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Exhibit 99.1

 

TOWER SEMICONDUCTOR LTD.

NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS

To Be Held On June 29, 2017

 

Notice is hereby given that the Annual General Meeting (the " Meeting ") of the shareholders of Tower Semiconductor Ltd. (" Tower " or the " Company "), an Israeli company, will be held at the offices of the Company, Shaul Amor Street, Ramat Gavriel Industrial Park, Migdal Haemek 2310502, Israel, on Thursday, June 29, 2017, at 11:00 a.m. (Israel time) for the following purposes:

 

1.	To elect ten members to the Board of Directors of the Company for the coming year;

 

2.	To appoint Mr. Amir Elstein as the Chairman of the Board of Directors and approve his terms of compensation;

 

3.

To approve an amended compensation policy for the Company's directors and officers, in accordance with the requirements of the Israeli Companies Law, 1999 and regulations promulgated thereunder (the " Companies Law "), in the form attached to the annexed Proxy Statement as Exhibit A and to provide for acceleration upon death of the outstanding equity held by and to be granted to our CEO, Other Executive Officers and Directors according to the revised terms thereof as described in the Proxy Statement;

 

4.	To approve an equity grant to our chief executive officer, Mr. Russell Ellwanger, subject to the approval of Proposal 3;

 

5.

To approve an increased annual fixed fee to the members of our Board of Directors (other than with respect to Mr. Amir Elstein and Mr. Russell Ellwanger whose compensation is separately addressed in Proposals 2 and 4 above, respectively) in compliance with the Company’s compensation policy approved by shareholders in June 2016;

 

6.

To approve an equity grant to the members of our Board of Directors (other than with respect to Mr. Amir Elstein and Mr. Russell Ellwanger whose compensation is separately addressed in Proposals 2 and 4 above, respectively) in compliance with the Company’s compensation policy approved by shareholders in June 2016;

 

7.

To approve the appointment of Brightman Almagor & Co. (a member of Deloitte Touche Tohmatsu International) as the independent public accountant of the Company for the year ending December 31, 2017 and for the period commencing January 1, 2018 and until the next annual shareholders' meeting, and to further authorize the Audit Committee of the Board of Directors to determine the remuneration of such auditors; and

 

8.	To receive the board and management's report on the business of the Company for the year ended December 31, 2016, and to transact such other business as may properly come before the Meeting.

 

Shareholders of record at the close of business on May 30, 2017, are entitled to notice of, and to vote at the Meeting. All shareholders are cordially invited to attend the Meeting in person.

 

Shareholders who do not expect to attend the Meeting in person are requested to mark, date, sign and mail the enclosed proxy as promptly as possible in the enclosed stamped envelope.  Beneficial owners who hold their shares through members of the Tel Aviv Stock Exchange (" TASE ") may either vote their shares in person at the Meeting by presenting a certificate signed by a member of the TASE which complies with the Israel Companies Regulations (Proof of Ownership for Voting in General Meetings)-2000 as proof of ownership of the shares, send such certificate along with a duly executed proxy to the Company at Shaul Amor Street, Ramat Gavriel Industrial Park, Post Office Box 619, Migdal Haemek 2310502, Israel, Attention: Associate General Counsel, or vote electronically via the electronic voting system of the Israel Securities Authority after receiving a personal identifying number, an access code and additional information regarding the Meeting from the member of the TASE through which they hold their shares and after carrying out a secured identification process, up to six hours before the time set for the Meeting.

 

 

 

PROXY STATEMENT

 

TOWER SEMICONDUCTOR LTD.

Shaul Amor Street, Ramat Gavriel Industrial Park

P.O. Box 619

Migdal Haemek 2310502, Israel

 

ANNUAL GENERAL MEETING OF SHAREHOLDERS

 

To Be Held On June 29, 2017

 

The enclosed proxy is being solicited by the board of directors (the " Board of Directors ") of Tower Semiconductor Ltd. (the " Company " or " Tower ") for use at our Annual General Meeting of Shareholders (the " Meeting ") to be held on Thursday, June 29, 2017, or at any postponement or adjournment thereof. The record date for determining shareholders entitled to notice of, and to vote at, the Meeting is established as of the close of business on May 30, 2017.

 

As of March 31, 2017, we had outstanding 95,605,348 of our ordinary shares, nominal value New Israeli Shekels (" NIS ") 15.00 (the " Ordinary Shares ").

 We expect to solicit proxies by mail and to mail this proxy statement and the accompanying proxy card to shareholders as soon as practicable after the record date.   We will bear the cost of the preparation and mailing of these proxy materials and the solicitation of proxies. We will, upon request, reimburse banks, brokerage houses, other institutions, nominees, and fiduciaries for their reasonable expenses in forwarding solicitation materials to beneficial owners.

Upon the receipt of a properly executed proxy in the form enclosed, the persons named as proxies therein will vote the Ordinary Shares covered thereby in accordance with the instructions of the shareholder executing the proxy. With respect to the proposals set forth in this Proxy Statement and accompanying Notice of Meeting, a shareholder may vote in favor of, against, or may abstain from voting on, any of the proposals. Shareholders should specify their choices on the accompanying proxy card. If no specific instructions are given with respect to the matters to be acted upon, the shares represented by a signed proxy will be voted FOR all nominees in Proposal 1 and FOR Proposals 2, 5, 6 and 7 which are set forth in the accompanying Notice of Meeting. Alternatively, shareholders who hold the Company's ordinary shares through a TASE member may vote electronically via the electronic voting system of the Israel Securities Authority (the " Electronic System ") after receiving a personal identifying number, an access code and additional information regarding the Meeting from the relevant member of the TASE and after carrying out a secured identification process, up to six hours before the time set for the Meeting. We are not aware of any other matters to be presented at the Meeting other than the proposals set forth in this Proxy Statement and the accompanying Notice of Meeting.

