a)
|
o |
Check if Transfer is pursuant to Rule 144
. (i) The Transfer is being effected pursuant to and in accordance with Rule 144 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.
|
|
(b)
|
o |
Check if Transfer is pursuant to Regulation S.
(i) The Transfer is being effected pursuant to and in accordance with Rule 903 or Rule 904 under the Securities Act and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any state of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will no longer be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes, on Restricted Definitive Notes and in the Indenture.
|
|
(c)
|
o |
Check if Transfer is pursuant to other exemption.
(i) The Transfer is being effected pursuant to and in compliance with an exemption from the registration requirements of the Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with the transfer restrictions contained in the Indenture and any applicable blue sky securities laws of any State of the United States and (ii) the restrictions on transfer contained in the Indenture and the Private Placement Legend are not required in order to maintain compliance with the Securities Act. Upon consummation of the proposed Transfer in accordance with the terms of the Indenture, the transferred beneficial interest or Definitive Note will not be subject to the restrictions on transfer enumerated in the Private Placement Legend printed on the Restricted Global Notes or Restricted Definitive Notes and in the Indenture.
|
[Insert Name of Transferor]
|
|||
By:
|
|||
Name:
|
|||
Title:
|
1.
|
The Transferor owns and proposes to transfer the following:
|
(a)
|
o
a beneficial interest in the:
|
(i)
|
o
144A Global Note (CUSIP 47214G AD9), or
|
(ii)
|
o
Regulation S Global Note (CUSIP U04293 AB9), or
|
(b)
|
o
a Restricted Definitive Note.
|
2.
|
After the Transfer the Transferee will hold:
|
(a)
|
o
a beneficial interest in the:
|
(i)
|
o
144A Global Note (CUSIP 47214G AD9), or
|
(ii)
|
o
Regulation S Global Note (CUSIP U04293 AB9), or
|
(iii)
|
o
Unrestricted Global Note (CUSIP 47214G AF4), or
|
(b)
|
o
a Restricted Definitive Note; or
|
(c)
|
o
an Unrestricted Definitive Note,
|
[Insert Name of Transferor]
|
|||
By:
|
|||
Name:
|
|||
Title:
|
[
GUARANTEEING SUBSIDIARY
]
|
|||
By:
|
|||
Name:
|
|||
Title:
|
|||
JAZZ TECHNOLOGIES, INC.
|
|||
By:
|
|||
Name:
|
|||
Title:
|
|||
[
EXISTING GUARANTORS
]
|
|||
By:
|
|||
Name:
|
|||
Title:
|
|||
TOWER SEMICONDUCTOR, INC.
|
|||
By:
|
|||
Name:
|
|||
Title:
|
|||
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
|
|||
By: | |||
Name:
|
|||
Title:
|
1
|
||
8
|
||
10
|
||
10
|
||
11
|
||
12
|
||
14
|
||
19
|
||
21
|
||
22
|
(1)
|
Panasonic Corporation, a Japanese corporation having its place of business at 1 Kotariyakemachi, Nagaokakyo City, Kyoto, 617-8520, Japan
(“
Panasonic
”); and
|
(2)
|
Tower Semiconductor Ltd., an Israeli corporation having its corporate headquarters at Ramat Gavriel Industrial Park, 1 Shaul Amor Avenue, P.O. Box 619, Migdal Haemek 23105, Israel (“
Tower
”) (Tower and Panasonic are collectively referred to as the “
Parties
” and each is individually referred to as “
Party
”).
|
2.1
|
Panasonic Pre-Closing Actions
.
|
|
Following execution of this Agreement and prior to the Closing, Panasonic shall implement, and/or cause the Company to implement, the following actions (the “
Panasonic Pre-Closing Actions
”):
|
|
(a)
|
Following the execution of this Agreement but no later than a month before the Closing Date, Panasonic
shall duly establish the Company and Tower shall review and approve (such approval shall not be unreasonably withheld or refused and shall be made by March 1, 2014) all formation documents;
|
|
(b)
|
Following the establishment of the Company but no later than the Closing Date, Panasonic shall enter into the Business Transfer Agreement with the Company;
|
|
(c)
|
Following the establishment of the Company but no later than the Closing Date, Panasonic shall cause the Company to issue the Long Term Corporate Bond and the Short Term Corporate Bond to Panasonic; and
|
|
(d)
|
Panasonic shall transfer the Transferred Business to the Company on or prior to the Closing Date in accordance with the Business Transfer Agreement and the Business Transfer shall be completed on or prior to the Closing Date.
|
2.2
|
Tower Pre-Closing Actions
.
|
|
(a)
|
Tower shall provide written instructions to its stock transfer agent to issue the New Tower Shares such that the stock transfer agent will be able to issue a physical stock certificate of the New Tower Shares in Panasonic’s name to Panasonic at the Closing pursuant to
Section 6.2(a)
and deliver them to Panasonic’s representative at such time.
|
2.3
|
Share Contribution
.
