ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
US GAAP
x
|
International Financial Reporting Standards as issued by the International Accounting Standards Board
¨
|
Other
¨
|
1 | ||
1 | ||
1 | ||
26 | ||
41 | ||
41 | ||
56 | ||
74 | ||
75 | ||
75 | ||
76 | ||
95 | ||
97 |
97 | ||
97 | ||
98 | ||
99 | ||
99 | ||
CODE OF ETHICS | 99 | |
99 | ||
100 | ||
100 | ||
CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT | 100 | |
CORPORATE GOVERNANCE. | 100 | |
MINE SAFETY DISCLOSURE | 100 |
ITEM 1.
|
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVI
SOR
S
|
ITEM 2.
|
OFFER STATISTICS AND EXPECTED TIMETABLE
|
ITEM 3.
|
KEY INFORMATION
|
Year Ended December 31,
|
||||||||||||||||||||
2014
|
2013
|
2012
|
2011
|
2010
|
||||||||||||||||
(in thousands, except per share data)
|
||||||||||||||||||||
Statement of Operations Data:
|
||||||||||||||||||||
Revenues
|
$ | 828,008 | $ | 505,009 | $ | 638,831 | $ | 611,023 | $ | 509,262 | ||||||||||
Cost of revenues
|
764,220 | 476,900 | 560,046 | 526,198 | 402,077 | |||||||||||||||
Gross profit
|
63,788 | 28,109 | 78,785 | 84,825 | 107,185 | |||||||||||||||
Research and development
|
51,841 | 33,064 | 31,093 | 24,886 | 23,876 | |||||||||||||||
Marketing, general and administrative
|
58,783 | 42,916 | 44,413 | 48,239 | 39,986 | |||||||||||||||
Nishiwaki Fab impairment
|
47,472 | -- | -- | -- | -- | |||||||||||||||
Nishiwaki Fab restructuring costs
|
8,028 | -- | -- | -- | -- | |||||||||||||||
Acquisition related and reorganization costs
|
1,229 | -- | 5,789 | 1,493 | -- | |||||||||||||||
Amortization related to a lease agreement early termination
|
-- | 7,464 | -- | -- | -- | |||||||||||||||
Operating profit (loss)
|
(103,565 | ) | (55,335 | ) | (2,510 | ) | 10,207 | 43,323 | ||||||||||||
Interest expenses, net
|
(33,409 | ) | (32,971 | ) | (31,808 | ) | (27,797 | ) | (26,406 | ) | ||||||||||
Other non-cash financing expenses, net
|
(55,404 | ) | (27,838 | ) | (27,583 | ) | (12,505 | ) | (46,519 | ) | ||||||||||
Gain from acquisition
|
166,404 | -- | -- | 19,467 | -- | |||||||||||||||
Other income (expense), net
|
(140 | ) | (904 | ) | (1,042 | ) | 13,460 | 65 | ||||||||||||
Income (loss) before income tax expenses
|
(26,114 | ) | (117,048 | ) | (62,943 | ) | 2,832 | (29,537 | ) | |||||||||||
Income tax benefit (expense)
|
24,742 | 9,388 | (7,326 | ) | (21,362 | ) | (12,830 | ) | ||||||||||||
Loss
|
(1,372 | ) | (107,660 | ) | (70,269 | ) | (18,530 | ) | (42,367 | ) | ||||||||||
Net loss attributable to non controlling interest
|
5,635 | -- | -- | -- | -- | |||||||||||||||
Net Income (Loss) attributable to the Company
|
$ | 4,263 | $ | (107,660 | ) | $ | (70,269 | ) | $ | (18,530 | ) | $ | (42,367 | ) | ||||||
Basic earnings (loss) per ordinary share
|
$ | $0.08 | $ | (2.72 | ) | $ | (3.17 | ) | $ | (0.90 | ) | $ | (2.63 | ) | ||||||
Diluted earnings per ordinary share
|
$ | 0.07 | ||||||||||||||||||
Other Financial Data:
|
||||||||||||||||||||
Depreciation and amortization, including amortization of financing expenses and accretion
|
$ | 243,362 | $ | 164,824 | $ | 173,585 | $ | 162,679 | $ | 143,023 |
As of December 31,
|
||||||||||||||||||||
2014
|
2013
|
2012
|
2011
|
2010
|
||||||||||||||||
(in thousands of US dollars, except share data which is in thousands)
|
||||||||||||||||||||
Selected Balance Sheet Data:
|
||||||||||||||||||||
Cash and cash equivalents, short-term interest-bearing deposits and designated deposits
|
$ | 187,167 | $ | 122,871 | $ | 133,398 | $ | 101,149 | $ | 198,382 | ||||||||||
Working capital
|
93,759 | 150,498 | 128,787 | 35,830 | 72,053 | |||||||||||||||
Total assets
|
884,146 | 705,887 | 814,241 | 857,221 | 801,728 | |||||||||||||||
Short-term bank debt and current maturities of debentures and bank loans
|
119,999 | 36,441 | 49,923 | 48,255 | 122,179 | |||||||||||||||
Loan from banks, net of current maturities
|
159,776 | 108,739 | 94,922 | 103,845 | 111,882 | |||||||||||||||
Debentures, net of current maturities
|
107,311 | 208,146 | 193,962 | 197,765 | 247,598 | |||||||||||||||
Shareholders’ equity
|
195,561 | 141,248 | 220,025 | 174,703 | 117,782 | |||||||||||||||
Weighted average number of ordinary shares outstanding during any year
|
51,798 | 39,633 | 22,173 | 20,649 | 16,086 | |||||||||||||||
Number of shares outstanding as of December 31 of any year
|
58,034 | 47,870 | 22,312 | 21,219 | 17,703 |
|
·
|
The cyclical nature of the semiconductor industry and the volatility of the markets served by our customers;
|
|
·
|
Changes in the economic conditions of geographical regions where our customers and their markets are located;
|
|
·
|
Inventory and supply chain management of our customers;
|
|
·
|
The loss of a key customer, postponement of an order from a key customer or the rescheduling or cancellation of large orders;
|
|
·
|
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;
|
|
·
|
The rescheduling or cancellation of planned capital expenditures;
|
|
·
|
The occurrence of an unexpected event, such as environmental events or industrial accidents such as fire or explosions, electricity outage or misprocess, affecting the manufacturing process and our ability to recover the lost or damaged products and provide quality and timely production to our customers with no significant additional costs;
|
|
·
|
Completing capacity expansions and recruitment of personnel in a timely manner to address product demands by our customers;
|
|
·
|
Our ability to satisfy our customers’ demand for quality and timely production;
|
|
·
|
The timing and volume of orders relative to our available production capacity;
|
|
·
|
Our ability to obtain raw materials and equipment on a timely and cost-effective basis;
|
|
·
|
Price erosion in the industry;
|
|
·
|
Our susceptibility to intellectual property rights disputes;
|
|
·
|
Our dependency on export licenses and other permits required for our operations and the sale of our products;
|
|
·
|
Our ability to maintain existing partners and to enter into new partnerships and technology and supply alliances on mutually beneficial terms;
|
|
·
|
Interest, price index and currency rate fluctuations that were not hedged;
|
|
·
|
Technological changes and short product life cycles;
|
|
·
|
Timing for the design and qualification of new products;
|
|
·
|
Increase in the fair value of our banks’ loans, certain of our warrants and debentures; and
|
|
·
|
Changes in accounting rules affecting our results.
|
|
·
|
limiting our ability to fulfill our debt obligations and other liabilities;
|
|
·
|
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;
|
|
·
|
increasing our vulnerability to adverse economic and industry conditions;
|
|
·
|
limiting our ability to obtain additional financing;
|
|
·
|
limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete;
|
|
·
|
placing us at a competitive disadvantage with respect to less leveraged competitors and competitors that have better access to capital resources;
|
|
·
|
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;
|
|
·
|
increasing the payable amounts in USD of the TPSCo loan and our financing expenses in case the exchange rate USD to JPY decreases;
|
|
·
|
the effect of financial instruments’ accounting treatment under US GAAP on non-cash other financing expenses, net to be included in our statement of operations in 2015, primarily the impact of amortization, accretion and acceleration thereof as a result of debentures Series F conversion to shares which may increase our non-cash other financing expenses in 2015 by up to an additional $80 million, primarily in the statements of operations for the first quarter of 2015, and reduce net profits (while reducing such expenses and improving profitability in the future periods thereafter), however, such impact would improve shareholders' equity and reduce liabilities, all in accordance with US GAAP (ASC 470 formerly EITF 98-5 and EITF 27-00), and such accelerated accretion and amortization of the Beneficial Conversion Feature created in 2012; and/or
|
|
·
|
enforcement by the banks and other financing entities of their liens against Tower or Jazz’s respective assets, as applicable at the occurrence of an event of default.
|
|
·
|
We may fail to identify acquisitions that would enable us to execute our business strategy.
|
|
·
|
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.
|
|
·
|
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.
|
|
·
|
Potential acquisitions may divert management’s attention away from our existing business operations, which may have a negative adverse effect on our business.
|
|
·
|
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.
|
|
·
|
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.
|
|
·
|
We may purchase a company with excessive unknown contingent liabilities, including, among others, patent infringement or product liability.
|
|
·
|
We may not be able to obtain sufficient financing which could limit our ability to engage in certain acquisitions.
|
|
·
|
The amount or terms of financing actually required before and after acquisition may vary from our expectations.
|
|
·
|
fluctuations in the level of revenues from our operating activities;
|
|
·
|
fluctuations in the collection of receivables;
|
|
·
|
timing and size of payables;
|
|
·
|
the timing and size of capital expenditures;
|
|
·
|
The net impact of JPY/ USD fluctuations on our JPY income and JPY expenses.
|
|
·
|
the repayment schedules of our debt service obligations;
|
|
·
|
our ability to fulfill our obligations and meet performance milestones under our facility agreement and foundry agreements;
|
|
·
|
fluctuations in the LIBOR or TIBOR (
Tokyo Interbank Offered Rate)
rates which apply to our banks’ loans; and
|
|
·
|
fluctuations in the USD to NIS exchange rate.
|
|
·
|
Failure to successfully integrate TPSCo in accordance with our business strategy;
|
|
·
|
Historically, TPSCo’s fabs solely manufactured Panasonic Corporation’s and its customers’ products. TPSCo 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 TPSCo 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 TPSCo is unable to generate sufficient additional revenues from third party customers, we may not meet our future revenue expectations and may fail to achieve certain level of utilization in certain TPSCo fabs which may lead to cessation of operations of certain TPSCo fabs, which could negatively affect our future revenue growth and financial performance.
|
|
·
|
The establishment of TPSCo involves a major change of control event in the fabrication facilities that were transferred by Panasonic Corporation to TPSCo, including the transfer of employees to a new employer (TPSCo) controlled by Tower and operation as an independent legal entity. There is no assurance that the employees will successfully integrate and adjust to the new business and working requirements, which are relevant to an independent manufacturing company, including, transfer and ramp up of new technologies, engagement with new customers, compliance with TPSCo’s manufacturing and service commitments to a diversified customer base, compliance with reporting requirements to government offices and banks and compliance with Sarbanes Oxley Act requirements. If TPSCo’s employees fail to successfully integrate and if TPSCO fails to execute its business plan, it could negatively affect our future revenue growth and financial performance.
|
If Tower fails to comply with the terms of an agreement under which Tower provided a turn-key solution for the upgrade of a fabrication facility in Asia, Tower’s financial results may be affected.
|
|
·
|
rapid technological developments;
|
|
·
|
evolving industry standards;
|
|
·
|
changes in customer and product end user requirements;
|
|
·
|
frequent new product introductions and enhancements; and
|
|
·
|
short product life cycles with declining prices as products mature.
|
|
·
|
greater manufacturing capacity;
|
|
·
|
more advanced technological capabilities;
|
|
·
|
a more diverse and established customer base;
|
|
·
|
greater financial, marketing, distribution and other resources;
|
|
·
|
a better cost structure; and/or
|
|
·
|
better operational performance in cycle time and yields.
|
|
·
|
difficulties in upgrading or expanding existing facilities;
|
|
·
|
unexpected breakdowns in our manufacturing equipment and/or related facility systems;
|
|
·
|
unexpected events, such as an electricity outage or misprocess, affecting the manufacturing process;
|
|
·
|
difficulties in changing or upgrading our process technologies;
|
|
·
|
raw material shortages or impurities;
|
|
·
|
delays in delivery or shortages of spare parts; and
|
|
·
|
difficulties in maintenance and upgrade of our equipment.
|
|
·
|
negotiating cross-license agreements;
|
|
·
|
acquiring licenses to the allegedly infringed patents, which may not be available on commercially reasonable terms, if at all;
|
|
·
|
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;
|
|
·
|
litigating the matter in court and paying substantial monetary damages in the event we lose; or
|
|
·
|
developing non-infringing technologies, which may not be feasible.