Any shareholder returning the accompanying proxy may revoke such proxy at any time prior to its exercise by: (i) giving written notice to us of such revocation; (ii) voting in person at the Meeting or requesting the return of the proxy at the Meeting; or (iii) executing and delivering to us a later-dated proxy. Written revocations and later-dated proxies should be sent to: the Company at Shaul Amor Street, Ramat Gavriel Industrial Park, Post Office Box 619, Migdal Haemek 2310502, Israel, Attention: Associate General Counsel.

Each Ordinary Share is entitled to one vote on each matter to be voted on at the Meeting. Subject to the terms of applicable law, two or more shareholders present, personally or by proxy, who hold or represent together at least 33% of the voting rights of our issued share capital will constitute a quorum for the Meeting. If within half an hour from the time scheduled for the Meeting a quorum is not present, the Meeting shall stand adjourned for one week, to July 6, 2017 at the same hour and place, without it being necessary to notify the shareholders. If a quorum is not present at the adjourned date of the Meeting within half an hour of the time scheduled for the commencement thereof, subject to the terms of applicable law, the persons present shall constitute a quorum.

Election of each of the nominees in Proposal 1 and each of Proposals 2, 5, 6 and 7 to be presented at the Meeting requires the affirmative vote of shareholders present in person, by proxy or voting via the Electronic System, and holding Ordinary Shares amounting in the aggregate to at least a majority of the votes actually cast with respect to each such proposal. Furthermore, under the Companies Law, the approval of each of Proposals 3 and 4 requires that either: (i) said majority include at least a majority of the voting power of the non-controlling and non-interested shareholders who are present in person or by proxy and vote on such proposal; or (ii) the total votes cast in opposition to the proposal by the non-controlling and non-interested shareholders does not exceed 2% of all the voting power in the Company. Abstentions shall not be taken into account.

Shareholders are requested to notify us whether or not they have a "Personal Interest" in connection with each of Proposals 3 and 4 (please see the definition of the term "Personal Interest" under the description of Proposal 3). Please note that shareholders voting through proxy cards or via the Electronic System are required notify as whether they have Personal Interest when voting. If any shareholder casting a vote in connection thereto does not notify us whether or not they have a Personal Interest with respect to each of Proposals 3 and 4, they will be considered as having a Personal Interest in the Proposal for which they haven't notified us, and their vote will not be counted for the required majority for the approval of such Proposal.

PRINCIPAL SHAREHOLDERS

The following information, as of March 31, 2017, concerns the beneficial ownership of Ordinary Shares by any person who is known to own at least 5% of our Ordinary Shares. On such date, 95,605,348 Ordinary Shares were issued and outstanding. The voting rights of our major shareholders do not differ from the voting rights of other holders of our Ordinary Shares.

 

Unless otherwise noted, the information set forth below calculates beneficial ownership as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended, under which all Ordinary Shares which a person has the right to acquire upon exercise or conversion of securities exercisable for or convertible into Ordinary Shares are treated as beneficially owned and as outstanding for calculation of that person’s beneficial interest but which does not treat as outstanding Ordinary Shares which are issuable upon such exercise or conversion by other persons. We also disclose information regarding the percentage ownership of these persons on a fully diluted basis, assuming that all currently outstanding securities to purchase Ordinary Shares, other than those which cannot be calculated as of the date of this proxy statement, have been exercised by all holders.

 

Based on information provided by Senvest Management, LLC, it holds approximately 5.4 million Ordinary Shares as of March 31, 2017, which represent 5.7% of the beneficial and outstanding  ownership of all Ordinary Shares and 5.1% on a fully diluted basis.

 

Pursuant to the Companies Law, the Company is required to present information regarding officers’ compensation. Alternatively, the Company may incorporate such information in its proxy statement by reference to its reports filed under the laws of a country in which its securities are registered for trading if such reports include the said information in the manner prescribed under the Companies Law. Accordingly, the said information is incorporated herein by reference to the Company's annual report for the year ended December 31, 2016 as filed on Form 20-F with the Securities and Exchange Commission on April 10, 2017 .

 

MATTERS RELATING TO THE ANNUAL GENERAL MEETING

 

At the Meeting, the shareholders will be asked to vote on the following proposals:

 

PROPOSAL NO. 1

 

ELECTION OF DIRECTORS

 

Our Board of Directors is currently comprised of ten members, all of whom are nominated for election to the Board of Directors until our next annual meeting. Of the ten serving directors: (i) six directors (Mr. Amir Elstein, Mr. Kalman Kaufman, Ms. Dana Gross, Mr. Rami Guzman, Mr. Yoav Chelouche, Ms. Rony Ross) were appointed as directors by the Company’s previous annual shareholder meeting until the current annual shareholder meeting, (ii)   one new additional director (Mr. Russell Ellwanger, the Company’s CEO) was appointed by the Board of Directors in September 2016, and (iii) three directors were elected by previous shareholders’ meetings for service as external directors as follows: Mr. Alex Kornhauser was previously elected for service as an external director for a three-year term commencing June 2014, Mr. Ilan Flato was previously elected for service as an external director for a three-year term commencing April 2015 and Ms. Iris Avner was previously elected for service as an external director for a three-year term commencing June 2016.

 

Pursuant to a recently enacted amendment to the Companies Regulations (Relief for Companies Whose Shares are Registered for Trading Outside of Israel), 2000 (the " Amendment to the Relief Regulations "), a company which meets certain conditions detailed therein may opt to comply with the applicable foreign exchange rules governing the appointment of independent directors and composition of audit and compensation committees applicable to U.S. domestic issuers (which with respect to the Company are the Nasdaq Listing Rules and the rules set forth in the Exchange Act of 1934 (the " Exchange Act ")) instead of complying with the Companies Law provisions relating to the appointment of external directors and the requirements relating to the composition of the audit committee and compensation committees . In September 2016, the Company's Board of Directors determined that the Company meets the requirements set forth in the Amendment to the Relief Regulations for being exempt from the requirement to appoint external directors and from the requirements relating to the composition of the audit committee and compensation committees set forth in the Companies Law, and resolved that commencing on November 1, 2016,    the Company shall follow the exemption provided under the Amendment to the Relief Regulation (the “ Opt Out ”), such that following such date, each of Mr. Alex Kornhauser, Mr. Ilan Flato and Ms. Iris Avner shall serve as non-external directors (as all other directors).  The Board of Directors has nominated all said directors, as named below, for election at the Meeting to serve as directors until the next annual meeting or until their respective successors are duly elected.