|
|
(a)
|
Upon the terms and subject to the conditions of this Agreement, on the Closing Date, Panasonic shall contribute the Contribution Shares to Tower and Tower shall issue such number of Tower Ordinary Shares as calculated in accordance with
Section 2.3(b)
(the “
New Tower Shares
”) to Panasonic (the “
Share Contribution
”).
|
|
(b)
|
The number of New Tower Shares to be issued to Panasonic on the Closing Date shall be the integer obtained by dividing (i) 765 million Japanese Yen (\765,000,000) by (ii) (A) the average (rounded to nearest 1/100) of the closing trading prices of Tower Ordinary Shares on the Tel Aviv Stock Exchange for the trailing fifteen (15) trading days ending on and including the second trading day prior to the Closing Date (the “
Calculation Period
”) times (B) the Exchange Rate, rounded to the nearest whole number.
|
|
(c)
|
On or prior to the Closing Date, Tower and Panasonic shall enter into a registration rights agreement in form and substance reasonably satisfactory to the Parties (the “
Registration Rights Agreement
”), which registration rights agreement shall include the following terms: 1) an obligation by Tower to file a resale registration statement on Form F-3 (the “
Registration Statement
”) with the SEC and the Tel Aviv Stock Exchange, if required, no later than 45 days after the Closing Date to register for resale all New Tower Shares on NASDAQ and the Tel Aviv Stock Exchange, 2) an obligation by Tower to use reasonable best efforts to cause the Registration Statement to be declared effective as soon as possible after filing, but in no event later than 120 days after the Closing Date, 3) an obligation by Tower to use reasonable best efforts to maintain the effectiveness of the Registration Statement, subject to grace periods reasonably acceptable to Panasonic, 4) Panasonic will be granted one demand registration right, which right will enable Panasonic to require Tower to conduct one underwritten offering of the New Tower Shares on behalf of Panasonic, all on terms reasonably acceptable to Panasonic, and 5) Panasonic will be granted piggy back registration rights reasonably acceptable to Panasonic. Tower’s obligation to file the Registration Statements within 45 days is subject to Panasonic providing the Carveout Financial Statements and any other necessary reports and account auditors’ reports as may be required to satisfy the SEC requirements to such filings. Panasonic will fully and reasonably cooperate with Tower to address any reasonable request from the SEC following the filing of the Registration Statement; for avoidance of doubt, Tower shall file the Registration Statement with the SEC and, if required, the Tel Aviv Stock Exchange, as soon as possible after Panasonic provides the Carveout Financial Statement to Tower.
|
3.1
|
Panasonic represents and warrants to Tower that the statements set forth in
Schedule 3.1
are true and correct as of the date of this Agreement (or if any specific date is referred to in any representation or warranty, as of such specific date).
|
3.2
|
Panasonic’s representations and warranties in
Section 3.1
(the “
Panasonic’s Warranties
”) are subject to the following matters:
|
|
(a)
|
any matter that is expressly contained or described as an exception to Panasonic’s Warranties in the Panasonic Disclosure Letter and only to the extent that such matter is readily apparent from the disclosure set forth in the Panasonic Disclosure Letter; and
|
|
(b)
|
all matters clearly disclosed, provided or noted (to the extent so disclosed, provided or noted) in the Financial Statements.
|
4.1
|
Tower represents and warrants to Panasonic that the statements set forth in
Schedule 4.1
are true and correct as of the date of this Agreement (or if any specific date is referred to in any representation or warranty, as of such specific date).
|
4.2
|
Tower’s representations and warranties in
Section 4.1
(the “
Tower’s Warranties
”) are subject to the following matters:
|
|
(a)
|
any matter that is expressly contained or described as an exception to Tower’s Warranties in the Tower Disclosure Letter and only to the extent that such matter is readily apparent from the disclosure set forth in the Tower Disclosure Letter; and
|
|
(b)
|
all matters clearly disclosed, provided or noted (to the extent so disclosed, provided or noted) in Tower’s public filings with the SEC.
|
5.1
|
Conditions Precedent
.
|
(a)
|
Conditions to Panasonic’s Obligations.
Panasonic’s obligation to consummate the Closing is conditional upon (1) receipt by Panasonic of a certificate executed by an officer of Tower confirming that each of the conditions specified in clauses (i) to (iii) below is satisfied in all respects, or (2) a written waiver by Panasonic, of the following conditions:
|
|
(i)
|
Tower’s Warranties set forth in
Section 4.1
shall be true and correct on the date hereof and shall be true and correct in all material respects as of the Closing Date (provided that those warranties that address matters only as of a particular date shall have been true and correct only as of such date
)
;
|
|
(ii)
|
Tower shall not have breached, in any material respect, any covenant or other obligation contained in this Agreement that is required to be performed by Tower at or prior to the Closing; and
|
|
(iii)
|
All of the Tower Pre-Closing Actions have been duly completed in accordance with this Agreement.
|
(b)
|
Conditions to Tower’s Obligations.