|
|
·
|
JPY and NIS fluctuations against the USD, see above “
Our exposure to currency exchange and interest rate fluctuations may increase our cost of operations”.
|
|
·
|
the burden and cost of compliance with foreign government regulation, as well as compliance with a variety of foreign laws;
|
|
·
|
general geopolitical risks, such as political and economic instability, international terrorism, potential hostilities and changes in diplomatic and trade relationships;
|
|
·
|
natural disasters affecting the countries in which we conduct our business;
|
|
·
|
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;
|
|
·
|
adverse foreign and international tax rules and regulations, such as withholding taxes deducted from amounts due to us may not be refunded to us by the tax authorities since we are not entitled to foreign tax credit in Israel;
|
|
·
|
weak protection of our intellectual property rights;
|
|
·
|
delays in product shipments due to local customs restrictions;
|
|
·
|
laws and business practices favoring local companies;
|
|
·
|
difficulties in collecting accounts receivable; and
|
|
·
|
difficulties and costs of staffing and managing foreign operations.
|
ITEM 4.
|
INFORMA
TI
ON ON THE COMPANY
|
|
A.
|
HISTORY AND DEVELOPMENT OF THE COMPANY
|
|
B.
|
BUSINESS OVERVIEW
|
|
·
|
technical evaluation;
|
|
·
|
product design to our specifications, including integration of third party intellectual property;
|
|
·
|
photomask - design and third party photomask manufacturing;
|
|
·
|
silicon prototyping;
|
|
·
|
assembly and test;
|
|
·
|
validation and qualification; and
|
|
·
|
production.
|
Year ended December 31,
|
||||||||||||
2014
|
2013
|
2012
|
||||||||||
United States
|
45 | % | 77 | % | 81 | % | ||||||
Japan
|
40 | % | 2 | % | 1 | % | ||||||
Asia, excluding Japan (*)
|
11 | % | 14 | % | 13 | % | ||||||
Europe
|
4 | % | 7 | % | 5 | % | ||||||
Total
|
100 | % | 100 | % | 100 | % |
|
·
|
technical competency;
|
|
·
|
production speed and cycle time;
|
|
·
|
time-to-market
|
|
·
|
research and development capabilities;
|
|
·
|
technology offering, available geometries and wafer size;
|
|
·
|
available capacity;
|
|
·
|
quality of manufacturing process and products manufactured;
|
|
·
|
access to intellectual property ;
|
|
·
|
manufacturing yields;
|
|
·
|
design and customer support services;
|
|
·
|
price;
|
|
·
|
management expertise;
|
|
·
|
strategic relationships; and
|
|
·
|
stability and reliability of supply in order to be a dependable supplier.
|
WAFER FABRICATION SERVICES
|
PROCUREMENT AND SOURCING
|
RESEARCH AND DEVELOPMENT
|
PROPRIETARY RIGHTS
|
DESIGN SERVICES
|
SPECIAL SECURITY AGREEMENT WITH DSS
|
|
C.
|
ORGANIZATIONAL STRUCTURE
|
|
D.
|
PROPERTY, PLANTS AND EQUIPMENT
|
ENVIRONMENTAL, SAFETY AND QUALITY MATTERS AND CERTIFICATIONS
|
ITEM 4A.
|
UNRESOL
V
ED STAFF COMMENTS
|
ITEM 5.
|
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
|
|
A.
|
OPERATING RESULTS
|
Year Ended December 31,
|
||||||||||||
2014
|
2013
|
2012
|
||||||||||
Statement of Operations Data:
|
||||||||||||
Revenues
|
100 | % | 100 | % | 100 | % | ||||||
Cost of revenues
|
92.3 | 94.4 | 87.7 | |||||||||
Gross profit
|
7.7 | 5.6 | 12.3 | |||||||||
Research and development expenses, net
|
6.3 | 6.5 | 4.9 | |||||||||
Marketing, general and administrative expenses
|
7.1 | 8.5 | 7.0 | |||||||||
Nishiwaki Fab impairment
|
5.7 | -- | -- | |||||||||
Nishiwaki Fab restructuring costs
|
1.0 | -- | -- | |||||||||
Merger related costs
|
0.1 | -- | 0.9 | |||||||||
Amortization related to a lease agreement early termination
|
-- | 1.5 | -- | |||||||||
Operating loss
|
(12.5 | ) | (10.9 | ) | (0.4 | ) | ||||||
Interest expenses, net
|
(4.0 | ) | (6.5 | ) | (5.0 | ) | ||||||
Other non-cash financing expense, net
|
(6.7 | ) | (5.5 | ) | (4.3 | ) | ||||||
Gain from acquisition
|
20.1 | -- | -- | |||||||||
Other expenses, net
|
-- | (0.2 | ) | (0.2 | ) | |||||||
Income tax benefit (expense)
|
2.9 | 1.9 | (1.1 | ) | ||||||||
Loss for the Period
|
(0.2 | ) | (21.2 | ) | (11.0 | ) | ||||||
Net loss attributable to the non-controlling interest
|
0.7 | -- | -- | |||||||||
Net profit (loss) for the period attributable to the company
|
0.5 | % | (21.2 | )% | (11.0 | )% |
|
B.
|
LIQUIDITY AND CAPITAL RESOURCES
|
C.
|
RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES
|
D.
|
TREND INFORMATION
|
E.
|
OFF-BALANCE SHEET ARRANGEMENTS
|
F.
|
TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS
|
Payment Due
|
||||||||||||||||||||||||||||
Total
|
Less than 1
year
|
2 Years
|
3 Years
|
4 Years
|
5 Years
|
After 5
years
|
||||||||||||||||||||||
(in thousands of dollars)
|
||||||||||||||||||||||||||||
Contractual Obligations
|
||||||||||||||||||||||||||||
Short term liabilitie(1)
|
166,931 | 166,931 | -- | -- | -- | -- | -- | |||||||||||||||||||||
Loans from banks (2)
|
206,616 | 14,629 | 39,236 | 80,023 | 62,207 | 10,521 | -- | |||||||||||||||||||||
Debentures (3)
|
357,291 | 170,429 | 116,893 | 4,665 | 65,304 | -- | -- | |||||||||||||||||||||
Operating leases
|
58,978 | 16,776 | 15,494 | 12,409 | 11,326 | 2,973 | -- | |||||||||||||||||||||
Construction & equipment purchase agreements (4)
|
7,823 | 7,823 | -- | -- | -- | -- | -- | |||||||||||||||||||||
Other long-term liabilities
|
15,865 | 4,129 | 746 | 839 | 923 | 989 | 8,239 | |||||||||||||||||||||
Purchase obligations
|
31,684 | 12,373 | 10,680 | 6,686 | 1,145 | 800 | -- | |||||||||||||||||||||
Total contractual obligations
|
845,188 | 393,090 | 183,049 | 104,622 | 140,905 | 15,283 | 8,239 |
(1)
|
Short-term liabilities include primarily our trade accounts payable for equipment and services as well as payroll related commitments.
|
(2)
|
Loans from banks include principal and interest payments in accordance with the terms of agreements with the banks.
|
(3)
|
Debentures include total amount of principal and interest payments for the presented periods.
|
|
As of December 31, 2014 approximately $255 million of such debentures were convertible into ordinary shares, of which $162 million has already been converted during the first quarter of 2015.
|
(4)
|
Construction & equipment purchase agreements include amounts related to ordered equipment that has not yet been received.
|
ITEM 6.
|
DIRECTORS, SENIOR MAN
A
GEMENT AND EMPLOYEES
|
A.
|
DIRECTORS AND SENIOR MANAGEMENT
|
Officer
|
Senior Managements’ Name
|
Age
|
Title
|
|||
A
|
Russell C. Ellwanger
|
60
|
Chief Executive Officer of Tower, and Chairman of the Board of Directors of its wholly-owned subsidiaries, Tower Semiconductor USA, Inc., Jazz Technologies, Inc. Jazz Semiconductor, Inc. and TowerJazz Panasonic Semiconductor Co., Ltd.
|
|||
B
|
Oren Shirazi
|
45
|
Chief Financial Officer, Senior Vice President of Finance
|
|||
C
|
Dr. Itzhak Edrei
|
55
|
President
|
|||
D
|
Rafi Mor
|
51
|
Chief Operating Officer
|
|||
E
|
Dalit Dahan
|
46
|
Senior Vice President of Human Resources and IT
|
|||
F
|
Nati Somekh
|
39
|
Senior Vice President, Chief Legal Officer and Corporate Secretary
|
|||
G
|
Yossi Netzer
|
50
|
Senior Vice President of Corporate Planning
|
|||
H
|
Dr. Marco Racanelli
|
48
|
Senior Vice President and General Manager of RF/High Performance Analog and Power Business Groups, General Manager of US Aerospace & Defense Business Group and Newport Beach Site Manager
|
|||
I
|
Ilan Rabinovich
|
58
|
Vice President of Quality and Reliability
|
|||
J
|
Ephie Koltin
|
53
|
Former Chief Operating Officer
|
|||
Directors’ Name
|
Age
|
Title
|
||||
K
|
Amir Elstein
|
59
|
Chairman of the Board
|
|||
L
|
Sagi Kabla
|
38
|
Director
|
|||
M
|
Yoav Doppelt
|
46
|
Director
|
|||
N
|
Kalman Kaufman
|
69
|
Independent Director
|
|||
O
|
Alex Kornhauser
|
68
|
Independent and External Director
|
|||
P
|
Dana Gross
|
47
|
Independent Director
|
|||
Q
|
Ilan Flato
|
58
|
Independent and External Director
|
|||
R
|
Rami Guzman
|
76
|
Director
|
B.
|
COMPENSATION
|
|
1.
|
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;
|
|
2.
|
To recommend to the Board of Directors as to any updates to the compensation policy which may be required;
|
|
3.
|
To review the implementation of the compensation policy by the Company;
|
|
4.
|
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
|
|
5.
|
To exempt, under certain circumstances, a transaction relating to terms of office and employment from the requirement of approval of the shareholders meeting.
|
|
a.
|
advancement of the goals of the Company, its working plan and its long term policy;
|
|
b.
|
the creation of proper incentives for the office holders while taking into consideration, inter alia, the Company’s risk management policies;
|
|
c.
|
the Company’s size and nature of its operations;
|
|
d.
|
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;
|
|
e.
|
the education, skills, expertise and achievements of the relevant office holders;
|
|
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
.
|
·
|
the educational background, professional experience and achievements of the officer or director;
|
·
|
the officer or director's position, responsibilities and prior salary and compensation arrangements;
|
·
|
compensation data for comparably situated executives at peer companies, including companies in the industry and/or geographic market;
|
·
|
data of other senior executives of the Company;
|
·
|
macroeconomic environment;
|
·
|
Company's own performance;
|
·
|
the officer or director's expected contribution to the Company’s future growth and profitability;
|
·
|
global competition and environment in which the Company operates and recruits employees;
|
·
|
the relationship between the compensation paid to the officer or director and the average and median compensation of the Company’s employees and contractors, as well as whether such variation has an effect on employment relations; and
|
·
|
any other requirements prescribed by applicable law from time to time.
|
|
o
|
To align the interests of the officers and directors of the Company with those of Tower and its shareholders in order to enhance shareholder value;
|
|
o
|
To provide the officers and directors with a structured compensation package, including competitive salaries and performance-based cash and equity incentive programs;
|
|
o
|
To maintain and increase the level of motivation and ambition;
|
|
o
|
To provide appropriate awards for superior individual and corporate performance;
|
|
o
|
To improve the business results and increase income and profitability over time; and
|
|
o
|
To support the implementation of the Company's business strategy.
|
·
|
Base salary;
|
·
|
Benefits and perquisites;
|
·
|
Performance-based cash bonuses;
|
·
|
Equity based compensation; and
|
·
|
Retirement, termination and other arrangements.
|
·
|
An annual fee which shall be capped at up to $60,000.
|
·
|
Per meeting fee shall be capped at up to $2,000.
|
·
|
Reasonable travel expenses.
|
C.
|
BOARD PRACTICES
|
|
·
|
an employment relationship;
|
|
·
|
a business or professional relationship maintained on a regular basis;
|
|
·
|
control; and
|
|
·
|
service as an office holder.
|
|
·
|
relatives of the controlling shareholder may not be appointed as external directors of a company.
|
|
·
|
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.
|
|
·
|
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.
|
|
·
|
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.
|
|
·
|
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
|
|
·
|
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.
|
D.
|
EMPLOYEES
|
As of December 31,
|
||||||||||||
2014
|
2013
|
2012
|
||||||||||
Process and product engineering, R&D and design
|
917 | 848 | 866 | |||||||||
Manufacturing and operations
|
2,431 | 1538 | 1,602 | |||||||||
Manufacturing support
|
293 | 239 | 209 | |||||||||
Sales and marketing, finance & administration..