 

The proxy allows shareholders to separately vote with respect to the election of each nominee for director. If a properly executed proxy does not give specific instructions with respect to the election of the directors, the persons named as proxies therein will vote the Ordinary Shares covered thereby FOR the election of all nominees under this Proposal 1. If any of such nominees is unable to serve (which event is not anticipated), the persons named as proxies in the proxy will vote the Ordinary Shares for the election of such other nominees as the Board of Directors may propose.

 

 

Set forth below are the names of, and certain other information concerning, the nominees for election as directors at the Meeting:

 

 

Alex Kornhauser  has served as an external director until November 2016, when the Company availed itself of the exemption provided under the Amendment to the Relief Regulations following which he continues to serve as an independent director.  Mr. Kornhauser has served as a member of the Audit Committee from August 2008 until May 2017 and as chairman of the Audit Committee since January 2011 until May 2017.  Mr. Kornhauser has served as a member of the Compensation Committee since June 2009.  Mr. Kornhauser served as Senior VP, General Manager of Global Operations at Numonyx Corporation from March 2008 to August 2010. From January 1978 to March 2008, Mr. Kornhauser held many positions at Intel Corporation from design engineer, project manager, department manager, engineering manager and general manager of certain groups, segments and plants. More specifically, from August 2000 to May 2007, he served as Intel Israel Site GM, from January 2006 until March 2008, he served as VP of the Flash Memory Group, from December 2004 to December 2005, Mr. Kornhauser served as VP of TMG NVM Strategic Segment, from January 2001 to November 2004, he served as VP of TMG F18 Plant Manager and from January 1996 to December 2000, he served as F18 General Manager. Mr. Kornhauser holds a B.S. in electronics from Bucharest Polytechnic Institute in Romania.

 

Dana Gross   has served as a director since November 2008, as a member of the Compensation Committee since February 2013 and has served as a director on the board of Jazz Semiconductor, Inc., our wholly owned subsidiary, since March 2009.  Mrs. Gross was the CFO of eToro, a FinTech company that developed a Social Investment network from 2014 to 2016, and the CEO of Btendo, a start-up company that developed MEMS based PICO projection solutions, until it was acquired by ST Microelectronic in 2012.  In 2008, Mrs. Gross joined Carmel Ventures, a leading Israeli Venture Capital firm as a Venture Partner. From 2006 to 2008, Mrs. Gross was a Senior VP, Israel Country Manager at SanDisk Corporation.  From 1992 to 2006, Mrs. Gross held various senior positions at M-Systems, including Chief Marketing Officer, VP World Wide Sales, President of M-Systems Inc. (US Subsidiary) and CFO, VP Finance and Administration.  In addition, Mrs. Gross served as a director of M-Systems Ltd., Audiocodes Ltd. and Power Dsine Ltd.  Mrs. Gross holds a B.Sc. in industrial engineering from Tel-Aviv University and an M.A. in business administration from San Jose State University.

 

Ilan Flato   has served as an external director until November 2016, w hen the Company availed itself of the exemption provided under the Amendment to the Relief Regulations following which he continues to serve as a director.  Mr. Flato has served as chairman of the Compensation Committee since February 2013 and as a member of the Audit Committee since April 2009. Mr. Flato is considered as an audit committee financial expert under applicable SEC rules. Mr.  Flato has served as President of The Association of Publicly Traded Companies on the Tel-Aviv Stock Exchange since January 2012.  Since 2011, Mr. Flato has been a member of the Israeli Bar Association.  Since 2009, Mr.  Flato has served as director in two Provident Funds and also as Chairman of the Business Executive of Kibbutz Kfar Blum.  Since 2004, Mr. Flato has functioned as an independent financial adviser.   Until 2004, Mr. Flato served as the VP for planning, economics and online banking in United Mizrahi Bank and as the Chief Economist of the bank. From 1992 until 1996, Mr. Flato served as the Economic Advisor to the Prime Minister of Israel. Prior to that position, Mr. Flato has served in the Treasury Office as the deputy director of the budget department. In addition, Mr. Flato served as a member of the board of directors of many government-owned companies. Mr. Flato holds a B.A. in economics from Tel-Aviv University, an LL.B. from Netanya College, an M.A. in law from Bar-Ilan University and an MSIT from Clark University.

 

Rami Guzman  has served as a director since February 2009 and has served as a member of our Audit Committee since August 2011. Mr. Guzman is considered as an audit committee financial expert under applicable SEC rules.  Mr. Guzman held various senior positions at Motorola Inc. and Motorola Israel Ltd. since 1985, including VP of Motorola Inc. and Director of Motorola Israel Ltd. In addition, until July 2004, Mr. Guzman was the CFO of Motorola Israel Ltd. Prior to joining Motorola, Mr. Guzman worked for the Ministry of Finance first as senior assistant and deputy to the Director of the Budget and then as Government-wide MIS and IT Commissioner. Mr. Guzman is a member of professional committees in the Israel Credit Insurance Company and the Israel Infrastructure Fund, and consultant and advisor to technology based companies.  Mr. Guzman also serves since 2005 as a director in various entities, including serving as a director in Bank Leumi until October 2015.  Mr. Guzman holds a B.A. in economics (1963) and an M.A. in business and public administration (1969) from the Hebrew University of Jerusalem. He was a Research Fellow at Stanford University and Stanford Research Institute, California, USA, and completed Ph.D. studies at the Hebrew University of Jerusalem.