Tower’s obligation to consummate the Closing is conditional upon (1) receipt by Tower of a certificate executed by an officer of Panasonic to the effect that each of the conditions specified in clauses (i) to (iv) below is satisfied in all respects, or (2) a written waiver by Tower, of the following conditions:
|
|
(i)
|
Panasonic’s Warranties set forth in
Section 3.1
shall be true and correct on the date hereof and shall be true and correct in all material respects as of the Closing Date (provided that those warranties that address matters only as of a particular date shall have been true and correct only as of such date);
|
|
(ii)
|
Panasonic shall not have breached, in any material respect, any covenant or other obligation contained in this Agreement that is required to be performed by Panasonic at or prior to the Closing;
|
|
(iii)
|
All of the Panasonic Pre-Closing Actions have been duly completed in accordance with this Agreement;
|
|
(iv)
|
There shall not have occurred or be continuing a Company Material Adverse Effect; and
|
|
(v)
|
With regard to the Transferred Lease Agreements, Panasonic shall have obtained from the lessors consent of the Company continuing the use of the leased properties under the Transferred Lease Agreements after the Business Transfer.
|
(c)
|
Conditions to Panasonic’s and Tower’s Obligations.
The Parties’ obligation to consummate the Closing is conditional upon the satisfaction, or written waivers by both Parties, of the following conditions:
|
|
(i)
|
All of Tower’s Required Approvals shall remain in full force and effect and any applicable mandatory waiting periods shall have expired; and
|
|
(ii)
|
There shall not be any Governmental Order, statute, rule or regulation enjoining or prohibiting the consummation of the transactions contemplated by this Agreement (including the Panasonic Pre-Closing Actions and the Tower Pre-Closing Actions) as of the Closing Date.
|
6.1
|
The closing of the Share Contribution (the “
Closing
”) shall take place at the office of Nishimura & Asahi, Ark Mori Building, 1-12-32 Akasaka, Minato-klu, Tokyo, Japan at 5:00 p.m. (Tokyo time) or such other place and time as agreed by the Parties on the Closing Date, subject to the satisfaction or waiver of all conditions set forth in
Article V
hereof (other than those conditions that, by their terms, are not capable of being satisfied or waived until the Closing Date, but subject to the satisfaction or waiver of such conditions at the Closing Date). All proceedings required to be taken and all documents required to be executed and delivered by all Parties on the Closing Date in accordance with this
Article VI
will be deemed to have been taken and executed simultaneously and no such proceedings will be deemed to have been taken nor such documents executed or delivered until all have been taken, executed and delivered.
|
6.2
|
At the Closing:
|
|
(a)
|
Tower shall deliver to Panasonic (i) a share certificate representing all of the New Tower Shares duly endorsed in ownership in favor of Panasonic, (ii) shall perform any and all actions reasonably requested by Panasonic in connection with having Panasonic listed as the owner of the New Tower Shares; and (iii) an opinion of Tower’s legal counsel that the New Tower Shares are duly and validly issued.
|
|
(b)
|
Panasonic shall transfer
the Contribution Shares to Tower, and shall perform any and all actions reasonably requested by Tower in connection with having the name of Tower listed as the registered owner of the Contribution Shares in the Company’s stock ledger;
|
|
(c)
|
the Parties shall and shall cause the Company to enter into a shareholders’ agreement, the working draft of which as of the date hereof is attached hereto as
Exhibit 6.2(c)
(the “
Shareholders Agreement
”);
|
|
(d)
|
the Parties shall cause the Company to hold its general meeting of shareholders and approve (i) the amendment of the Company’s articles of incorporation as separately agreed by the Parties and (ii) the appointment of the persons recommended by Panasonic and Tower, as applicable, in accordance with the Shareholders Agreement as directors and statutory auditors of the Company;
|
|
(e)
|
Panasonic shall deliver to Tower a certificate dated as of the Closing Date and signed by duly authorized officer of Panasonic, certifying as to the matters set forth in
Section 5.1(b)
;
|
|
(f)
|
Tower shall deliver to Panasonic a certificate dated as of the Closing Date and signed by duly authorized officer of Tower, certifying as to the matters set forth in
Section 5.1(a)
; and
|
|
(g)
|
the Parties shall enter into the Registration Rights Agreement.
|
|
(i)
|
amend its articles of incorporation or other organizational documents;
|
|
(ii)
|
issue or authorize issuance any new shares or other securities convertible or exchangeable for or rights to acquire any shares of the Company;
|
|
(iii)
|
declare or pay any dividend or distribution with respect to any shares of the Company;
|
|
(iv)
|
implement any repurchase of any shares of the Company;
|
|
(v)
|
liquidate, dissolve, or wind-up the Company;
|
|
(vi)
|
change any material accounting principle, method or practice of the Company, except as may be required by a concurrent change in Japanese GAAP or applicable Law;
|
|
(vii)
|
be party to (A) any merger, acquisition, consolidation, stock-for-stock exchange, recapitalization or similar transaction involving the Company or (B) any purchase of all or any substantial portion of the assets of the Company;
|
|
(viii)
|
increase the compensation or fringe benefits of, or modify the employment terms and benefits of, any Transferred Employee, other than immaterial changes that occur following the date hereof in the ordinary course of business;
|
|
(ix)
|
establish or adopt any new employee benefit (including health) or pension plans or employment agreements, other than new hire employment agreements on standard forms;
|
|
(x)
|
hire any new officer;
|
|
(xi)
|
sell, lease, license, exchange, transfer, place an Encumbrance on, or dispose of any Asset (as defined in the Business Transfer Agreement) or any nontransferred asset or leased assets located in the Company;
|
|
(xii)
|
terminate (except pursuant to its terms) or modify or amend any Contract (as defined in the Business Transfer Agreement);
|
|
(xiii)
|
cancel or compromise any material debt or claim or waive or release any material rights of the Transferred Business;
|
|
(xiv)
|
authorize or enter into an agreement to take any of the actions described above;
|
|
(xv)
|
terminate, modify, or not renew existing insurance coverage; or
|
|
(xvi)
|
maintain inventories, stock items and work in process at conditions which are not in the ordinary course of business.