|
270 | 194 | 218 | |||||||||
Total
|
3,911 | 2,819 | 2,895 |
E.
|
SHARE OWNERSHIP
|
ITEM 7.
|
MA
J
OR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
|
A.
|
MAJOR SHAREHOLDERS
|
Identity of Person or Group
|
Percent of
Class(1)
|
Percent of Class
(Diluted)(2)
|
||||||
Kenon Holdings Ltd. (3)
|
25.05 | % | 18.71 | % | ||||
Rima Senvest Management (4)
|
5.40 | % | 3.95 | % |
(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 schedule 13D/A filed by Kenon on May 7, 2015 it has as of May 1, 2015 approximately 18.0 million shares, in addition to warrants exercisable to acquire approximately 1.67 million shares and 2,668 Ordinary Shares issuable upon the exercise of options.
|
(4)
|
Based on information provided by Rima Senvest Management as of March 31, 2015 it had approximately 4.1 million shares and debentures (Series F) convertible into approximately 0.03 million shares.
|
B.
|
RELATED PARTY TRANSACTIONS
|
C.
|
INTERESTS OF EXPERTS AND COUNSEL
|
ITEM 8.
|
FIN
ANC
IAL INFORMATION
|
A.
|
CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
|
B.
|
SIGNIFICANT CHANGES
|
ITEM 9.
|
THE OFF
ER
AND LISTING
|
NASDAQ Stock Market
|
Tel Aviv Stock Exchange
|
|||||||||||||||
High ($)
|
Low ($)
|
High (NIS)
|
Low (NIS)
|
|||||||||||||
Period
|
||||||||||||||||
April 2015
|
17.98 | 14.38 | 70.65 | 58.90 | ||||||||||||
March 2015
|
18.29 | 16.16 | 73.79 | 63.80 | ||||||||||||
February 2015
|
16.84 | 13.01 | 63.79 | 50.45 | ||||||||||||
January 2015
|
16.59 | 12.41 | 64.21 | 49.90 | ||||||||||||
December 2014
|
14.26 | 12.32 | 56.00 | 48.10 | ||||||||||||
November 2014
|
13.33 | 9.78 | 50.48 | 36.83 | ||||||||||||
First quarter 2015
|
18.29 | 12.41 | 73.79 | 49.90 | ||||||||||||
Fourth quarter 2014
|
14.26 | 8.64 | 56.00 | 32.90 | ||||||||||||
Third quarter 2014
|
12.26 | 9.07 | 43.78 | 30.74 | ||||||||||||
Second quarter 2014
|
10.06 | 7.56 | 34.68 | 26.02 | ||||||||||||
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 | ||||||||||||
2014
|
14.26 | 5.44 | 56.00 | 19.20 | ||||||||||||
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 |
ITEM 10.
|
ADDITI
ON
AL 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 or 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 may 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.
|
ITEM 11.
|
QUANTI
TA
TIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
ITEM 12.
|
DESCRIP
TION
OF SECURITIES OTHER THAN EQUITY SECURITIES
|
ITEM
13
.
|
DEFAULTS,
DIVIDEND ARREARAGES
AND DELINQUENCIES
|
ITEM 14.
|
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
|
ITEM 15.
|
CONTROL
S
AND PROCEDURES
|
ITEM 16.
|
[RESER
VED
]
|
ITEM 16A.
|
AUDIT COMMITTEE FINANCIAL EXPERT
|
ITEM 16B.
|
CODE OF ETHICS
|
ITEM 16C.
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
2014
|
2013
|
|||||||
(US dollars In Thousands)
|
||||||||
Audit Fees (1)
|
856 | 561 | ||||||
Audit Related Fees (2)
|
67 | 12 | ||||||
Tax Fees (3)
|
77 | 53 | ||||||
All Other Fees
|
-- | -- | ||||||
1,000 | 626 |
(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 audit of our internal control over financial reporting) and reviews of our quarterly financial results submitted on Form 6-K. The main increase is attributed to the audit services in regards to the newly acquired TPSCo
|
(2)
|
Audit-related fees consist of assurance and related services by the principal accountant that are reasonably related to the performance of the audit of our financial statements and are not reported under “Audit Fees”. 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, consent letters for our SEC filings and reporting standards.
|
ITEM 16D.
|
EXEMPTIONS
FROM THE
LISTING STANDARDS FOR AUDIT COMMITTEES.
|
ITEM 16E.
|
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS.
|
ITEM 17.
|
FINANCIAL STA
T
EMENTS
|
ITEM 18.
|
FINANCIAL STATEMENTS
|
ITEM 19.
|
EXHIBITS
|
|
(i)
|
Consolidated Balance Sheets at December 31, 2014 and 2013;
|
|
(ii)
|
Consolidated Statements of Operations for the years ended December 31, 2014, 2013 and 2012;
|
|
(iii)
|
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2014, 2013 and 2012;
|
|
(iv)
|
Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012; 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-57
|
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
|
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
|
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
|
(dollars and share data in thousands)
|
Year ended
|
||||||||||||
December 31,
|
||||||||||||
2014
|
2013
|
2012
|
||||||||||
CASH FLOWS - OPERATING ACTIVITIES
|
||||||||||||
NET PROFIT (LOSS) ATTRIBUTABLE TO THE COMPANY
|
$ | 4,263 | $ | (107,660 | ) | $ | (70,269 | ) | ||||
Net loss attributable to non controlling interest
|
(5,635 | ) | -- | -- | ||||||||
Net profit (loss)
|
(1,372 | ) | (107,660 | ) | (70,269 | ) | ||||||
Adjustments to reconcile net loss for the period
|
||||||||||||
to net cash provided by operating activities:
|
||||||||||||
Income and expense items not involving cash flows:
|
||||||||||||
Depreciation and amortization
|
243,362 | 164,824 | 173,585 | |||||||||
Effect of indexation, translation and fair value measurement on debt
|
(3,667 | ) | 4,091 | 13,544 | ||||||||
Financing costs relating to Jazz notes exchange
|
9,817 | -- | -- | |||||||||
Other expense, net
|
140 | 904 | 6,831 | |||||||||
Gain from acquisition
|
(166,404 | ) | -- | -- | ||||||||
Changes in assets and liabilities:
|
||||||||||||
Trade accounts receivable
|
(24,021 | ) | (5,194 | ) | (6,857 | ) | ||||||
Other receivables and other current assets
|
49,934 | (3,647 | ) | (843 | ) | |||||||
Inventories
|
(1,758 | ) | (780 | ) | 2,316 | |||||||
Trade accounts payable
|
11,107 | 25 | (7,603 | ) | ||||||||
Deferred revenue and customers' advances
|
1,915 | 1,202 | (4,475 | ) | ||||||||
Other current liabilities
|
25,744 | (38 | ) | (23,942 | ) | |||||||
Deferred tax liability, net
|
(23,977 | ) | (11,453 | ) | 9,126 | |||||||
Other long-term liabilities
|
4,517 | (6 | ) | 3,840 | ||||||||
Net cash provided by operating activities excluding Nishiwaki fab closure employee related retirement cost | 125,337 | 42,268 | 95,253 | |||||||||
Nishiwaki fab closure employee related retirement cost
|
(27,572 | ) | -- | (20,074 | ) | |||||||
Net cash provided by operating activities
|
97,765 | 42,268 | 75,179 | |||||||||
CASH FLOWS - INVESTING ACTIVITIES
|
||||||||||||
Investments in property and equipment, net (a)
|
(50,209 | ) | (77,044 | ) | (103,830 | ) | ||||||
Investments in other assets, intangible assets and others
|
(76 | ) | (409 | ) | (4,498 | ) | ||||||
Acquisition of subsidiary consolidated for the first time (b)
|
57,582 | -- | -- | |||||||||
Investment grants received
|
-- | -- | 2,618 | |||||||||
Interest bearing deposits, including designated deposits
|
10,000 | -- | (10,000 | ) | ||||||||
Net cash provided by (used in) investing activities
|
17,297 | (77,453 | ) | (115,710 | ) | |||||||
CASH FLOWS - FINANCING ACTIVITIES
|
||||||||||||
Proceeds on account of shareholders' equity and notes
|
19,613 | 38,956 | 104,690 | |||||||||
Proceeds from long-term loans
|
85,884 | -- | 14,443 | |||||||||
Short-term loan repayment to Panasonic
|
(85,884 | ) | -- | -- | ||||||||
Short-term bank debt
|
-- | -- | 3,800 | |||||||||
Debt repayment
|
(51,411 | ) | (6,540 | ) | (55,854 | ) | ||||||
Net cash provided by (used in) financing activities
|
(31,798 | ) | 32,416 | 67,079 | ||||||||
Effect of foreign exchange rate change
|
(8,968 | ) | (7,758 | ) | (4,299 | ) | ||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
74,296 | (10,527 | ) | 22,249 | ||||||||
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD
|
112,871 | 123,398 | 101,149 | |||||||||
CASH AND CASH EQUIVALENTS - END OF PERIOD
|
$ | 187,167 | $ | 112,871 | $ | 123,398 |
|
A.
|
Use of Estimates in Preparation of Financial Statements
|
|
B.
|
Principles of Consolidation
|
|
C.
|
Cash and Cash - Equivalents
|
|
D.
|
Allowance for Doubtful Accounts
|
|
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.
|
Buildings and building improvements (including facility infrastructure)
|
10-25 years
|
Machinery and equipment, software and hardware
|
3-7 years
|
|
F.
|
Property and Equipment (cont.)
|
(2)
|
Impairment examinations and recognition are performed and determined based on the accounting policy outlined in R below.
|
|
G.
|
Intangible Assets
|
|
H.
|
Other Assets
|
|
I.
|
Convertible Debentures
|
|
I.
|
Convertible Debentures (cont.)
|
|
J.
|
Stock-Based Instruments in Financing Transactions
|
|
K.
|
Revenue Recognition
|
|
L.
|
Research and Development
|
|
M.
|
Income Taxes
|
|
N.
|
Earnings (Loss) Per Ordinary Share
|
|
O.
|
Comprehensive Income (Loss)
|
|
P.
|
Functional Currency and Exchange Rate Losses
|
|
Q.
|
Stock-Based Compensation
|
|
R.
|
Impairment of Assets
|
|
R.
|
Impairment of Assets (cont.)
|
|
S.
|
Derivatives
|
|
T.
|
Classification of liabilities and equity
|
|
U.
|
Reclassification and presentation
|
|
V.
|
Recently Issued Accounting Pronouncements
|
As of
March 31, 2014
|
||||
Current assets
|
$ | 91,414 | ||
Machinery and equipment
|
245,278 | |||
Intangible assets
|
24,520 | |||
Total assets as of acquisition date
|
$ | 361,212 | ||
Current liabilities
|
$ | 1,426 | ||
Long-term Loan
|
85,249 | |||
Deferred tax liability
|
93,602 | |||
Total liabilities as of acquisition date
|
$ | 180,277 | ||
Total net assets acquired
|
$ | 180,935 | ||
The fair value non-controlling interests in TPSCo
|
7,120 | |||
Tower’s consideration
|
7,411 | |||
Gain on acquisition
|
$ | 166,404 |
As of December 31,
|
||||||||
2014
|
2013
|
|||||||
Government receivables
|
$ | 3,848 | $ | 4,435 | ||||
Others
|
1,911 | 6,508 | ||||||
$ | 5,759 | $ | 10,943 |
As of December 31,
|
||||||||
2014
|
2013
|
|||||||
Raw materials
|
$ | 21,564 | $ | 19,647 | ||||
Work in process
|
62,269 | 36,627 | ||||||
Finished goods
|
4,040 | 8,530 | ||||||
$ | 87,873 | $ | 64,804 |
As of December 31,
|
||||||||
2014
|
2013
|
|||||||
Severance pay funds (see Note 15)
|
$ | 10,214 | $ | 12,522 | ||||
Others
|
1,682 | 1,972 | ||||||
$ | 11,896 | $ | 14,494 |
|
A.
|
Composition
|
As of December 31,
|
||||||||
2014
|
2013
|
|||||||
Original cost:
|
||||||||
Buildings (including facility infrastructure)
|
$ | 304,919 | $ | 306,674 | ||||
Machinery and equipment
|
1,630,834 | 1,400,213 | ||||||
1,935,753 | 1,706,887 | |||||||
Accumulated depreciation:
|
||||||||
Buildings (including facility infrastructure)
|
(189,971 | ) | (173,696 | ) | ||||
Machinery and equipment
|
(1,326,671 | ) | (1,183,152 | ) | ||||
(1,516,642 | ) | (1,356,848 | ) | |||||
$ | 419,111 | $ | 350,039 |
|
B.