Yoav Z. Chelouche   has served as a director since April 2016 and has served as a Chairman and member of our Audit Committee since May 2017.  Mr. Chelouche is considered as an audit committee financial expert under applicable SEC rules.  Mr. Chelouche serves as Managing Partner of Aviv Ventures since Aviv’s inception in 2001.  Between 1995 and 2001, Mr. Chelouche served as President & CEO of Scitex Corp.  Until 2015, he was co-chairman of Israel Advanced Technology Industries.  He currently serves on the Board of Directors of Checkpoint Software Technologies (NASDAQ:CHKP) and the Tel-Aviv Stock Exchange (TASE). He is currently a board member of Aviv’s portfolio companies: MGVS, Briefcam, ScaleMP  and Optimal Test.  Mr. Chelouche also previously served as Chairman of several public companies. He holds a B.A. in economics and statistics from Tel-Aviv University and an MBA from INSEAD, Fontainebleau, France.

 

Rony Ross has served as a director since May 2016.  Ms. Ross has served as chairperson of Panorama Software since 2003, after having served as chief executive officer of Panorama Software Systems from 1993 until 2003.  From 1988 until 1993, Ms. Ross served as VP of Development of Metalsoft, Inc. and later as chief executive officer of Metalsoft Israel, Ltd.  From 1983 to 1986, she served as business development manager of Contahal Ltd. and from 1980 until 1983, she served as computer systems and information technology manager in Kitan Ltd.  Ms. Ross previously served on several boards and board committees, including Israel Railways freight subsidiary Isorad, Ltd., Radcom, Fundtech and Clal Electronics Industries.  Ms. Ross holds a B.S. in mathematics from Tel-Aviv University, an M.Sc. in computer science from the Weitzman Institute, and an MBA from Tel-Aviv University.

 

Iris Avner has served as an external director until November 2016, when the Company availed itself of the exemption provided under the Amendment to the Relief Regulations following which she continues to serve as a director .  Ms. Avner has served as a member of the Compensation Committee and Audit Committee since June 2016.  Ms. Avner is considered as an audit committee financial expert under applicable SEC rules.  Ms. Avner serves as Chief Executive Officer of Nika Holdings, Ltd. From 2008 to 2015, Ms. Avner served as Managing Partner of Mustang Mezzanine Fund, L.P. and served on Mustang’s board of directors from 2014 until 2015.  From 1996 until 2008, she served as Chief Executive Officer of Mizrahi Tefahot Capital Markets Ltd. and from 1996 until 2005, served as Senior Credit Officer & Deputy CEO of Mizrahi Tefahot Bank. In addition, from 1997 until 2002, she served as Assistant Professor and external lecturer in the Executive MBA Program in Tel Aviv University.  From 1988 until 1996, Ms. Avner held various positions at Israeli Discount Bank including Senior Credit Officer and Senior Economist.   She previously served on several boards and board committees in Israel and abroad, both as director and chairperson.  Ms. Avner holds a B.A. in accounting and economics from Hebrew University and an MBA from Tel-Aviv University.

 

Russell C. Ellwanger   has served as our Chief Executive Officer since May 2005. Mr. Ellwanger has also served as a director since September 2016, and as Chairman of the Board of Directors of our subsidiaries, Tower Semiconductor USA, Inc., Tower US Holdings, Inc., Jazz US Holdings, Inc., Jazz Semiconductor, Inc., TowerJazz Panasonic Semiconductor Co., Ltd. and TowerJazz Texas, Inc.    He also served as a director of the Company between May 2005 and April 2013.  From 1998 to 2005, Mr. Ellwanger served in various executive positions for Applied Materials Corporation, including Group Vice President, General Manager of the Applied Global Services (AGS), from 2004 to 2005, Group Vice President, General Manager of the CMP and Electroplating Business Group, from 2002 to 2004.  Mr. Ellwanger also served as Corporate Vice President, General Manager of the Metrology and Inspection Business Group, from 2000 to 2002, during which he was based in Israel.  From 1998 to 2000, Mr. Ellwanger served as Vice President of Applied Materials’ 300-mm Program Office, USA.  Mr. Ellwanger served as General Manager of Applied Materials’ Metal CVD Division from 1997 to 1998 and from 1996 to 1997, Mr. Ellwanger served as Managing Director of CVD Business Development, during which he was based in Singapore.  In addition, Mr. Ellwanger held various managerial positions in Novellus System from 1992 to 1996 and in Philips Semiconductors from 1980 to 1992.

 

All directors have attended 100 percent of board and committee meetings, except for (i) Rony Ross who attended four out of five meetings since the date of her appointment; and (ii) Yoav Chelouche who attended five out of seven board meetings since the date of his appointment due to two previously scheduled engagements which could not be rescheduled.

 

All directors are party to an indemnification agreement with the Company in the form previously approved by the shareholders on August 11, 2011 for all directors, and are covered by the Company’s directors and officers insurance coverage which provides coverage for all directors of the Company, as in effect from time to time.

 

The shareholders of the Company will be requested to adopt the following resolution at the Meeting:

 

 "RESOLVED that each of Mr. Amir Elstein,  Mr. Kalman Kaufman, Ms. Dana Gross, Mr. Rami Guzman, Mr. Yoav Chelouche, Ms. Rony Ross,  Mr. Alex Kornhauser, Mr. Ilan Flato, Ms. Iris Avner and Mr. Russell Ellwanger, are hereby elected to serve as members of the Board of Directors of the Company until the next annual meeting of shareholders or until their respective successors are duly elected.

 

The election of each of the nominees requires the affirmative vote of shareholders present in person or by proxy or voting via the Electronic System and holding Ordinary Shares amounting in the aggregate to at least a majority of the votes actually cast with respect to the election of such director.

 

PROPOSAL NO. 2

 

PROPOSAL TO APPOINT MR. AMIR ELSTEIN AS THE CHAIRMAN OF THE

BOARD OF DIRECTORS AND APPROVE HIS TERMS OF COMPENSATION

 

Pursuant to a provision of the Company's Articles of Association, our shareholders are to appoint a member of the Board of Directors to serve as its Chairman. Following discussion and review, the Board of Directors nominated Mr. Amir Elstein to continue to serve as the Company’s Chairman of the Board of Directors of the Company until the next annual meeting of the shareholders or until his successor is duly appointed.