|
(i)
|
amend its articles of incorporation or other organizational documents;
|
|
(ii)
|
declare or pay any dividend or distribution with respect to any of its shares
|
(iii)
|
implement any repurchase of any of its shares;
|
(iv)
|
liquidate, dissolve, or wind-up;
|
|
(v)
|
change any material accounting principle, method or practice, except as may be required by a concurrent change in U.S. GAAP or applicable Law;
|
|
(vi)
|
be party to (A) any merger, acquisition, consolidation, stock-for-stock exchange, recapitalization or similar transaction or (B) any purchase of all or any substantial portion of its assets;
|
|
(vii)
|
material increases to the compensation or fringe benefits of, or modify the employment terms and benefits of, any of its employees, other than immaterial changes that occur during the Calculation Period in the ordinary course of business;
|
|
(viii)
|
establish or adopt any new material employee benefit (including health) or pension plans or employment agreements, other than new hire employment agreements on standard forms or in the ordinary course of business such as renewal of plans;
|
|
(x)
|
sell, lease, license, place an Encumbrance on, or dispose of any of its material assets;
|
|
(xi)
|
cancel or compromise any material debt or claim or waive or release any material rights;
|
|
(xii)
|
act to voluntarily delist the Tower Ordinary Shares from NASDAQ and/or the Tel Aviv Stock Exchange; or
|
|
(xiii)
|
authorize or enter into an agreement to take any of the actions described above.
|
7.3
|
Transferred Employees
.
|
|
(a)
|
During the period commencing with the execution and delivery of this Agreement until the earlier to occur of the termination of this Agreement pursuant to its terms and the Closing, Panasonic shall afford Tower and its respective officers, authorized employees, accountants, counsel and other authorized representatives reasonable access at reasonable time during normal business hours and in a manner so as not to interfere with the normal business operation of the Transferred Business, to the Transferred Business as Tower may reasonably request, and make available to Tower: (i) copies of the organizational documents of the Company, including, if applicable, all amendments thereto; (ii) the stock records of the Company; and (iii) copies of the minutes of the meetings at which actions were taken or any actions taken by written consent without a meeting of the stockholders of the Company, the board of directors of the Company and all committees of the board of directors of the Company (if any), to the extent, in the case of the documents described in clauses (i) through (iii), such documents are required to be prepared and maintained under applicable Law. Panasonic shall afford access to an appraiser of the fabs to inspect the transferred Assets and Panasonic will provide all necessary documents and evidence pertaining to the Assets.
|
|
(b)
|
During the period commencing with the execution and delivery of this Agreement until the earlier to occur of the termination of this Agreement pursuant to its terms and the Closing, Tower shall afford Panasonic and its respective officers, authorized employees, accountants, counsel and other authorized representatives reasonable access at reasonable time during normal business hours and in a manner so as not to interfere with the normal business operation of
Tower
, to Tower as Panasonic may reasonably request.
|
|
(i)
|
The transition service agreement between Panasonic and the Company;
|
|
(ii)
|
The IP license agreement between Panasonic and the Company (the “
Panasonic IP License Agreement
”);
|
|
(iii)
|
The IP license agreement between Panasonic and Tower to grant Tower the right to use certain Panasonic IP and technologies for third party foundry business;
|
|
(iv)
|
The subcontract agreements between Panasonic and the Company;
|
|
(v)
|
The manufacturing agreement between Panasonic and the Company;
|
|
(vi)
|
The secondment agreement between Panasonic and the Company;
|
|
(vii)
|
The memorandum concerning transfer of employees between Panasonic and the Company;
|
|
(viii)
|
The lease agreement between Panasonic and the Company (“
Panasonic Lease Agreement
”);
|
|
(b)
|
Basket.