|
Investment Grants
|
As of December 31,
|
|||||||||||
Useful Life
|
2014
|
2013
|
|||||||||
Facilities lease rights
|
5; 19 | $ | 15,699 | $ | 16,988 | ||||||
Technologies, patents and other rights
|
4;5;9 | 21,154 | 11,300 | ||||||||
Trade name
|
9 | 3,499 | 2,146 | ||||||||
Customer relationships
|
15 | 1,510 | 1,684 | ||||||||
Others
|
175 | 275 | |||||||||
$ | 42,037 | $ | 32,393 |
As of December 31,
|
||||||||
2014
|
2013
|
|||||||
Prepaid long-term land lease, net (see Note 16C)
|
$ | 3,779 | $ | 3,899 | ||||
Debenture issuance expenses and deferred financing charges
|
3,995 | 5,719 | ||||||
Prepaid expenses - long-term and others
|
2,244 | 1,929 | ||||||
$ | 10,018 | $ | 11,547 |
As of December 31,
|
||||||||
2014
|
2013
|
|||||||
Government payables
|
$ | 7,344 | $ | 1,332 | ||||
Capital leases
|
559 | 637 | ||||||
Interest payable in relation to debentures
|
2,207 | 3,727 | ||||||
TJP facility closure related accruals
|
4,603 | -- | ||||||
Other
|
1,906 | 2,298 | ||||||
$ | 16,619 | $ | 7,994 |
|
A.
|
Composition
|
As of December 31, 2014
|
As of December 31, 2013
|
|||||||
In U.S. Dollars, see also B and C below
|
$ | 120,155 | $ | 150,155 | ||||
In JPY, see also D below
|
73,647 | 10,954 | ||||||
Total long-term loans from banks-principal amount
|
193,802 | 161,109 | ||||||
Fair value adjustments
|
(24,026 | ) | (22,370 | ) | ||||
Total long-term loans from banks
|
169,776 | 138,739 | ||||||
Current maturities
|
(10,000 | ) | (30,000 | ) | ||||
$ | 159,776 | $ | 108,739 |
|
B.
|
Facility Agreement with Tower
|
|
C.
|
Wells Fargo Asset-Based Revolving Credit Line
|
|
D.
|
GE Capital Asset-Based Revolving Line
|
|
E.
|
Long Term Loan Agreement with JA Mitsui Leasing, Ltd. and Bank of Tokyo (BOT)
|
|
A.
|
Composition by repayment schedule (carrying amount):
|
As of December 31, 2014
|
|||||||||||||||||||
Interest rate
|
2015
|
2016
|
2017
|
2018
|
|||||||||||||||
Debentures Series D
|
8% | $ | 5,796 | $ | 5,796 | $ | -- | $ | -- | ||||||||||
Debentures Series F
|
7.8% | 58,626 | 58,626 | -- | -- | ||||||||||||||
Jazz’s 2010 Notes (as defined in D below)
|
8% | 45,577 | -- | -- | -- | ||||||||||||||
Jazz’s 2014 Notes (as defined in E below)
|
8% | -- | -- | -- | 42,889 | ||||||||||||||
$ | 109,999 | $ | 64,422 | $ | -- | $ | 42,889 |
|
A.
|
Composition by repayment schedule (carrying amount) (cont.):
|
|
B.
|
Debentures Series D Issued in 2007
|
|
C.
|
Debentures Series F
|
|
C.
|
Debentures Series F (cont.)
|
|
D.
|
Notes Issued By Jazz in 2010
|
|
E.
|
Jazz 2014 Notes Transaction
|
|
E.
|
Jazz 2014 Notes Transaction (cont.)
|
|
E.
|
Jazz 2014 Notes Transaction (cont.)
|
|
A.
|
Exchange Rate Transactions
|
|
B.
|
Concentration of Credit Risks
|
|
B.
|
Concentration of Credit Risks (cont.)
|
|
C.
|
Fair Value of Financial Instruments
|
|
D.
|
Fair Value Measurements
|
|
D.
|
Fair Value Measurements (cont.)
|
December 31, 2014
|
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)(*)
|
$ | 77,029 | $ | -- | $ | -- | $ | 77,029 | ||||||||
Others
|
34 | -- | -- | 34 | ||||||||||||
$ | 77,063 | $ | -- | $ | -- | $ | 77,063 |
Tower’s loans (including current maturities)
|
Others
|
|||||||
As of January 1, 2014 - at fair value
|
$ | 108,685 | $ | 47 | ||||
Loan Repayment
|
(30,000 | ) | -- | |||||
Total losses (gains) unrealized in earnings
|
(1,656 | ) | (13 | ) | ||||
As of December 31, 2014 - at fair value
|
$ | 77,029 | $ | 34 | ||||
Unrealized losses (gains) recognized in earnings from liabilities held at period end
|
$ | (1,656 | ) | $ | (13 | ) |
|
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 | ) |
|
A.
|
Employee Termination Benefits
|
|
A.
|
Employee Termination Benefits (cont.)
|
|
B.
|
Jazz Employee Benefit Plans
|
|
B.
|
Jazz Employee Benefit Plans (cont.)
|
|
Year ended December 31, 2014
|
Year ended December 31, 2013
|
Year ended December 31, 2012
|
||||||||||
Net periodic benefit cost
|
||||||||||||
Service cost
|
$ | 24 | $ | 32 | $ | 146 | ||||||
Interest cost
|
118 | 126 | 399 | |||||||||
Expected return on the plan’s assets
|
-- | -- | -- | |||||||||
Amortization of transition obligation (asset)
|
-- | -- | -- | |||||||||
Amortization of prior service costs
|
(1,737 | ) | (1,703 | ) | (244 | ) | ||||||
Amortization of net (gain) or loss
|
(227 | ) | (132 | ) | -- | |||||||
Total net periodic benefit cost
|
$ | (1,822 | ) | $ | (1,677 | ) | $ | 301 | ||||
Other changes in plan assets and benefits obligations recognized in other comprehensive income
|
||||||||||||
Prior service cost for the period
|
$ | -- | $ | (91 | ) | $ | (3,851 | ) | ||||
Net (gain) or loss for the period
|
558 | (668 | ) | (1,355 | ) | |||||||
Amortization of transition obligation (asset)
|
-- | -- | -- | |||||||||
Amortization of prior service costs
|
1,737 | 1,703 | 244 | |||||||||
Amortization of net gain or (loss)
|
227 | 132 | -- | |||||||||
Total recognized in other comprehensive income (expense)
|
$ | 2,522 | $ | 1,076 | $ | (4,962 | ) | |||||
Total recognized in net periodic benefit cost and other comprehensive income
|
$ | 700 | $ | (601 | ) | $ | (4,661 | ) |
Weighted average assumptions used:
|
||||||||||||
Discount rate
|
5.20 | % | 4.30 | % | 5.20 | % | ||||||
Expected return on plan assets
|
N/A | N/A | N/A | |||||||||
Rate of compensation increases
|
N/A | N/A | N/A | |||||||||
Assumed health care cost trend rates:
|
||||||||||||
Health care cost trend rate assumed for current year (Pre-65/Post-65)
|
7.75%/25.00 | % | 8.25/35.00 | % | 8.25/35.00 | % | ||||||
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 | 2022/2022 | |||||||||
Measurement date
|
December 31, 2014
|
December 31, 2013
|
December 31, 2012
|
|
A.
|
Jazz Employee Benefit Plans (cont.)
|
Increase
|
Decrease
|
|||||||
Effect on service cost and interest cost
|
$ | 10 | $ | (8 | ) | |||
Effect on postretirement benefit obligation
|
$ | 254 | $ | (198 | ) |
Year ended
December 31,
2014
|
Year ended
December 31,
2013
|
Year ended
December 31,
2012
|
||||||||||
Change in benefit obligation:
|
||||||||||||
Benefit obligation at beginning of period
|
$ | 2,317 | $ | 2,995 | $ | 7,749 | ||||||
Service cost
|
24 | 32 | 146 | |||||||||
Interest cost
|
118 | 126 | 399 | |||||||||
Benefits paid
|
(40 | ) | (77 | ) | (93 | ) | ||||||
Change in plan provisions
|
-- | (91 | ) | (3,851 | ) | |||||||
Actuarial gain
|
558 | (668 | ) | (1,355 | ) | |||||||
Benefit obligation end of period
|
$ | 2,977 | $ | 2,317 | $ | 2,995 | ||||||
Change in plan assets:
|
||||||||||||
Fair value of plan assets at beginning of period
|
$ | -- | $ | -- | $ | -- | ||||||
Actual return on plan assets
|
-- | -- | -- | |||||||||
Employer contribution
|
40 | 77 | 93 | |||||||||
Benefits paid
|
(40 | ) | (77 | ) | (93 | ) | ||||||
Fair value of plan assets at end of period
|
$ | -- | $ | -- | $ | -- | ||||||
Funded status
|
$ | (2,977 | ) | $ | (2,317 | ) | $ | (2,995 | ) |
As of
December 31, 2014
|
As of
December 31, 2013
|
As of
December 31, 2012
|
||||||||||
Amounts recognized in statement of financial position:
|
||||||||||||
Non-current assets
|
$ | -- | $ | -- | $ | -- | ||||||
Current liabilities
|
(83 | ) | (89 | ) | (132 | ) | ||||||
Non-current liabilities
|
(2,894 | ) | (2,228 | ) | (2,863 | ) | ||||||
Net amount recognized
|
$ | (2,977 | ) | $ | (2,317 | ) | $ | (2,995 | ) | |||
Weighted average assumptions used:
|
||||||||||||
Discount rate
|
4.30 | % | 5.20 | % | 4.30 | % | ||||||
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)
|
7.00%/20.00 | % | 7.75/25.00 | % | 8.25/35.00 | % | ||||||
Ultimate rate (Pre 65/ Post 65)
|
4.50%/5.00 | % | 5.00/5.00 | % | 5.00/5.00 | % | ||||||
Year the ultimate rate is reached (Pre 65/ Post 65)
|
2025/2022 | 2022/2022 | 2022/2022 |
Fiscal Year
|
Other Benefits
|
|||
2015
|
$ | 83 | ||
2016
|
76 | |||
2017
|
96 | |||
2018
|
114 | |||
2019
|
125 | |||
2020 - 2024
|
$ | 699 |
|
B.
|
Jazz Employee Benefit Plans (cont.)
|
Year ended December 31, 2014
|
Year ended December 31, 2013
|
Year ended December 31, 2012
|
||||||||||
Net periodic benefit cost
|
||||||||||||
Service cost
|
$ | -- | $ | -- | $ | -- | ||||||
Interest cost
|
796 | 732 | 761 | |||||||||
Expected return on plan assets
|
(1,257 | ) | (948 | ) | (817 | ) | ||||||
Amortization of transition obligation(asset)
|
-- | -- | -- | |||||||||
Amortization of prior service costs
|
3 | -- | -- | |||||||||
Amortization of net (gain) or loss
|
-- | 97 | 70 | |||||||||
Total net periodic benefit cost
|
$ | (458 | ) | $ | (119 | ) | $ | 14 | ||||
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
|
3,117 | (4,696 | ) | 1,000 | ||||||||
Amortization of transition obligation (asset)
|
-- | -- | -- | |||||||||
Amortization of prior service costs
|
(3 | ) | -- | -- | ||||||||
Amortization of net gain or (loss)
|
-- | (97 | ) | (70 | ) | |||||||
Total recognized in other comprehensive income (expense)
|
$ | 3,114 | $ | (4,700 | ) | $ | 930 | |||||
Total recognized in net periodic benefit cost and other comprehensive income (expense)
|
$ | 2,656 | $ | (4,819 | ) | $ | 944 | |||||
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 |
Year ended December 31, 2014
|
Year ended December 31, 2013
|
Year ended December 31, 2012
|
||||||||||
Estimated amounts that will be amortized from accumulated other comprehensive income in
the next fiscal year ending :
|
||||||||||||
Transition obligation (asset)
|
$ | -- | $ | -- | $ | -- | ||||||
Prior service cost
|
3 | 3 | -- | |||||||||
Net actuarial (gain) or loss
|
$ | 31 | $ | -- | $ | 97 |
|
B.
|
Jazz Employee Benefit Plans (Cont.)