In line with the Current Compensation Policy (defined in Proposal 3) and the Amended Compensation Policy (defined in Proposal 3), the Compensation Committee and Board of Directors have considered and approved that the terms of compensation provided to the Chairman remain appropriate. His compensation will continue to be capped at $600,000 per annum, unchanged since the Company's shareholders approved the Policy (defined in Proposal 3) in 2013. Half of his compensation will be made in monthly cash installments of $25,000 (gross) each and be subject to applicable withholding taxes, and the remaining half in time-vested Restricted Stock Units (RSUs) of which one-third shall vest each year over the following three years.

The shareholders of the Company will be requested to adopt the following resolution at the Meeting:

"RESOLVED to appoint Mr. Amir Elstein as the Chairman of the Board of Directors to serve until the next annual meeting of the shareholders or until his successor shall be duly appointed and approve the terms of his compensation as set forth in Proposal 2 of the Proxy Statement."

 

The reappointment of Mr. Amir Elstein as the Chairman of the Board of Directors requires the affirmative vote of shareholders present in person or by proxy or voting via the Electronic System and holding Ordinary Shares amounting in the aggregate to at least a majority of the votes actually cast with respect to such proposal.

The Board of Directors, with the exception of Mr. Elstein who expresses no recommendation as to the vote on the above proposal, recommends that the shareholders vote "FOR" the appointment of Mr. Amir Elstein as the Chairman of the Board of Directors to serve until the next annual meeting or until his successor shall be duly appointed and the terms of his compensation.

 

PROPOSAL NO. 3

 

PROPOSAL TO APPROVE AN AMENDED COMPENSATION POLICY

 

The Company has adopted a compensation policy for the Company's directors and officers, in accordance with the requirements of the Companies Law. Our compensation policy was first approved at a special general meeting held in September 2013 (the " Policy "). The Companies Law requires that the compensation policy be reviewed, assessed and approved at least every three years, or as otherwise required if the circumstances at which the compensation policy was approved have changed or for any other reason. Accordingly, the Policy was reviewed and assessed by the Compensation Committee, which proposed and approved a few amendments thereto in April 2016 (the " Current Compensation Policy ") and recommended to the Board of Directors to approve it.  Thereafter, in June 2016, the Current Compensation Policy was approved by the shareholders.

In light of the increased size of the Company in terms of additional manufacturing facilities in various geographic locations to reach additional markets and regions, increased number of employees, substantial increases in revenues and market capitalization in 2016 compared to 2012 (as further detailed below),  and in light of the results of the benchmarking study detailed below, facilitated by an independent consultant (the “ Benchmarking Study ”), certain changes are proposed to be included in an amended compensation policy, in the form attached hereto as Exhibit A (the " Amended Compensation Policy ").    In addition, the Amended Compensation Policy includes changes to reflect the fact that following the Opt Out, the Israeli rules governing the compensation of external directors no longer apply to the Company.

The Company’s ownership structure has significantly changed in recent years. As compared to all of the years from the Company’s inception in 1993 until 2016, the Company is not aware of any strategic or major shareholder holding more than 10% of the Company’s outstanding shares, and in addition, over the last two years, more than two thirds of its daily trade is done on the NASDAQ while less than one third is done on the TASE. The Company’s business has improved significantly with revenues increased by a factor of 2.5x when compared to 2013. The Company reported net profits of approximately $204 million for financial year 2016 as compared to a negative of $108 million for 2013 and cash balance position increased by a factor of 3x from 2013 to $389 million as of December 31, 2016. During this period, the Company’s market capitalization has also more than tripled and the executive team also strengthened the Company’s balance sheet with a greater than 4x shareholders’ equity increase.  The notable growth over the years now positions the Company as a developed global player with 7 manufacturing facilities (as compared to 4 in 2013) and 5,500 employees (as compared to 2,800 in 2013). As such, the Company is no longer just competing with peers for market share and technologies, but also for retention of its key employees and hiring of new skilled and capable employee talent.

The Compensation Committee has always been attentive to shareholders’ sensitivities and will continue to do so in the future by monitoring and adjusting to market best practice. To this end, the Compensation Committee undertook a Benchmarking Study to ascertain the positioning of the pay packages vis-à-vis the peers the Company competes with globally which are of similar complexity, including semiconductor companies and other companies which compete with the Company for similar talent, and companies that do business in the relevant geographical locations, as well as determine the global best practices in executive compensation. The benchmarking exercise was facilitated by an independent consultant and included a large peer group of companies in the United States, Israel (including Israeli companies listed for trading in Israel and in additional jurisdictions) and Europe in similar industries. The exercise showed that the total annual pay for the Company’s CEO was well below median of the peer group which the Compensation Committee considered needed adjusting to ensure the Company remains attractive and retentive. More specifically, the exercise showed that the Company’s CEO was receiving significantly lower amounts of equity incentives while his base salary and bonus opportunity is in line with peers.

When considering the proposed Amended Compensation Policy, the Compensation Committee and the Board of Directors considered various other factors, including the relevant matters and provisions set forth in the Companies Law, the Company's long-term strategy, risk management approach, and the Company’s current size and nature of operations.  In addition, the Compensation Committee and the Board of Directors took into account the relevant office holder's contribution to achieving the Company’s long-term objectives and delivering sustained shareholder value.