|
9.1
|
This Agreement may be terminated at any time prior to the consummation of the Closing under the following circumstances:
|
|
(a)
|
by mutual written consent of Panasonic and Tower;
|
|
|
(b)
|
prior to the consummation of the Closing, by written notice from Panasonic to Tower if (i) there is any material breach of any representation, warranty, covenant or agreement of Tower set forth in this Agreement, except that, if such breach is curable by Tower, then, for a period of thirty (30) days after receipt by Tower of the notice from Panasonic of such breach, such termination shall not be effective, and such termination shall become effective only if the breach is not cured within the thirty (30) day period, (ii) the Closing has not occurred on or before June 30, 2014, (the “
Deadline
”) (other than as a result of a material breach of this Agreement by Panasonic),
or (iii) the consummation of any of the transactions contemplated hereby (including the Panasonic Pre-Closing Actions and the Tower Pre-Closing Actions) is permanently enjoined, prohibited or otherwise restrained by the terms of a final, non-appealable Governmental Order; or
|
|
|
(c)
|
prior to the consummation of the Closing, by written notice from Tower to Panasonic if (i) there is any material breach of any representation, warranty, covenant or agreement of Panasonic set forth in this Agreement, except that, if such breach is curable by Panasonic, then, for a period of thirty (30) days after receipt by Panasonic of the notice from Tower of such breach, such termination shall not be effective, and such termination shall become effective only if the breach is not cured within the thirty (30) day period, (ii) the Closing has not occurred on or before the Deadline (other than as a result of a material breach of this Agreement by Tower) or (iii) the consummation of any of the transactions contemplated hereby (including the Panasonic Pre-Closing Actions and the Tower Pre-Closing Actions) is permanently enjoined, prohibited or otherwise restrained by the terms of a final, non-appealable Governmental Order.
|
9.2
|
In the event of the termination of this Agreement pursuant to
Section 9.1
, this Agreement shall, subject to the last sentence of this
Section 9.2
, forthwith become void and have no effect, without any liability on the part of any Party or its respective Affiliates, officers, directors or stockholders, other than any claim arising from a breach of any obligation of this Agreement where such breach occurred prior to such termination. Notwithstanding the foregoing, the provisions of
Articles I
and
VIII
, this
Section 9.2
and
Article X
shall survive any termination of this Agreement.
|
10.5
|
Applicable Law; Dispute Resolution
.
|
|
(a)
|
This Agreement shall be governed by and construed in accordance with the laws of Japan without giving effect to any choice or conflict of law provision or rules.
|
|
(b)
|
Any dispute, action or proceeding arising out of or in connection with this Agreement, including any question regarding its existence, validity, binding effect, breach, amendment or termination, which cannot be resolved amicably between the Parties shall be settled by arbitration in Singapore under the rules of the Singapore International Arbitration Centre (“
SIAC Rules
”) by a single arbitrator to be appointed by the Parties or, failing agreement within fourteen (14) days after either Party has given to the other Party a written request to concur in the appointment of an arbitrator, a single arbitrator to be appointed on the request of either Party by the President of the Court of Arbitration of the Singapore International Arbitration Centre and such submission shall be a submission to arbitration in accordance with the SIAC Rules as then in force by which the Parties in dispute agree to be so bound. The arbitration shall be conducted wholly in the English language.
|
SIGNED by
Keiji Fujimoto
TITLE: Director
on behalf of Panasonic Corporation
DATE: December 20, 2013
|
SIGNED by
Russell Ellwanger
TITLE: CEO
on behalf of Tower Semiconductor Ltd.
DATE: December 20, 2013
|
SIGNED by
Dr. Itzhak Edrei
TITLE: President
on behalf of Tower Semiconductor Ltd.
DATE: December 20, 2013
|
(A)
|
Panasonic Corporation, a Japanese corporation having its place of business at 1 Kotariyakemachi, Nagaokakyo City, Kyoto, 617-8520, Japan (“
Panasonic
”);
|
(B)
|
Tower Semiconductor Ltd., an Israeli corporation having its principal place of business at Ramat Gavriel Industrial Park, 1 Shaul Amor Avenue, P.O. Box 619, Migdal Haemek 23105, Israel (“
Tower
”, Tower and Panasonic are collectively referred to as the “
Shareholders
” and each is individually referred to as a “
Shareholder
”); and
|
(C)
|
TowerJazz Panasonic Semiconductor Co., Ltd., a Japanese corporation having its principal place of business at 800 Higashiyama, Uozu City, Toyama 937-8585, Japan (the “
Company
”; the Shareholders and Company will be referred to individually as a “
Party
” and collectively as the “
Parties
”).
|
4.1
|
Business Plan
.
|
4.2
|
Articles of Incorporation and Board of Directors Rules
.
|
|
(i)
|
Fiscal Year 2014: ***
|
|
(ii)
|
Fiscal Year 2015***
|
|
(iii)
|
Fiscal Year 2016: ***
|
|
(iv)
|
Fiscal Year 2017: ***
|
|
(v)
|
Fiscal Year 2018: ***
|
|
(vi)
|
Fiscal Quarter 1, 2019: ***
|
(d)
|
***
|
|
(a)
|
Panasonic Manufacturing Agreement
. The Parties understand and confirm that the terms and conditions of the manufacturing transactions between Panasonic and the Company regarding the Panasonic Products (Captive Business) are as set forth in the Panasonic Manufacturing Agreement.
|
|
(b)
|
Retention of Employment
. The Company shall use its best efforts to maintain employment of employees engaged in Foundry Lines (the “
Foundry Line Employees
”) by redeployment or any other method in the event of the reduction of production volumes of the products manufactured in Foundry Lines including Panasonic Products (Captive Business). The Company shall provide Panasonic with prior notification regarding layoffs.