|
Year ended December 31, 2014
|
Year ended December 31, 2013
|
Year ended December 31, 2012
|
||||||||||
Change in benefit obligation:
|
||||||||||||
Benefit obligation at beginning of period
|
$ | 15,873 | $ | 17,272 | $ | 15,134 | ||||||
Service cost
|
-- | -- | -- | |||||||||
Interest cost
|
796 | 732 | 761 | |||||||||
Benefits paid
|
(532 | ) | (437 | ) | (293 | ) | ||||||
Change in plan provisions
|
-- | 93 | -- | |||||||||
Actuarial loss (gain)
|
3,167 | (1,787 | ) | 1,670 | ||||||||
Benefit obligation end of period
|
$ | 19,304 | $ | 15,873 | $ | 17,272 | ||||||
Change in plan assets
|
||||||||||||
Fair value of plan assets at beginning of period
|
$ | 16,652 | $ | 12,543 | $ | 10,842 | ||||||
Actual return on plan assets
|
1,307 | 3,857 | 1,488 | |||||||||
Employer contribution
|
709 | 689 | 506 | |||||||||
Benefits paid
|
(532 | ) | (437 | ) | (293 | ) | ||||||
Fair value of plan assets at end of period
|
$ | 18,134 | $ | 16,652 | $ | 12,543 | ||||||
Funded status
|
$ | (1,170 | ) | $ | 779 | $ | (4,729 | ) | ||||
Accumulated benefit obligation
|
$ | 19,304 | $ | 15,873 | $ | 17,272 | ||||||
Amounts recognized in statement of
financial position
|
||||||||||||
Non-current assets
|
$ | -- | $ | 779 | $ | -- | ||||||
Current liabilities
|
-- | -- | -- | |||||||||
Non-current liabilities
|
(1,170 | ) | -- | (4,729 | ) | |||||||
Net amount recognized
|
$ | (1,170 | ) | $ | 779 | $ | (4,729 | ) | ||||
Weighted average assumptions used
|
||||||||||||
Discount rate
|
4.20 | % | 5.10 | % | 4.30 | % | ||||||
Rate of compensation increases
|
N/A | N/A | N/A |
|
B.
|
Jazz Employee Benefit Plans (cont.)
|
Fiscal Year
|
Other Benefits
|
|||
2015
|
$ | 600 | ||
2016
|
670 | |||
2017
|
743 | |||
2018
|
809 | |||
2019
|
864 | |||
2020 - 2024
|
$ | 5,150 |
Level 1
|
Level 2
|
Level 3
|
||||||||||
Investments in Mutual Funds
|
$ | -- | $ | 18,134 | $ | -- | ||||||
Total plan assets at fair value
|
$ | -- | $ | 18,134 | $ | -- |
Level 1
|
Level 2
|
Level 3
|
||||||||||
Investments in Mutual Funds
|
$ | -- | $ | 16,652 | $ | -- | ||||||
Total plan assets at fair value
|
$ | -- | $ | 16,652 | $ | -- |
Asset Category:
|
December 31, 2014
|
Target allocation 2015
|
||||||
Equity securities
|
60 | % | 60 | % | ||||
Debt securities
|
40 | % | 40 | % | ||||
Total
|
100 | % | 100 | % |
|
B.
|
Jazz Employee Benefit Plans (cont.)
|
|
A.
|
Commitments and Contingencies Relating to Fab 2
|
(1)
|
Facility Agreement
|
(2)
|
Approved Enterprise Status
For details regarding Approved Enterprise Status relating to Fab 2, see Note 20A and Note 8B.
|
|
B.
|
License Agreements
|
|
C.
|
Leases
|
2015
|
2016
|
2017
|
2018
|
2019
|
Total
|
|||||||||||||||||||
Operating leases
|
$ | 2,665 | $ | 2,674 | $ | 851 | $ | 413 | $ | 383 | $ | 6,986 |
|
C.
|
Leases (cont.)
|
2015
|
2016
|
2017
|
2018
|
2019
|
Total
|
|||||||||||||||||||
Operating leases
|
$ |
13,273
|
$ |
12,771
|
$ |
11,558
|
$ |
10,913
|
$ |
2,590
|
$ |
51,105
|
|
D.
|
Other Principal Agreements
|
|
E.
|
Environmental Affairs
|
|
F.
|
Trusted Foundry Manufacturer for the Defense Security Service of the United States Department of Defense and Special Security Agreement with DSS
|
|
G.
|
Other Commitments
|
|
A.
|
Description of Ordinary Shares
|
|
B.
|
Share Option Plans
|
(1)
|
General
|
|
B.
|
Share Option Plans (cont.)
|
(2)
|
Tower’s 2009 Share Incentive Plans (the "2009 Plans")
|
(3)
|
Tower’s 2013 Share Incentive Plan (the "2013 Plan")
|
(4)
|
Independent Directors’ Option Plan
|
|
B.
|
Share Option Plans (cont.)
|
(4)
|
Independent Directors’ Option Plan (cont.)
|
(5)
|
Summary of the Status of all the Company’s Employee and Director Share Options
|
2014
|
2013
|
2012
|
||||||||||||||||||||||
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
|
8,066,749 | $ | 6.31 | 4,351,487 | $ | 15.21 | 4,483,793 | $ | 14.97 | |||||||||||||||
Granted
|
746,431 | 5.81 | 5,402,961 | 4.54 | 30,336 | 12.64 | ||||||||||||||||||
Exercised
|
(762,607 | ) | 4.36 | (23,932 | ) | 4.35 | (125,260 | ) | 4.36 | |||||||||||||||
Terminated
|
(30,901 | ) | 35.40 | (4,273 | ) | 52.79 | (411 | ) | 63.57 | |||||||||||||||
Forfeited
|
(482,453 | ) | 5.86 | (1,659,494 | ) | 23.76 | (36,971 | ) | 20.23 | |||||||||||||||
Outstanding as of end of year
|
7,537,219 | 6.37 | 8,066,749 | 6.31 | 4,351,487 | 15.21 | ||||||||||||||||||
Options exercisable as of end of year
|
1,834,281 | $ | 11.54 | 2,419,180 | $ | 9.03 | 3,553,662 | $ | 14.28 |
(6)
|
Summary of Information about Employee Share Options Outstanding
|
Outstanding as of
December 31, 2014
|
Exercisable as of
December 31, 2014
|
|||||||||||||||||||||
Range of exercise
Prices
|
Number outstanding
|
Weighted average remaining contractual life
(in years)
|
Weighted average exercise price
|
Number exercisable
|
Weighted average exercise price
|
|||||||||||||||||
$ | 3.15 | 10,000 | 5.25 | $ | 3.15 | 10,000 | $ | 3.15 | ||||||||||||||
4.35-13.20 | 6,733,734 | 5.27 | 4.81 | 1,030,796 | 5.39 | |||||||||||||||||
15.90-20.85 | 418,202 | 3.34 | 16.85 | 418,202 | 16.85 | |||||||||||||||||
$ | 21.00-32.25 | 375,283 | 2.37 | $ | 22.76 | 375,283 | $ | 22.76 | ||||||||||||||
7,537,219 | 1,834,281 |
|
B.
|
Share Option Plans (cont.)
|
(6)
|
Summary of Information about Employee Share Options Outstanding (cont.)
|
Year Ended December 31,
|
||||||||||||
2014
|
2013
|
2012
|
||||||||||
The intrinsic value of options exercised
|
$ | 3,680 | $ | 42 | $ | 927 | ||||||
The original fair value of options exercised
|
$ | 2,661 | $ | 158 | $ | 819 |
(7)
|
Weighted Average Grant-Date Fair Value of Options Granted to Employees
|
2014
|
2013
|
2012
|
|||||||
Risk-free interest rate
|
1.3%-1.8% | 0.8%-1.8% | 0.6%-1.0% | ||||||
Expected life of options
|
4.75 years
|
4.75 years
|
4.75 years
|
||||||
Expected annual volatility
|
47%-57% | 51%-65% | 52%-55% | ||||||
Expected dividend yield
|
None
|
None
|
None
|
|
C.
|
Equity-Equivalent Capital Notes and Banks’ Warrants
|
|
D.
|
Treasury Stock
|
|
E.
|
Dividend Restriction
|
|
F.
|
Warrants J and Warrants 7
|
|
G.
|
Securities Issuance Pursuant to the Acquisition of TJP
|
|
H.
|
Rights Offering
|
|
I.
|
Debentures
|
|
A.
|
Revenues by Geographic Area - as percentage of total sales
|
Year ended December 31,
|
||||||||||||
2014
|
2013
|
2012
|
||||||||||
USA
|
45 | % | 77 | % | 81 | % | ||||||
Japan
|
40 | 2 | 1 | |||||||||
Asia *
|
11 | 14 | 13 | |||||||||
Europe *
|
4 | 7 | 5 | |||||||||
Total
|
100 | % | 100 | % | 100 | % |
|
B.
|
Property and equipment, net - by Geographic Area
|
As of December 31,
|
||||||||
2014
|
2013
|
|||||||
Israel
|
$ | 145,816 | $ | 180,976 | ||||
United States
|
66,953 | 75,040 | ||||||
Japan
|
206,342 | 94,023 | ||||||
Total
|
$ | 419,111 | $ | 350,039 |
|
C.
|
Major Customers - as percentage of net accounts receivable balance
|
As of December 31,
|
||||||||
2014
|
2013
|
|||||||
Customer 1
|
35 | % |
--
|
% | ||||
Customer 2
|
16 | % | 9 | % | ||||
Customer 3
|
--
|
% | 20 | % |
|
D.
|
Major Customers - as percentage of total sales
|
Year ended December 31,
|
||||||||||||
2014
|
2013
|
2012
|
||||||||||
Customer A
|
38 | % |
--
|
% |
--
|
% | ||||||
Customer B
|
7 | 27 | 43 | |||||||||
Other customers (*)
|
16 | 16 | 10 |
(*)
|
Represents sales to two different customers accounted for between 7% and 9% of sales during 2014 and 2013 and to two different customers accounted for between 4% and 6% of sales during 2012.
|
|
A.
|
Interest Expenses, Net
|
|
B.
|
Other Financing Expenses, Net
|
Year ended December 31,
|
||||||||||||
2014
|
2013
|
2012
|
||||||||||
Debentures Series F accretion and amortization including accelerated accretion associated with Debentures Series F (see Note 13C above)
|
$ | 39,494 | $ | 13,113 | $ | 5,365 | ||||||
Jazz Notes accretion and amortization
|
9,307 | 6,770 | 5,705 | |||||||||
Jazz 2014 Exchange Agreement related financing costs, see Note 13E
|
9,817 | -- | -- | |||||||||
Changes in fair value (total level 3 changes in fair value as reported in Note 14D)
|
(1,669 | ) | 1,792 | 10,827 | ||||||||
Changes in fair value on debentures, derivatives and warrants - other than level 3
|
-- | -- | 1,284 | |||||||||
Exchange rate difference
|
(5,352 | ) | 4,038 | 2,707 | ||||||||
Other
|
3,807 | 2,125 | 1,695 | |||||||||
Other financing expenses, net
|
$ | 55,404 | $ | 27,838 | $ | 27,583 |
|
A.
|
Approved Enterprise Status
|
|
B.
|
The company’s Income Tax provision is as follows
|
Year Ended
|
||||||||||||
December 31, 2014
|
December 31, 2013
|
December 31, 2012
|
||||||||||
Current tax expense (benefit):
|
||||||||||||
Foreign
|
$ | 2,814 | $ | (534 | ) | $ | (1,800 | ) | ||||
Total current
|
2,814 | (534 | ) | (1,800 | ) | |||||||
Deferred tax expense (benefit):
|
||||||||||||
Foreign
|
(27,556 | ) | (8,854 | ) | 9,126 | |||||||
Total deferred
|
(27,556 | ) | (8,854 | ) | 9,126 | |||||||
Income tax provision (benefit)
|
$ | (24,742 | ) | $ | (9,388 | ) | $ | 7,326 |
Year Ended
|
||||||||||||
December 31, 2014
|
December 31, 2013
|
December 31, 2012
|
||||||||||
Profit (loss) before taxes
|
||||||||||||
Domestic
|
$ | 78,677 | $ | (90,497 | ) | $ | (83,049 | ) | ||||
Foreign
|
(104,791 | ) | (26,551 | ) | 20,106 | |||||||
Total income (loss) before taxes
|
$ | (26,114 | ) | $ | (117,048 | ) | $ | (62,943 | ) |
|
C.
|
Components of Deferred Tax Asset/Liability
|
As of December 31,
|
||||||||
2014
|
2013
|
|||||||
Net deferred tax benefit - current
|
||||||||
Net operating loss carryforwards
|
$ | 938 | $ | 2,026 | ||||
Employees benefits and compensation
|
5,170 | 4,003 | ||||||
Debt discount
|
1,253 | -- | ||||||
Accruals, reserves and others
|
3,809 | 2,760 | ||||||
11,170 | 8,789 | |||||||
Valuation allowance
|
(3,354 | ) | (2,779 | ) | ||||
Total net current deferred tax benefit
|
$ | 7,816 | $ | 6,010 |
|
C.
|
Components of Deferred Tax Asset/Liability
(cont.)