More specifically, the key changes introduced in the proposed Amended Compensation Policy are to: (i) update the “Executive Ratio”, or the pay mix between fixed and variable pay, of the CEO to reflect certain proposed changes to his compensation package, (ii) increase the annual cap of equity that may be granted to the CEO to allow the proposed terms of compensation for the CEO brought for shareholder approval under Proposal 4, (iii) add a new section that  allows for accelerated vesting of outstanding equity granted in the event of death and to allow the exercise of such vested equity in accordance with the terms of the applicable equity plan governing it, which shall apply to (a) the equity previously granted to our serving CEO, Directors and Other Executive Officers (as such terms are defined in the Amended Compensation Policy)  as well as to all other Company employees  (i.e. options and RSUs granted and/or issued to purchase a total aggregate amount of approximately 1 million of our ordinary shares as of the date hereof), and (b) equity which may be granted and/or issued to them in the future; (iv) update the mix of variable pay to fix portion of compensation as well as the maximum payout per annum (from 0.1% to 0.12%) to our office holders to allow for future merit increases and/or compensation updates;  (v) include an annual cap of $80,000 for equity grants, as opposed to a three-year cap of $180,000, to each member of the Board of Directors of the Company, and (vi) reflect the Opt Out and remove the reference to the Companies Regulations (Rules on Remuneration and Expenses of Outside Directors), 2000, as amended by the Companies Regulations (Relief for Public Companies Traded in Stock Exchange Outside of Israel), 2000, while maintaining the compensation caps for annual and participation fees from the Current Compensation Policy unchanged.

If the Amended Compensation Policy is approved, then according to the Companies Law, the Amended Compensation Policy must be re-approved by shareholders within three years of such date. Any amendment to the compensation policy requires the same approvals. To the extent not approved by shareholders, the Compensation Committee and the Board of Directors may nonetheless approve the compensation policy, following re-discussion of the matter and for specified reasons, provided such approval is in the best interests of the Company.

The shareholders of the Company will be requested to adopt the following resolution at the Meeting:

"RESOLVED to approve the amended Compensation Policy, in the form attached as Exhibit A to the Company’s Proxy Statement and to provide for acceleration upon death of the outstanding equity held by and to be granted to our CEO, Other Executive Officers and Directors according to the revised terms thereof as described in the Proxy Statement."

 

The approval of this Proposal 3 requires the affirmative vote of shareholders present in person or by proxy or voting through the Electronic System, and holding Ordinary Shares amounting in the aggregate to at least a majority of the votes actually cast with respect to such proposal. Furthermore, under the Israeli Companies Law, the approval of such proposal requires that either: (i) said majority include more than half of the voting power of the non-controlling and non-interested shareholders who are present in person or by proxy and who vote on such proposal or voting through the Electronic System; or (ii) the total votes cast in opposition to the proposal by the non-controlling and non-interested shareholders does not exceed 2% of all the voting power in the Company.

Each shareholder voting at the Meeting or prior thereto by means of the accompanying proxy card or through the Electronic System is requested to notify us if he, she or it has a Personal Interest in connection with this Proposal 3 as a condition for his or her vote to be counted for the required majority with respect to this Proposal 3. If any shareholder casting a vote in connection hereto does not notify us if he, she or it has a Personal Interest with respect to this Proposal 3, his, her or its vote with respect to this Proposal 3 will be considered as having a Personal Interest in this Proposal 3, and his, her or its vote will not be counted for the required majority for the approval of this Proposal 3. For this purpose, “Personal Interest” is defined as: (1) a shareholder’s personal interest in the approval of an act or a transaction of the Company, including (i) the personal interest of his or her relative (which includes for these purposes any members of his/her (or his/her spouse's) immediate family or the spouses of any such members of his or her (or his/her spouse's) immediate family); and (ii) a personal interest of a body corporate in which a shareholder or any of his/her aforementioned relatives serves as a director or the chief executive officer, owns at least 5% of its issued share capital or its voting rights or has the right to appoint a director or chief executive officer, but (2) excluding a personal interest arising solely from the fact of holding shares in the Company or in a body corporate. A shareholder will also be deemed to have a Personal Interest if it provides a proxy to another person who – in turn - has a Personal Interest.  If you do not have a Personal Interest in the above matter being presented to the shareholders, you may assume that using the form of proxy enclosed herewith will not create a Personal Interest.

The Board of Directors recommends that the shareholders vote "FOR" the approval of the Compensation Policy as set forth above.

PROPOSAL NO. 4

 

PROPOSAL TO APPROVE AN EQUITY GRANT TO OUR CHIEF EXECUTIVE OFFICER,

 MR. RUSSELL ELLWANGER, SUBJECT TO THE APPROVAL OF PROPOSAL 3

Under the Companies Law, the terms of service of our CEO require the approval of the Compensation Committee, Board of Directors and shareholders of the Company by special majority (as set forth below), in such order. Each of the Compensation Committee and the Board of Directors of the Company approved the grant of Restricted Stock Units (RSUs) as specified below to Mr. Ellwanger, our CEO, who also serves as a member of our Board of Directors, Chairman of the board of our subsidiaries, which grant is in compliance with the Company's Amended Compensation Policy which has been proposed for approval by the shareholders under Proposal 3 above and subject thereto.

No changes to Mr. Ellwanger’s base salary and bonus plan are being proposed by the Compensation Committee and Board of Directors. The last equity grant made to Mr. Ellwanger, at a value of two annual salaries, was in June 2016 following shareholder approval of the Company’s Current Compensation Policy. This award comprised of 197,890 options, 31,053 time-vested RSUs and 15,790 performance-based RSUs.  The Compensation Committee and Board of Directors now propose to grant Mr. Ellwanger equity in a value of 4.14 annual salaries (or $3 million), which is comprised of 70% time-vested RSUs and 30% performance-based RSUs, both awards vesting linearly over a three-year period, 33% at the end of each year of the 3 years following the grant date. The performance measures set for these RSUs are two financial corporate metrics (net profit and cash from operations, weighted equally). Due to the commercially sensitive nature of these measures, the Company will disclose the attainment under each performance measure at the time of vesting in its public filings.