|
10.5
|
Fair Value
. Fair Value shall be determined as follows:
|
13.10
|
Confidentiality
.
|
PANASONIC:
|
|||
TOWER:
|
|||
COMPANY:
|
|||
|
(1)
|
Panasonic Corporation, a Japanese corporation having its place of business at 1 Kotariyakemachi, Nagaokakyo City, Kyoto, 617-8520, Japan
(the “
Seller
”)
; and
|
|
(2)
|
TowerJazz Panasonic Semiconductor Co., Ltd., a Japanese corporation having its place of business at 800 Higashiyama, Uozu City, Toyama 937-8585, Japan
(the “
Purchaser
,” together with the Seller, the “
Parties
” and each a “
Party
”).
|
|
1.1
|
The following words and expressions shall have the following meanings:
|
|
1.2
|
Any reference to a statutory provision shall include such provision and any regulations made in pursuance thereof as from time to time modified or re-enacted whether before or after the date of this Agreement so far as such modification or re-enactment applies or is capable of applying to any transactions entered into prior to completion and (so far as liability thereunder may exist or can arise) shall also include any past statutory provisions or regulations (as from time to time modified or re-enacted) that such provisions or regulations have directly or indirectly replaced;
|
|
1.3
|
References to “
Clauses
” and the “
Schedule
” are to clauses of and the Schedule to this Agreement and references to this “
Agreement
” shall mean this Agreement and the Schedule;
|
|
1.4
|
The headings in this Agreement are for convenience only and shall not affect the interpretation hereof; and
|
|
1.5
|
Unless the context otherwise requires, references to the singular number shall include references to the plural number and vice versa, references to natural persons shall include bodies corporate, and the use of any gender shall include all genders.
|
|
2.2.
|
Acknowledgement of Liabilities
.
|
|
(b)
|
The Purchaser shall not assume or be liable for any Liabilities of the Seller other than the Assumed Liabilities.
|
|
|
3.1
|
On or prior to the Closing Date, the Purchaser shall pay the Purchase Price to the Seller by issuing and delivering the Corporate Bond to the Seller, and applicable consumption tax (
shohi-zei
) by cash. The Corporate Bond shall be issued as soon as possible following the Closing Date and no later than one week thereafter.
|
|
3.2
|
Upon payment of applicable consumption tax (
shohi-zei
) by cash, in consideration of the payment of the Purchase Price by the Purchaser, the Seller shall transfer the Transferred Business to the Purchaser on the Closing Date.
|
|
3.3
|
On the Closing Date or promptly thereafter (in case where the business of the Purchaser will not be negatively affected even if the Purchaser does not enter into such Newly Executed Contracts on the Closing Date), the Purchaser shall enter into the Newly Executed Contracts.
|
|
4.1
|
Calculation of the Actual Assets Amount
|
|
(a)
|
By no later than April 10, 2014, the Seller shall provide the final value amount (book value in JPY under JAPAN-GAAP which the Seller complies with) and final quantities of the Assets and reasonable supporting documents (other than cash) as of March 31, 2014 (for WIP, raw materials and spare parts, as of 8:30 AM (Japan Time); (the “Actual Assets Amount”), and shall notify the amount with the reasonable supporting documents to the Purchaser in writing thereof. The Purchaser shall cooperate in order to enable the Seller to finalize its calculation.
|
|
(b)
|
If the Purchaser agrees on the amount notified by the Seller (the “Notified Assets Amount”), or does not notify any proposal to modify the Notified Assets Amount to the Seller within 10 business days from the receipt of the notification from the Seller (the “Seller’s Notification”), the Notified Assets Amount shall be the Actual Assets Amount.
|
|
(c)
|
If the Purchaser has a proposal to modify the Notified Assets Amount, the Purchaser shall notify the proposal to the Seller in writing within 10 business days from the receipt of the Seller’s Notification, and shall have good faith discussions to determine the amount with the Seller. If the Parties do not agree on the amount within 30 calendar days from the receipt of the Seller’s Notification, a reputable accounting firm determined by the Parties shall review the Notified Assets Amount and determine the Actual Assets Amount. The costs and expenses to be paid to the accounting firm shall be equally borne by the Parties.
|
|
4.2
|
If the amount obtained by deducting the Estimated Assets Amount from the Actual Assets Amount is a positive figure, the Purchaser shall pay to the Seller an amount equal to such difference as an increase in consideration for the Transferred Business, within 30 calendar days from the date on which the Actual Assets Amount is determined in accordance with Section 4.1 (b) or (c).
|
|
4.3
|
If the amount obtained by deducting the Estimated Assets Amount from the Actual Assets Amount is a negative figure, the Seller shall pay to the Purchaser an amount equal to such difference as a reduction from the consideration for the Transferred Business, within 30 calendar days from the date on which the Actual Assets Amount is determined in accordance with Section 4.1 (b) or (c).