|
As of December 31,
|
||||||||
2014
|
2013
|
|||||||
Net deferred tax benefit - long-term
|
||||||||
Deferred tax assets -
|
||||||||
Net operating loss carryforwards
|
$ | 320,954 | $ | 284,446 | ||||
Employees benefits and compensation
|
2,663 | 4,605 | ||||||
Research and development
|
1,940 | 2,005 | ||||||
Others
|
1,237 | 1,212 | ||||||
326,794 | 292,268 | |||||||
Valuation allowance
|
(293,670 | ) | (255,899 | ) | ||||
$ | 33,124 | $ | 36,369 | |||||
Deferred tax liability - depreciation and amortization
|
(30,293 | ) | (41,255 | ) | ||||
Deferred tax related to gain on acquisition
|
(66,722 | ) | -- | |||||
Intangible assets
|
(6,318 | ) | (6,929 | ) | ||||
Debt discount
|
(4,200 | ) | (884 | ) | ||||
Others
|
(869 | ) | (912 | ) | ||||
Total net long-term deferred tax liability
|
$ | (75,278 | ) | $ | (13,611 | ) |
Unrecognized tax benefits
|
||||
Balance at January 1, 2014
|
$ | 25,676 | ||
Additions for tax positions of current year
|
51 | |||
Reductions for tax positions of prior year
|
-- | |||
Translation differences
|
(766 | ) | ||
Balance at December 31, 2014
|
$ | 24,961 |
|
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 |
|
D.
|
Effective Income Tax Rates
|
Year ended December 31,
|
||||||||||||
2014
|
2013
|
2012
|
||||||||||
Tax expense (benefit)
computed at statutory rates
|
$ |
(6,920
|
) | $ | (29,262 | ) | $ | (15,736 | ) | |||
Effect of different tax rates in different jurisdictions
|
(18,453
|
) | 1,408 | 7,514 | ||||||||
Gain on acquisition of TPSCo | (33,280 | ) | - | - | ||||||||
Tax benefits for which deferred taxes were not recorded
|
27,757 | 20,139 | 15,955 | |||||||||
Permanent differences and other, net
|
6,154 | (1,673 | ) | (407 | ) | |||||||
Income tax provision (benefit)
|
$ | (24,742 | ) | $ | (9,388 | ) | $ | 7,326 |
|
E.
|
Net Operating Loss Carry forward
|
|
E.
|
Net Operating Loss Carry forward (cont.)
|
|
F.
|
Final Tax Assessments
|
|
A.
|
Balances
|
The nature of the relationships involved
|
As of December 31,
|
||||||||
2014
|
2013
|
||||||||
Long-term investment
|
Equity investment in a limited partnership
|
$ | 44 | $ | 60 | ||||
Trade accounts payable
|
Trade accounts payable
|
$ | 62 | $ | 90 |
B.
|
Transactions
|
Description of the transactions
|
Year Ended December 31,
|
||||||||||||
2014
|
2013
|
2012
|
|||||||||||
Sales
|
Sales to a limited partnership
|
$ | -- | $ | 59 | $ | 431 | ||||||
Cost of revenues
|
Purchase of services and goods from
affiliates of a major shareholder
|
$ | 14,883 | $ | 3,379 | $ | 2,853 | ||||||
General and Administrative expenses
|
Mainly directors fees and reimbursement to directors
|
$ | 221 | $ | 311 | $ | 238 | ||||||
Other expense (income), net
|
Equity loss (profit) in a limited partnership
|
$ | 16 | $ | 144 | $ | (184 | ) |
|
A.
|
Goodwill
|
|
B.
|
Financial instruments
|
|
C.
|
Pension plans
|
|
D.
|
Termination Benefits
|
BALANCE SHEETS RECONCILIATION OF US GAAP TO IFRS (CONDENSED)
|
||||||||
(dollars in thousands)
|
|
E.
|
Balance sheet in accordance with IFRS
|
As of December 31, 2014
|
||||||||||||||||
remark
|
US GAAP
|
Adjustments
|
IFRS
|
|||||||||||||
A S S E T S
|
||||||||||||||||
CURRENT ASSETS
|
$ | 394,084 | $ | -- | $ | 394,084 | ||||||||||
PROPERTY AND EQUIPMENT, NET
|
419,111 | -- | 419,111 | |||||||||||||
LONG TERM ASSETS
|
I,J | 70,951 | (10,412 | ) | 60,539 | |||||||||||
TOTAL ASSETS
|
$ | 884,146 | $ | (10,412 | ) | $ | 873,734 | |||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||||||||||
CURRENT LIABILITIES
|
K | $ | 300,325 | $ | 25,622 | $ | 325,947 | |||||||||
LONG-TERM LIABILITIES
|
L,M | 388,260 | 24,075 | 412,335 | ||||||||||||
Total liabilities
|
688,585 | 49,697 | 738,282 | |||||||||||||
TOTAL EQUITY
|
G,H | 195,561 | (60,109 | ) | 135,452 | |||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
|
$ | 884,146 | $ | (10,412 | ) | $ | 873,734 |
|
F.
|
Profit and loss in accordance with IFRS
|
Year ended December 31, 2014
|
||||||||||||
US GAAP
|
Adjustments
|
IFRS
|
||||||||||
PROFIT BEFORE INCOME TAX AND EXCLUDING OTHER FINANCING EXPENSE, NET
|
$ | 29,290 | $ | (905 | ) | $ | 28,385 | |||||
OTHER FINANCING EXPENSE, NET
|
(55,404 | ) | 21,556 | (33,848 | ) | |||||||
LOSS BEFORE INCOME TAX BENEFIT
|
(26,114 | ) | 20,651 | (5,463 | ) | |||||||
INCOME TAX BENEFIT
|
24,742 | -- | 24,742 | |||||||||
PROFIT (LOSS)
|
(1,372 | ) | 20,651 | $ | 19,279 | |||||||
NET LOSS ATTRIBUTABLE TO NON CONTROLLING INTEREST
|
5,635 | -- | 5,635 | |||||||||
NET PROFIT ATTRIBUTABLE TO THE COMPANY
|
$ | 4,263 | $ | 20,651 | $ | 24,914 |
|
G.
|
Reconciliation of net loss from US GAAP to IFRS:
|
Year ended December 31,
|
||||||||||||
2014
|
2013
|
2012
|
||||||||||
Net profit (loss) in accordance with US GAAP
|
$ | 4,263 | $ | (107,660 | ) | $ | (70,269 | ) | ||||
Financial Instruments
|
21,556 | (1,619 | ) | 4,232 | ||||||||
Pension plans
|
(1,314 | ) | (1,166 | ) | -- | |||||||
Termination Benefits
|
409 | 106 | 126 | |||||||||
Net loss in accordance with IFRS
|
$ | 24,914 | $ | (110,339 | ) | $ | (65,911 | ) |
|
H.
|
Reconciliation of shareholders’ equity from US GAAP to IFRS:
|
As of December 31,
|
||||||||
2014
|
2013
|
|||||||
Shareholders’ equity in accordance with US GAAP
|
$ | 195,561 | $ | 141,248 | ||||
Financial Instruments
|
(54,656 | ) | (71,368 | ) | ||||
Termination Benefits
|
1,547 | 1,138 | ||||||
Goodwill
|
(7,000 | ) | (7,000 | ) | ||||
Shareholders’ equity in accordance with IFRS
|
$ | 135,452 | $ | 64,018 |
|
I.
|
Reconciliation of goodwill from US GAAP to IFRS:
|
As of December 31,
|
||||||||
2014
|
2013
|
|||||||
Goodwill in accordance with US GAAP
|
$ | 7,000 | $ | 7,000 | ||||
Goodwill
|
(7,000 | ) | (7,000 | ) | ||||
Goodwill in accordance with IFRS
|
$ | -- | $ | -- |
|
J.
|
Reconciliation of other assets from US GAAP to IFRS:
|
As of December 31,
|
||||||||
2014
|
2013
|
|||||||
Other assets in accordance with US GAAP
|
$ | 10,018 | $ | 11,547 | ||||
Financial Instruments
|
(3,412 | ) | (4,860 | ) | ||||
Other assets in accordance with IFRS
|
$ | 6,606 | $ | 6,687 |
|
K.
|
Reconciliation of short term bank debt and current maturities of loans and debentures from US GAAP to IFRS:
|
As of December 31,
|
||||||||
2014
|
2013
|
|||||||
Short term bank debt and current maturities of loans and debentures in accordance with US GAAP
|
$ | 119,999 | $ | 36,441 | ||||
Financial Instruments
|
25,622 | (93 | ) | |||||
Short term bank debt and current maturities of loans and debentures in accordance with IFRS
|
$ | 145,621 | $ | 36,348 |
|
L.
|
Reconciliation of long term debentures from US GAAP to IFRS:
|
As of December 31,
|
||||||||
2014
|
2013
|
|||||||
Long term debentures in accordance with US GAAP
|
$ | 107,311 | $ | 208,146 | ||||
Financial Instruments
|
25,622 | 66,508 | ||||||
Long term debentures in accordance with IFRS
|
$ | 132,933 | $ | 274,654 |
|
M.
|
Reconciliation of other long term liabilities from US GAAP to IFRS:
|
As of December 31,
|
||||||||
2014
|
2013
|
|||||||
Other long term liabilities in accordance with US GAAP
|
$ | 22,924 | $ | 21,703 | ||||
Termination Benefits
|
(1,547 | ) | (1,138 | ) | ||||
Other long-term liabilities in accordance with IFRS
|
$ | 21,377 | $ | 20,565 |
Article 1.
|
Definitions
|
1.1.
|
Unless otherwise defined in this Agreement, terms defined and references construed in the Loan Documents shall have the same meaning and construction in this Agreement.
|
1.2.
|
In this Agreement, unless the context requires otherwise, the following terms shall have the following meanings:
|
Article 2.
|
Creation of Pledge
|
2.1.
|
In order to secure the full and punctual payment, performance and discharge of the Secured Obligations to and in favour of the Security Banks by the Grantor and the due and punctual performance by the Grantor of all the terms, covenants, undertakings, conditions and provisions of the Finance Documents, including the Loan Documents, the Grantor hereby pledges and grants to each Security Bank a security interest in the form of a revolving pledge (
ne-shichiken
) (collectively, the "
Pledge
") upon all of the Grantor’s rights, title and interest in, to and over the Receivables. The Security Banks may at any time set the principal of the Secured Obligations then secured by the Pledge (
ganponkakutei
) by written notice to the Grantor.
|
2.2.
|
The Grantor, on the date hereof, shall deliver the documents described in items (i) to (iii) of the definition of “Collateral Agent Held Assets” above to the Collateral Agent who acts as possessing agent on behalf of the Security Banks. For the purpose of effectuating and perfecting the Pledge hereunder, on the date hereof, the Grantor shall:
|
|
2.2.1
|
give a notice to the Company of the creation of the Pledge in favour of each of the Security Banks in accordance with the terms in Clause 2.1 (substantially in the form set out in Exhibit 1 attached hereto); and
|
|
2.2.2
|
procure, at its own cost and expense, the Company’s acknowledgement and consent thereto (substantially in the form set out in Exhibit 1 (attached hereto) with a certified date stamp of the notary public (
kakutei hizuke
) and deliver said document (described in item (iv) of the definition of "Collateral Agent Held Assets" above) to the Collateral Agent.
|
2.3
|
During the Security Period, the Grantor shall not, and shall procure that the Company shall not, take any action which impairs the Security Banks’ first priority perfected security interests in the Receivables or the Security Banks’ abilities to exercise their rights and remedies available under this Agreement or applicable law.
|
2.4.
|
Notwithstanding the execution of this Agreement and anything contained herein to the contrary (i) the Grantor shall remain liable under all contracts and agreements applicable to the Company to which the Grantor is a party or by which it is bound (including the Underlying Agreements) (collectively, the “Related Agreements”), to perform all of Grantor’s duties and obligations thereunder to the same extent as if this Agreement had not been executed, (ii) the exercise by the Security Banks of any of the rights hereunder shall not release the Grantor from any of its duties or obligations under the Related Agreements and (iii) the Security Banks shall have no duty or obligation under any Related Agreements by reason of this Agreement or the enforcement of the Security Banks’ rights hereunder. The powers conferred on the Security Banks hereunder are solely to protect their interests in the Receivables and shall not impose any duty upon the Security Banks to exercise any such powers.
|
2.5
|
The Collateral Agent shall hold any Collateral Agent Held Assets delivered to it for the benefit of the Security Banks. The Grantor and the Security Banks hereby reciprocally confirm that the delivery of the Collateral Agent Held Assets to the Collateral Agent shall be deemed as having been delivered to the Security Banks.
|
2.6
|
The Collateral Agent shall hold the Collateral Agent Held Assets which are delivered to it, as agent for the benefit of Security Banks at the place and in the manner designated by the Collateral Agent until the completion of the Security Period.
|
2.7
|
The Collateral Agent may accept without enquiry, objection or investigation the Collateral Agent Held Assets and shall not be liable for any failure or omission to ascertain the authenticity of the Collateral Agent Held Assets or any of them. The Security Banks shall not claim any liability against the Collateral Agent for any such failure or omission.