In addition, for 2017, the Compensation Committee and Board of Directors propose to grant an additional performance-based RSU grant to Mr. Ellwanger’s to bring the value of equity granted to him closer to what is provided to his peers in accordance with the Benchmark Study, as well as serve as a “bridge” grant to compensate for the previous grant cycle whereby awards vested on annual basis as opposed to the current structure whereby awards vest over a three year term. To this end, it has been approved by the Compensation Committee and Board of Directors to grant Mr. Ellwanger a one-time performance-based RSU grant in a value of 2.07 annual salaries (or $1.5 million), vesting over three years, with 45% vesting at the first anniversary of the grant, additional 40% at the second anniversary and the remaining at the 3 ^rd anniversary.  Like the above annual grant, these performance-based RSUs will be earned by Mr. Ellwanger only in the event the abovementioned two financial corporate performance metrics are attained and the Company will disclose the attainment under each performance measure at the time of vesting in our public filings.

The date of grant for the abovementioned awards shall be the date of shareholders’ approval at the Meeting.  All terms of the grant shall be as set forth in the Company's Amended Compensation Policy and in accordance with the applicable equity plan of the Company.  The proposed equity grants described above are in accordance with the requirement in the Company’s Amended Compensation Policy that the aggregate amount outstanding of all equity based compensation grants at any time to all of the directors and employees, including the CEO, shall not be in excess of 10% of the Company's share capital on a fully diluted basis.

 

The shareholders of the Company will be requested to adopt the following resolution at the Meeting:

 

"RESOLVED to approve the equity grant to our chief executive officer, Mr. Russell Ellwanger, as described in Proposal 4 of the Proxy Statement, subject to the approval of Proposal 3."

The approval of this Proposal 4 requires the affirmative vote of shareholders present in person or by proxy and holding Ordinary Shares amounting in the aggregate to at least a majority of the votes actually cast with respect to such proposal. Furthermore, under the Israeli Companies Law, the approval of such proposal requires that either: (i) said majority include more than half of the voting power of the non-controlling and non-interested shareholders who are present in person or by proxy and who vote on such proposal; or (ii) the total votes cast in opposition to the proposal by the non-controlling and non-interested shareholders does not exceed 2% of all the voting power in the Company.

Each shareholder voting at the Meeting or prior thereto by means of the accompanying proxy card is requested to notify us if he, she or it has a Personal Interest in connection with this Proposal 4 as a condition for his or her vote to be counted for the required majority with respect to this Proposal 4. If any shareholder casting a vote in connection hereto does not notify us if he, she or it has a Personal Interest with respect to this Proposal 4, his, her or its vote with respect to this Proposal 4 will be considered as having a Personal Interest in this Proposal 4, and their vote will not be counted for the required majority for the approval of this Proposal 4. If you do not have a Personal Interest in the above matter being presented to the shareholders, you may assume that using the form of proxy enclosed herewith will not create a Personal Interest.

 

The Board of Directors, with the exception of Mr. Russell Ellwanger who expresses no recommendation as to the vote on the above proposal, recommends that the shareholders vote "FOR" the approval of the proposed equity grant to our chief executive officer, Mr. Russell Ellwanger, as described above.

 

PROPOSAL NO. 5

 

PROPOSAL TO APPROVE AN INCREASED ANNUAL FIXED FEE TO THE

MEMBERS OF OUR BOARD OF DIRECTORS (OTHER THAN WITH RESPECT TO

MR. AMIR ELSTEIN AND MR. RUSSELL ELLWANGER WHOSE COMPENSATION

IS SEPARATELY ADDRESSED IN RESOLUTIONS 2 AND 4 ABOVE RESPECTIVELY)

IN COMPLIANCE WITH THE COMPANY’S CURRENT AND AMENDED

COMPENSATION POLICIES

 

Under the terms of the Company’s Current Compensation Policy and Amended Compensation Policy, the members of the board of directors are entitled to an annual fee of up to $60,000, to a per meeting fee of up to $2,000 and to reimbursement for reasonable travel expenses.

Each of the Compensation Committee and the Board of Directors of the Company have approved, and the Board of Directors recommends that, subject to their appointment as directors pursuant to Proposal 1, the directors (other than with respect to Mr. Amir Elstein and Mr. Russell Ellwanger, whose compensation is separately addressed in resolutions 2 and 4, respectively) shall be entitled to an increase in annual fees to $40,000 on an annual basis (as compared to 115,400 NIS currently, which is approximately $32,000). The participation (per meeting) fees shall remain the same as last year, within the cap under the Current and Amended Compensation Policies, currently at 3,470 NIS per meeting (approximately $960) and reimbursement for travel expenses shall remain, provided it is in accordance with the Company's travel reimbursement policy for directors.

 

The shareholders of the Company will be requested to adopt the following resolution at the Meeting:

 

"RESOLVED, subject to their appointment as directors under Proposal 1, to approve an increased annual fixed fee to the members of our Board of Directors (other than with respect to to Amir Elstein and Russell Ellwanger), in compliance with the Company’s compensation policy approved by shareholders in June 2016."

 

The approval of the above Proposal 5 requires the affirmative vote of shareholders present in person or by proxy and holding Ordinary Shares amounting in the aggregate to at least a majority of the votes actually cast with respect to such proposal.

 

The Board of Directors recommends that the shareholders vote "FOR" the approval of the increased annual fixed fee to the members of our Board of Directors, as described above.

 

PROPOSAL NO. 6

 

PROPOSAL TO APPROVE AN EQUITY GRANT TO THE MEMBERS OF OUR

BOARD OF DIRECTORS (WITH THE EXCEPTION OF MR. AMIR ELSTEIN AND

MR. RUSSELL ELWANGER) IN COMPLIANCE WITH THE COMPANY’S AMENDED

POLICY APPROVED BY SHAREHOLDERS IN JUNE 2016

 

In compliance with the Company’s Current Compensation Policy and Amended Compensation Policy, the Company may offer equity based compensation in the form of time-vested RSUs to its directors, in accordance with the Company’s equity based compensation policies and programs in place from time to time.