|
|
5.1
|
The Joint Venture Formation Agreement having been entered into between the Seller and Tower and remaining in full force and effect and there is no cause (including any threats thereof) for termination, cancellation or nullification thereof;
|
|
5.2
|
There being no Governmental Order, statute, rule or regulation enjoining or prohibiting the consummation of the Business Transfer or the transactions contemplated by the Joint Venture Formation Agreement.
|
|
6.1
|
The Parties shall cooperate and coordinate with each other with respect to the satisfaction of the conditions set forth in Article 4.
|
|
6.2
|
The Seller shall second Employees to the Purchaser from the Closing Date to September 30, 2014 in accordance with the Secondment Agreement, and the Purchaser shall employ the Employees on October 1, 2014 or a date otherwise agreed between the Parties.
|
|
6.3
|
The Seller hereby undertakes to (i) use its best efforts to continue to outsource the Services (as defined in the Outsourcing Agreement) to the Purchaser and not to determine to close any of Panasonic Outsourcing Line (as defined in the Shareholders Agreement) for so long as the Seller is a shareholder of the Purchaser and/or needs to procure the Panasonic Products (Outsourcing) (as defined in the Shareholders Agreement), and (ii) hold good faith discussions with the Purchaser before it determines to close any Panasonic Outsourcing Line and treatment of
any possible employment termination of Panasonic Outsourcing Line Employees
(as defined in the Shareholders Agreement).
|
|
6.4
|
In addition to Section 7.1, for the first five (5) years from the Closing Date, the Seller shall make its best effort so that the Purchaser can have the benefit of all of the Material Contracts (as defined in the Joint Venture Formation Agreement), including Intellectual Property (as defined in the Joint Venture Formation Agreement) and any rights thereto, and any software licenses for tools, intellectual property licenses and others, which are required, as of the Closing Date, to perform the Transferred Business (as defined in the Joint Venture Formation Agreement). In the event that, despite such best effort by the Seller, the Purchaser fails to have such benefit due to a reason attributable to the Seller, the Seller shall compensate the Purchaser for any losses arising out of such Purchaser’s failure. In the event that there is any dispute regarding the cause of the failure between the Parties, the Parties shall have good faith discussions.
|
|
6.5
|
The Purchaser shall use its best efforts to maintain employment of employees engaged in Panasonic Outsourcing Lines (the “Panasonic Outsourcing Line Employees”) by redeployment or any other method in the event of the reduction of production volumes of Panasonic Products (Outsourcing). The Purchaser shall provide the Seller with prior notification regarding layoffs. If, in spite of the Purchaser’s and the Seller’s best efforts, the Purchaser decides to reduce the number of the Panasonic Outsourcing Line Employees, the Seller hereby undertakes to hold good faith discussions in advance with the Purchaser about the treatment of such Panasonic Outsourcing Line Employees. If any Panasonic Outsourcing Line Employees are unilaterally terminated by the Purchaser pursuant to a decision to reduce the number of Panasonic Outsourcing Line Employees, and any such terminated Panasonic Outsourcing Line Employees bring a claim against the Purchaser based on such unilateral termination, the Seller hereby undertakes to hold good faith discussions in advance with the Purchaser about the treatment of such terminated Panasonic Outsourcing Line Employees. Further, if any such Panasonic Outsourcing Line Employee is reinstated as an employee of the Purchaser, the Seller hereby undertakes to hold good faith discussions in advance with the Purchaser about the treatment of such Panasonic Outsourcing Line Employee.
|
|
7.1
|
In accordance with the Joint Venture Formation Agreement, the Seller represents and warrants the following statements are true and correct as of the Closing Date:
|
|
(a)
|
The Seller will assign to the Purchaser or procure for the Purchaser to have the benefit of all the Material Contracts (as defined in the Joint Venture Formation Agreement) and all of the contracts which are required to perform the Transferred Business to the Purchaser with the same or substantially similar terms and conditions as of the Closing Date in accordance with this Agreement and applicable Laws, and ensure that any Liability incurred before the Closing Date will not be transferred to the Purchaser.
|
|
(b)
|
All material Intellectual Property (as defined in the Joint Venture Formation Agreement) and material rights to Intellectual Property necessary to conduct the Transferred Business as currently conducted, are (A) owned by the Seller and will be licensed to the Purchaser as of the Closing in accordance with the Panasonic IP License Agreement (as defined in the Joint Venture Formation Agreement) (with respect to the trade name “Panasonic,” the use thereof shall be limited to the corporate name of the Purchaser), (B) licensed to the Seller and the Seller shall (a) assign or sub-license or otherwise enable the Purchaser to use those such rights licensed to the Seller that do not require third party consent, (b) use its best efforts to either assign, sub-license or otherwise enable the Purchaser to use those such rights that require third party consent to the Purchaser with respect to the Intellectual Properties listed in the Panasonic Disclosure Letter (as defined in the Joint Venture Formation Agreement), and (c) use all its best efforts for the Purchaser to be able to conduct the Transferred Business as currently conducted without using such Intellectual Property or rights; or (C) otherwise in the possession or control of the Seller to the extent necessary to conduct the Transferred Business as currently conducted and as will be conducted following the Closing.