|
Article 3.
|
Continuing Security
|
Article 4.
|
Enforcement of Security Interests
|
4.1.
|
If an Enforcement Event is continuing and either: (i) a declaration, in accordance with clause 17.21.3 of the Facility Agreement, that the Loans are immediately due and payable has been made; or (ii) the Loans and/or the amounts referred to in clause 17.21.2 of the Facility Agreement have become, pursuant to clause 17.22 of the Facility Agreement, immediately due and payable, then the Security Banks may, in addition to all the other rights and remedies provided for herein or otherwise available to them under applicable law, exercise all or any of the following powers by notice to the Grantor and the Company with respect to all or any part of the Receivables:
|
|
(1)
|
to collect and apply any money payable under the Receivables;
|
|
(2)
|
to acquire the ownership of, or definitive title to, all or any part of the Receivables, in such manner, at such price and at such time as the Security Banks deem generally appropriate without following the statutory procedures, and may apply the proceeds from such disposition to the repayment of the Secured Obligations and the Grantor shall have no right to object to the manner, price and method of appropriation made by the Security Banks as long as the price of the Receivables is determined in good faith and in a commercially reasonable manner; or
|
|
(3)
|
to sell, transfer, assign, or otherwise dispose of or deal in all or any part of the Receivables in one or more public or private sale or sales, in such manner, at such price and at such time as the Security Banks reasonably deem generally appropriate.
|
4.2.
|
In each of the cases described in Article 4.1 above, the order and the method of the application to the repayment of the Secured Obligations shall be made in accordance with clause 9.4 of the Debenture.
|
4.3.
|
For the avoidance of doubt, in addition to, and without derogating from, the foregoing Articles 4.1 and 4.2 above, upon the occurrence of an Enforcement Event which is continuing, the Security Banks shall have the right to exercise any and all rights and remedies available to them under the Finance Documents or pursuant to applicable law.
|
4.4
|
During the Security Period, the Grantor shall, promptly upon the reasonable request of the Security Banks:
|
|
4.4.1
|
take any such steps as are required to be taken on the part of the Grantor for the purposes of the transfer of any Receivables to the Security Banks or any third party purchaser pursuant to Clause 4.1; and
|
|
4.4.2
|
take any such steps as are required to be taken on the part of the Grantor for the purposes of facilitating the enforcement of the Pledge by the Security Banks pursuant to Article 4.1, including, without limitation, the delivery to the Security Banks of any and all Receivables Documentation.
|
Article 5.
|
Grantor’s Rights
|
Article 6.
|
Representations of the Grantor
|
6.1.
|
The Grantor hereby represents and warrants to the Security Banks and the Collateral Agent that each of the following statements is true and accurate on the date hereof:
|
|
(1)
|
(i) the Grantor is duly incorporated and validly existing under the laws of Israel with full power and authority to execute and deliver this Agreement and perform its obligations under this Agreement; and (ii) the Company is duly incorporated and validly existing under the laws of Japan with full power and authority to execute and deliver theAcknowledgement and Consent Letter for Pledge (as detailed in Exhibit 1) and perform its obligations thereunder ;
|
|
(2)
|
no action or thing (other than as taken, fulfilled or done on or prior to the date hereof) is required to be taken, fulfilled or done by the Grantor or the Company, respectively, to create and perfect the Pledge;
|
|
(3)
|
the execution, delivery and performance of this Agreement by the Grantor do not and will not (i) violate or contravene any applicable provision of law or other governmental directive, whether or not having the force of law; (ii) conflict with the Organizational Documents of the Grantor or of the Company; (iii) conflict with or result in a breach of any provision of any agreement or instrument to which any of them is a party or by which any of them or any of their assets may be bound; and (iv) result in the existence of, or oblige the Grantor or the Company to create, any Encumbrances over all or any of its present or future revenues or assets, save as otherwise required under this Agreement;
|
|
(4)
|
the execution, delivery and performance of this Agreement have been duly authorized by the Grantor by all requisite action, and this Agreement constitutes the legal, valid and binding obligations of the Grantor, enforceable against the Grantor in accordance with its terms, subject to bankruptcy, suspension of payments, insolvency or similar laws affecting creditors’ rights generally;
|
|
(5)
|
neither the Grantor nor the Company is insolvent, nor has any of them suspended payment and the respective liabilities of the Grantor and/or of the Company have not exceeded their respective assets, and there is no threat of their either becoming insolvent, suspending payments or threat of either’s liabilities exceeding its assets by the consummation of this Agreement or the transactions contemplated hereby;
|
|
(6)
|
no application has been made with respect to the Grantor or the Company for legal insolvency proceedings in or outside of Japan, no Receiver, liquidator or similar officer has been appointed with respect to the Grantor or the Company or any material part of their respective assets and neither the Grantor nor the Company is aware of any such application, proceedings or appointment pending;
|
|
(7)
|
the Receivables are free and clear of all Encumbrances of any kind whatsoever except with regard to the Pledge hereunder and neither the Grantor nor the Company has received notice of adverse claims with respect to any Receivables;
|
|
(8)
|
the Pledge constitutes a valid, perfected, first priority revolving pledge (
ne-shichiken
) in and to all of the Receivables and is not liable to be voided or otherwise set aside on the liquidation of the Grantor or the Company or otherwise;
|
|
(9)
|
no promissory note or other securities have been issued in respect of any Receivables;
|
|
(10)
|
no electronically recorded claim (
denshi saiken
) has arisen in respect of any Receivables;
|
|
(11)
|
the Grantor is the legal holder of the Receivables;
|
|
(12)
|
the Grantor has title to and is entitled to the legal and beneficial interest and ownership of the Receivables, free from any Encumbrance (other than any Encumbrance created by or pursuant to this Agreement);
|
|
(13)
|
no person has any right or option to purchase the Receivables and there is no restriction or limit on the transfer or sale of the Receivables; and there is no restriction on the pledging and/or charging of the Receivables pursuant to this Agreement, upon the realisation of the Pledge hereunder or upon the transfer or sale of the Receivables in connection therewith;
|
|
(14)
|
no consent, approval, authorisation or other action by any person is required (which has not been obtained) for: (i) the Pledge created pursuant to this Agreement; (ii) the execution, delivery or performance of this Agreement and theAcknowledgement and Consent Letter for Pledge (as detailed in Exhibit 1) by the Grantor and the Company, respectively; or (iii) the realisation of the rights or remedies provided in this Agreement, other than as detailed in this Agreement;
|
|
(15)
|
in any Proceedings taken in relation to this Agreement, neither the Grantor nor the Company will be entitled to claim for itself or any of its assets immunity from suit, execution, attachment or other legal process;
|
|
(16)
|
it is not necessary that this Agreement be filed, recorded or enrolled with any court or other authority or that any stamp, registration or similar tax be paid on or in relation to this Agreement, other than stamp duty under the Stamp Tax Act of Japan, the filing of this Agreement (and a notarised Hebrew translation thereof) with the Israeli Registrar of Companies pursuant to Chapter 8 of the Companies Ordinance [New Version], 5743–1983 and the registration, pursuant to the Israeli Pledges Law, of the particulars of this Agreement with the Israeli Registrar of Pledges;
|
|
(17)
|
the Receivables are legally and validly existing and are enforceable against the Company;
|
|
(18)
|
the Receivables are not subject to attachment (
sashiosae
), temporary attachment (
kari sashiosae
) or provisional injunction (
karishobun
); and
|
|
(19)
|
the governing law of the Receivables is Japanese law.
|
Article 7.
|
Undertakings by the Grantor
|
7.1.
|
The Grantor shall not at any time during the Security Period, without the prior written consent of the Security Banks, sell, assign, transfer, exchange, or otherwise dispose of or grant any option with respect to, the Receivables or any part thereof. The Grantor shall not create, incur or permit to exist any Encumbrance (other than any Encumbrance created by or pursuant to this Agreement) with respect to the Receivables or any part thereof, or any interest therein, or any proceeds thereof.
|
7.2.
|
Without derogating from Article 16.6 below, if at any time the Grantor shall enter into Contracts additional to the Underlying Agreements with the Company pursuant to which any Additional Receivables may be generated or the Grantor otherwise enters into Contracts with any other Debtor pursuant to which any Additional Receivables may be generated, (i) the Grantor shall promptly notify the Security Banks of any such Contracts and the Additional Receivables that may be generated therefrom and provide a certified copy of any such Contract to the Security Banks, and (ii) the Grantor shall execute and deliver, and cause the Debtor to execute and deliver, an Additional Receivables Pledge Agreement to the Collateral Agent in order to further create, effectuate and perfect first priority security interests in favour of each of the Security Banks.
|
7.3.
|
To obtain and comply with, perform and observe the terms and do all that is necessary to maintain in full force and effect all authorisations, consents and approvals required in or by all applicable laws and regulations, so as to enable the Grantor lawfully to enter into and perform its obligations under this Agreement, and to ensure the legality, validity and enforceability of this Agreement.
|
7.4.
|
To notify the Security Banks and the Collateral Agent immediately of the imposition of any attachment, or the issue of any execution proceedings or of any application for the appointment of a Receiver over or with respect to the Receivables or any part thereof, or any act, proceedings or application similar to any of the foregoing, and to notify immediately the authorities which levied such attachment or issued such execution proceedings or received the application for the appointment of such Receiver and any third party who initiated or applied for such action, of this Agreement in favour of the Security Banks and to take, as soon as possible, but in any event no later than 45 (forty-five) days after such attachment, execution, proceeding, appointment of Receiver or similar act or proceedings as aforesaid, at the expense of the Grantor, all steps and measures necessary for the discharge or cancellation of such attachment, execution proceedings or appointment of Receiver, or any act, proceedings or appointment similar to the foregoing, as the case may be.
|
7.5.
|
To be liable towards the Security Banks and the Collateral Agent for any defect in the Grantor’s title to the Receivables, including the Collateral Agent Held Assets, and to bear the responsibility for the authenticity, regularity and correctness of all the signatures, endorsements and particulars of any Receivables (including the Collateral Agent Held Assets and the Receivables Documentation) which, under this Agreement has been or may, during the Security Period, be delivered to the Collateral Agent or the Security Banks, or otherwise pursuant to the provisions of this Agreement.
|
7.6.
|
To make, from time to time, all such filings, reports and other communications as may be required under all applicable laws in connection with the Receivables (including, any transaction, omission, act or holding of any interest, by the Grantor, in the Receivables).
|
7.7.
|
To refrain from any act or omission which would in any way lead to any restriction whatsoever on the ability of the Security Banks to realise their rights under this Agreement.
|
7.8.
|
Forthwith upon the Security Banks’ first demand, to furnish to the Security Banks any consent, authorisation, approval or other document which, in the Security Banks’ reasonable opinion, is required or necessary for the purpose of proof of compliance by the Grantor with its respective obligations under this Article 7.
|
7.9.
|
Not to institute any Proceedings whatsoever in respect of the Receivables which would have an adverse effect on the ability of the Security Banks to realise the Receivables.
|
7.10
|
Not to cause any electronically recorded claim (
denshi saiken
) to arise, in respect of any Receivables.
|
7.11
|
Not to cause any promissory note or other securities to be issued in respect of any Receivables.
|
7.12
|
The Grantor shall perform in all material respects all of its obligations under the Underlying Agreements.
|
7.13
|
The Grantor shall not amend, modify or waive any relevant provisions of the Underlying Agreements, or any Receivable, that shall reasonably be expected to materially reduce the aggregate amount of the Receivables.
|
7.14
|
Not to set-off any of the Receivables of the Grantor against the Company against any claims of the Company against the Grantor (and the Grantor shall procure that the Company shall not set-off any of the Receivables of the Company against the Grantor against any claims of the Grantor against the Company), and the Grantor confirms and agrees, and shall procure that the Company confirms and agrees, that any such attempted set-off shall be null and void ab initio.
|
7.15
|
The Grantor shall only enter into Contracts with the Debtors which do not prohibit the pledging, assignment or any other disposal of Additional Receivables arising under such Contracts.
|
7.16
|
The Grantor shall keep and maintain, at its own cost and expense, records of and in respect of the Receivables, including, the originals (or true, complete and accurate copies) of all documentation (including invoices and all attachments thereto and/or other supporting documentation therefor) with respect to all Receivables and records of all payments received from the Company in connection therewith.
|
7.17
|
The Grantor shall provide a written report to the Security Banks of the outstanding balance, and other details in respect, of the Receivables (i) as at the end of each Quarter within 15 Business Days after the end of such Quarter; and (ii) at any other time, promptly following the request of the Security Banks therefor.
|
Article 8.
|
Nature of Collateral
|
8.1.
|
The security interest created hereunder is in addition to the other collateral
held by the Security Banks relating to the Secured Obligations and the Grantor acknowledges and agrees that the creation of the security interest hereunder shall not affect any such other collateral
|
8.2.
|
Grantor shall not object to a change in or cancellation of other collateral securing the Secured Obligations made by the Security Banks at their discretion, or to the timing of realisation of any of the collateral, as the Security Banks may determine at their discretion, including without limitation, as to which collateral and what part thereof shall be firstly enforced and whether the whole collateral or a part thereof is enforced.
|
Article 9.
|
Expenses and Fees
|
9.1
|
All costs, fees and expenses (including legal fees), incurred by the Security Banks in the preparation and execution of this Agreement, the registration of this Agreement and/or any document ancillary hereto and/or to be entered into hereunder and/or otherwise incurred by the Security Banks and the Collateral Agent in connection with the perfection, protection or creation of any security contemplated under this Agreement (including under Japanese and Israeli law), together with any VAT or other Taxes incurred or levied thereto, all custodial costs, fees and expenses of the Collateral Agent in holding the Collateral Agent Held Assets, and all and any costs, fees and expenses (including legal fees) incurred by the Security Banks or the Collateral Agent in, or in connection with, the realisation of the Receivables (or any part thereof), the institution of proceedings for collection of any Secured Obligation (including attorneys’ fees and disbursements) or otherwise incurred in connection with, or arising from, the preservation and enforcement of the Security Banks’ and Collateral Agent’s rights hereunder, whether or not any of the same are occasioned by any act, neglect or default of the Grantor, shall be paid, together with Interest payable in accordance with clause 18
(“Default Interest”)
of the Facility Agreement from the date of the same being incurred or becoming payable until the date the same are unconditionally and irrevocably paid and discharged in full, by the Grantor, forthwith on demand.
|
9.2
|
The Security Banks, the Collateral Agent, every Receiver, attorney, agent and every other person appointed in connection with this Agreement shall be entitled to be indemnified out of the Receivables in respect of all liabilities, damages, losses, expenses and other amounts incurred by, or demanded from, any of them in connection with or arising from any action taken or omitted from being taken by any of them under or pursuant to this Agreement and/or in connection with the execution or purported execution of any action and/or omission of the powers, authorities or discretions vested in them pursuant hereto and/or by law and against all actions, proceedings, costs, claims and demands in respect of any matter or thing done or omitted in any way relating to the Receivables (or any part thereof) (save, in respect of any Security Bank, Collateral Agent, Receiver, attorney, agent or any other person appointed in connection with this Agreement, to the extent any such actions, proceedings, costs, claims or demands result from such person’s gross negligence or wilful default).
|
9.3
|
The Grantor shall pay the Collateral Agent an annual fee of NIS 10,000 (ten thousand New Israel Sheqels) for safekeeping the Collateral Agent Held Assets. Such fee to be paid on the date hereof and every 12 (twelve) months thereafter.
|
10.1
|
Any payment by the Grantor under this Agreement shall be made in the currency in which the relevant Secured Obligation is stated, in the applicable Finance Document, as being payable or, where no currency is stated, as aforesaid, for payment of a particular Secured Obligation, then payment of such Secured Obligation shall be made in Dollars.
|
10.2
|
If any sum due from the Grantor under this Agreement or any order or judgment given or made in relation to this Agreement has to be converted from the currency (the “first currency”) in which the same is payable under this Agreement or under such order or judgment into another currency (the “second currency”) for the purpose of: (i) making or filing a claim or proof against the Grantor; (ii) obtaining an order or judgment in any court or other tribunal or (iii) enforcing any order or judgment given or made in relation to this Agreement, the Grantor shall indemnify and hold harmless each Security Bank from and against any loss suffered as a result of any difference between: (a) the rate of exchange used for such purpose to convert the sum in question from the first currency into the second currency; and (b) the buying rate or rates of exchange (cheques and remittances) of the relevant Security Bank for the purchase of the first currency with the second currency as at the date of receipt of the sum paid to such Security Bank, as aforesaid, in satisfaction, in whole or in part, of any such order, judgment, claim or proof.
|
Article 11.
|
Delegation
|
12.1.
|
The Grantor hereby, by way of security and in order more fully to secure the performance of its obligations hereunder, irrevocably appoints the Security Banks and every delegate or sub-delegate, as referred to in Article 11 above, to be its attorney acting on its behalf and in its name or otherwise to execute and do all such acts and things which the Grantor ought to do under or in connection with this Agreement (including to execute, deliver and register any pledges, charges, mortgages, assignments or other security and otherwise to perfect any security granted hereunder or thereunder and to perfect any agreement, instrument or act which the Security Banks may deem proper) to the extent permitted by applicable law.
|
12.2.
|
The Grantor hereby ratifies and confirms and agrees to ratify and confirm whatever any such attorney as is mentioned in Article 12.1 above shall do or purport to do in the exercise or purported exercise of all or any of the powers, authorities and discretions referred to in such Article.
|
Article 13.
|
Taxes
|
Article 14.
|
Books of Accounts
|
14.1.
|
the Grantor confirms that each of the Security Bank’s respective books, accounts and entries shall be binding upon the Grantor and the Company, shall be deemed to be correct and shall, in the absence of manifest or proven error, be prima facie evidence against the Grantor and the Company in all their particulars; and
|
14.2.
|
a certificate by each of the Security Banks setting out the amount of any Secured Obligation due from the Grantor to such Security Bank shall, in the absence of manifest or proven error, be
prima facie
evidence of such amount against the Grantor.
|
Article 15.
|
Collateral Agent
|
15.1
|
that until the expiry of the Security Period, the Collateral Agent shall hold the Collateral Agent Held Assets and shall only act in relation to the Collateral Agent Held Assets and manage and administer the same, all in accordance with the instructions of the Security Banks and in accordance with the provisions of this Agreement. Without derogating from the foregoing, the Grantor agrees that the Collateral Agent shall (to the exclusion of the Grantor) only refer to, and/or take instructions from, the Security Banks with respect to any matter and/or act and/or thing relating to, or in connection with, the Collateral Agent Held Assets. The Grantor further agrees that it may not give the Collateral Agent any instructions regarding any of the foregoing and such instructions if given, shall not be of any effect and shall not obligate the Collateral Agent in any way or in any manner;
|
15.2.
|
that the nature of any instructions that may, from time to time, be given to the Collateral Agent, and/or the Security Banks refraining from issuing instructions, are, in each case, in the sole and absolute discretion of the Security Banks;
|
15.3.
|
that the Collateral Agent may execute any document and do all such acts as the Security Banks may require in order to perfect the pledges and charges created hereunder with respect to the Collateral Agent Held Assets and/or to facilitate the realisation thereof; and
|
15.4.
|
that the Collateral Agent shall be entitled, upon the instructions of the Security Banks and without any further authority being required from the Grantor, to do all such acts as the Security Banks may request in connection with, or within the framework of, the realisation of the Collateral Agent Held Assets (or any part thereof).
|
15.5.
|
None of the Security Banks, the Collateral Agent and any person acting on behalf of any of the foregoing, shall be liable for, and the Grantor hereby waives any claim it may have against each Security Bank, the Collateral Agent and/or any other person acting on behalf of any of the foregoing, which arises from, any loss or damage which may be caused as a result of the non-exercise, exercise or purported exercise of the powers, authorities, rights or discretions vested in any Security Bank or otherwise caused in connection herewith and the Grantor shall indemnify each Security Bank, the Collateral Agent and any person acting on behalf of any of the foregoing against any loss or damage suffered by any of the foregoing in respect of any matter or thing done or omitted to be done by any such person in connection with the Receivables (including any action or claim made against any of the foregoing persons which may be caused as a result of the non-exercise, exercise or purported exercise of such powers, authorities, rights or discretions, as aforesaid) or otherwise in connection with this Agreement.
|
Article 16.
|
Miscellaneous
|
16.1.
|
Amendments
|
16.2.
|
No Waiver
|
16.3.
|
Remedies Cumulative
|
16.4
|
Assignment
|
16.5.
|
Notice, etc.
|
16.5.1.
|
Every notice, request, demand or other communication under this Agreement (i) to be given by the Grantor to any other Party, shall be given to each of the Security Banks and to the Collateral Agent; and (ii) to be given to the Grantor shall (except as otherwise provided under this Agreement), be given by the Security Banks or the Collateral Agent.
|
16.5.2.
|
Notices to be given hereunder shall be in writing and may be given personally, by facsimile or as required by Article 16.5.3 below. Any notice to be given to a Security Bank or the Collateral Agent must be given during normal banking hours of such Security Bank to the person and at the address designated below. If notice is sent by facsimile during normal banking hours as aforesaid, it shall be deemed to have been served when confirmation of receipt by the intended recipient has been received. All notices given by facsimile shall be confirmed by letter despatched in the manner provided in Article 16.5.3 within 24 (twenty-four) hours of transmission. No notice by the Grantor to the Collateral Agent shall be valid unless a copy thereof is simultaneously served, in the same manner as that served, on the Security Banks.
|
16.5.3.
|
Any other notices to be given hereunder shall be served on a Party by prepaid express registered letter (or nearest equivalent) to its address given below or such other address as may from time to time be notified for this purpose and any notice so served shall be deemed to have been served within 10 (ten) days after the time at which such notice was posted and in proving such service, it shall be sufficient to prove that the notice was properly addressed and posted:
|
16.5.3.1. | to the Grantor at: |
Tower Semiconductor Ltd.
P.O. Box 619
Migdal Haemek
Israel
Facsimile: (04) 604 7242
Attention: Oren Shirazi,
Chief Financial Officer
|
|
with a copy to: |
Yigal Arnon & Co.
1 Azrieli Centre
46th Floor, The Round Tower
Tel-Aviv, 67021
Israel
Facsimile: (03) 608 7714
Attention: David H. Schapiro, Adv.
|
16.5.3.2. | to Bank Hapoalim at: |
Corporate Division
Midgal Levenstein
23 Menachem Begin Road
Tel-Aviv, Israel
Facsimile: (03) 567 4719
Attention: Head of
Special Credits Division
|
|
16.5.3.3. | to Bank Leumi at: |
Special Credits Division
13 Ahad Haam Street
Tel-Aviv, Israel
Facsimile:
(03) 514 7092
Attention: Head of
Special Credits Division
|
|
16.5.3.4. | to the Collateral Agent at: |
Poalim Trust Services Ltd.
Migdal Levinstein
23 Menachem Begin Road
Tel-Aviv
Israel
Facsimile: (03) 567 3624
Attention: Chief Executive Officer
|
16.6.
|
Further Assurances
|
16.8.
|
Counterparts
|
16.9.
|
Governing Law
|
16.10.
|
Jurisdiction
|
Grantor:
Tower Semiconductor Ltd.
By:_____________________________________________
Name:___________________________________________
Title:____________________________________________
Security Bank:
Bank Hapoalim B.M.
By:_____________________________________________
Name:___________________________________________
Title:____________________________________________
Security Bank:
Bank Leumi le-Israel B.M.
By:_____________________________________________
Name:___________________________________________
Title:____________________________________________
Collateral Agent:
Poalim Trust Services Ltd.
By:_____________________________________________
Name:___________________________________________
Title:____________________________________________
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To:
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TowerJazz Panasonic Semiconductor Co., Ltd. as the Company
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Cc:
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Bank Hapoalim B.M. and Bank Leumi le-Israel B.M. as Security Banks
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Re:
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The Receivables owed to TOWER SEMICONDUCTOR LTD.
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To:
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TOWER SEMICONDUCTOR LTD. as the Grantor, Bank Hapoalim B.M. and Bank Leumi le-Israel B.M. as Security Banks and Poalim Trust Services Ltd. as Collateral Agent
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Re:
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The Receivables owed to TOWER SEMICONDUCTOR, LTD.
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Subsidiary
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Jurisdiction
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Ownership
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Jazz Technologies, Inc.
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Delaware
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100% directly
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Jazz Semiconductor, Inc.
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Delaware
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100% indirectly through Jazz Technologies, Inc.
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Newport Fab LLC
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Delaware
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100% indirectly through Jazz Semiconductor, Inc.
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TowerJazz Japan Ltd.
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Japan
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100% directly
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TowerJazz Panasonic Semiconductor Co., Ltd.,
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Japan
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51% directly
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/s/
Russell C. Ellwanger
Russell C. Ellwanger
Chief Executive Officer
Tower Semiconductor Ltd.
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/s/
Oren Shirazi
Oren Shirazi
Senior VP & Chief Financial Officer
Tower Semiconductor Ltd.
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1.
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the Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
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2.
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
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/s/
Russell C. Ellwanger
Russell C. Ellwanger
Chief Executive Officer
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1.
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the Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
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2.
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the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
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/s/ Oren Shirazi
Oren Shirazi
Senior VP & Chief Financial Officer
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