|
|
(c)
|
The Seller has, and at the Closing, the Purchaser will have, full title and ownership of, or has a valid and enforceable license to, all of the Assets and such Assets enable the Seller, and after formation, the Purchaser to carry on the Transferred Business without any conflict with or infringement of the material rights of any third party and free and clear of any Encumbrances other than security interests attached for the Long Term Corporate Bond or the Short Term Corporate Bond.
|
|
7.2
|
The Seller’s representations and warranties in Section 7.1 (the “Seller’s Warranties”) are subject to all matters clearly disclosed, provided or noted (to the extent so disclosed, provided or noted) in the Financial Statements (as defined in the Joint Venture Formation Agreement).
|
8.1
|
Subject to the limitations set forth in
Section 8.2,
hereof, the Seller shall indemnify the Purchaser from and against any and all losses to the extent arising out of or resulting from (i) any inaccuracy of any the Seller’s Warranty (the “
Seller Warranty Breach
”) or (ii) any breach of the Seller’s obligations under this Agreement.
|
|
(b) Basket.
|
|
No indemnification shall be payable by Seller for any the Seller Warranty Breach unless and until the amount of all losses due to any the Seller Warranty Breach against the Purchaser exceeds 10 million Japanese Yen (¥10,000,000) (the “
Basket
”); whereupon, subject to
Section 8.2(c)
, indemnification by the Seller shall be payable for all such Losses (including the Basket amount).
|
|
9.1
|
If the transfer of the Transferred Business to the Purchaser is not duly completed by May 15, 2014, either Party may terminate this Agreement by providing written notice to the other Party without incurring any liability to such other Party.
|
|
9.2
|
The Parties may terminate this Agreement by their
mutual written consent.
|
|
9.3
|
The following clauses shall survive the termination of this Agreement: Articles 1, 9.3, and 10.1 through 10.4.
|
|
Except as specifically provided otherwise in the transaction documents, each Party shall bear its own expenses with respect to the transactions contemplated hereby.
|
|
This Agreement may be amended, modified or supplemented only in writing signed by the Parties, subject to the receipt of the written consent of Tower, as a third party beneficiary, to the proposed amendment. Such written consent of Tower may not be unreasonably withheld.
|
|
(a)
|
This Agreement shall be governed by and construed in accordance with the laws of Japan.
|
|
(b)
|
Any dispute, action or proceeding arising out of or in connection with this Agreement, including any question regarding its existence, validity, binding effect, breach, amendment or termination shall be subject to the non-exclusive jurisdiction of the Tokyo District Court.
|
SIGNED by [ ]
on behalf of Panasonic Corporation
|
SIGNED by [Name]
on behalf of [
Name of Purchaser
]
|
Die Yield Rate (%) =
|
number of non-defective chips per wafer
|
x 100
|
total number of gross chips per wafer
|
|
(a)
|
for Products for *** months’ prior notice; and
|
(b)
|
for other Products – *** months’ prior notice.
|
|
(i)
|
If a Die Yield Rate is above a Minimum Die Yield Rate per product: Panasonic shall accept all such wafer.
|
|
(ii)
|
Maverick Procedure as set forth in Exhibit D will be implemented.
|
|
(iii)
|
If a Die Yield Rate is below the Minimum Die Yield Rate: Panasonic may refuse to accept or return all such lots of the Products and the Company shall not be released from its obligations to deliver the relevant ordered Products. The Company shall conduct analysis of such failure, using its professional, expert or skilled technique or experience, including root cause analysis at its own expense with support of Panasonic. In the event that the cause of such failure is eventually determined to be attributable to Panasonic, Panasonic shall make a payment equivalent to the Purchase Price of the relevant Products.
|
PANASONIC CORPORATION
|
|||
|
By:
|
||
Name:
|
|||
Title:
|
TOWERJAZZ PANASONIC
SEMICONDUCTOR CO., LTD.
|
|||
By:
|
|||
Name:
|
|||
Title:
|
|||
Subsidiary
|
Jurisdiction
|
Ownership
|
Jazz Technologies, Inc.
|
Delaware
|
100%
|
Jazz Semiconductor, Inc.
|
Delaware
|
100%
|
Newport Fab LLC
|
Delaware
|
100%
|
TowerJazz Japan Ltd.
|
Japan
|
100%
|
TowerJazz Panasonic Semiconductor Co., Ltd.,
|
Japan
|
51%
|
/s/
Russell C. Ellwanger
Russell C. Ellwanger
Chief Executive Officer
Tower Semiconductor Ltd.
|
/S/
|
Oren Shirazi
|
||
Oren Shirazi
|
|||
Senior VP & Chief Financial Officer
|
|||
Tower Semiconductor Ltd.
|
|
1.
|
the Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
|
|
2.
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
|
/s/
Russell C. Ellwanger
Russell C. Ellwanger
Chief Executive Officer
|
|
1.
|
the Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
|
|
2.
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
|
/s/ Oren Shirazi
Oren Shirazi
Senior VP & Chief Financial Officer
|