Subject to their appointment as directors under Proposal 1 above, the Compensation Committee and Board of Directors resolved to recommend to the shareholders to approve a grant to the members of the Board of Directors (other than to our Chairman, Amir Elstein and chief executive officer, Russell Ellwanger) of time-vested RSUs in a value of $75,000 to each such director, vesting over a two-year period, with 50% vesting at the end of the first anniversary of the date of grant and 50% on the second anniversary of the date of grant.  In the event any such director’s service with the Company is terminated for any reason, including by way of resignation, prior to the second anniversary from the date of grant, (i) if such director has served on the board of directors for 5 years or more, all unvested RSUs shall be accelerated for exercise; and (ii) if such director has served on the board of directors for less than 5 years, 50% of all unvested RSUs shall be accelerated for exercise.  All terms of the grant shall be as set forth in the Company's Current Compensation Policy (which do not differ in this respect from the terms of the Amended Compensation Policy) and in accordance with the applicable equity plan of the Company. Further to the above, if approved by shareholders at this Meeting, the grant date for said equity grant to each director appointed by the shareholders under Proposal 1 above (other than to our Chairman, Amir Elstein and chief executive officer, Russell Ellwanger) will be the date of approval by shareholders.

 

The shareholders of the Company will be requested to adopt the following resolution at the Meeting:

 

"RESOLVED, subject to their appointment as directors under Proposal 1, to approve the proposed equity grant to the members of our Board of Directors (other than to Amir Elstein and Russell Ellwanger), in compliance with the Company’s compensation policy approved by shareholders in June 2016."

 

The approval of the above Proposal 6 requires the affirmative vote of shareholders present in person or by proxy and holding Ordinary Shares amounting in the aggregate to at least a majority of the votes actually cast with respect to such proposal.

 

The Board of Directors recommends that the shareholders vote "FOR" the approval of the proposed equity grant to the members of our Board of Directors, as described above.

 

PROPOSAL NO. 7

 

PROPOSAL TO APPROVE THE APPOINTMENT

OF INDEPENDENT PUBLIC ACCOUNTANT

 

The Audit Committee of the Board of Directors has authorized and approved the appointment of the accounting firm of Brightman Almagor & Co. (a member of Deloitte Touche Tohmatsu International) to serve as the Company's independent public accountant for the year ending December 31, 2017 and for the period commencing January 1, 2018 and until the next annual shareholders' meeting. The Audit Committee of the Board of Directors believes that such appointment is appropriate and in the best interests of the Company and its shareholders.  Subject to the authorization of our shareholders, the Audit Committee of the Board of Directors shall determine the remuneration of Brightman Almagor & Co. in accordance with the volume and nature of its services.

 

A representative of Brightman Almagor & Co. will be invited to be present at the Meeting. In addition, the fees paid to Brightman Almagor & Co. for its year 2016 audit and non-audit services were disclosed in the Company’s Annual Report on Form 20-F and shall be reported to our shareholders at the Meeting upon request. The non-audit services include advisory services in connection with due diligence relating to acquisition opportunities, local and VAT tax advice and economical evaluations.

 

The shareholders of the Company will be requested to adopt the following resolution at the Meeting:

 

 "RESOLVED that the appointment of Brightman Almagor & Co. (a member of Deloitte Touche Tohmatsu International) as the independent public accountant of the Company for the year ending December 31, 2017 and for the period commencing January 1, 2018 and until the next annual shareholders' meeting, and the authorization of the Audit Committee of the Board of Directors to determine the remuneration of such auditor in accordance with the volume and nature of its services, is hereby approved."

 

 

The affirmative vote of the holders of a majority of the voting power of the Company represented at the Meeting in person or by proxy or voting via the Electronic System and voting thereon is necessary for approval of the appointment of Brightman Almagor & Co. as the independent public accountant of the Company and the authorization of the Audit Committee to determine such auditor's remuneration.

 

The Board of Directors recommends that the shareholders vote "FOR" the appointment of Brightman Almagor & Co. as the independent public accountant of the Company for the year ending December 31, 2017 and for the period commencing January 1, 2018, and the authorization of the Audit Committee to determine such auditors' remuneration.

 

REVIEW OF THE COMPANY'S BALANCE SHEET AS OF

DECEMBER 31, 2016 AND THE CONSOLIDATED STATEMENT OF

OPERATIONS FOR THE YEAR THEN ENDED

 

At the Meeting, shareholders will have an opportunity to review, ask questions and comment on the Company's Consolidated Balance Sheet as of December 31, 2016 and the Consolidated Statement of Operations for the year then ended. This financial information may be obtained from the Company's website at www.towerjazz.com under "Investors". Copies will also be mailed to shareholders upon request sent to the Company at Shaul Amor Street, Ramat Gavriel Industrial Park, Post Office Box 619, Migdal Haemek 2310502, Israel, Attention: Associate General Counsel.

 

ADDITIONAL INFORMATION

Foreign Private Issuer . We are subject to the informational requirements of the Exchange Act, as applicable to foreign private issuers. Accordingly, we file reports and other information with the SEC. Shareholders may read and copy any document that we file at the SEC's public reference room at 100 F Street N.E., N.W., Washington, D.C. 20549 U.S.A. Shareholders can call the SEC at 1-800-SEC-0330 for further information on using the public reference room. As a foreign private issuer, all documents which were filed after November 4, 2002 on the SEC's EDGAR system are available for retrieval on the SEC's website at www.sec.gov. These SEC filings are also available to the public on the Israel Securities Authority’s Magna website at www.magna.isa.gov.il.

 

 

As a "foreign private issuer", we are exempt from the rules under the Exchange Act prescribing certain disclosure and procedural requirements with respect to proxy solicitations.  In addition, we are not required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as United States companies whose securities are registered under the Exchange Act.  The Notice of Annual General Meeting and this Proxy Statement have been prepared in accordance with the applicable disclosure requirements in Israel.

 

ISA Exemption. With the exception of the reporting obligations applicable to a company organized under the laws of the State of Israel whose shares are traded on approved securities exchanges outside of Israel and in Israel as specified in Chapter Five (iii) of the Israeli Securities Law, 1968 (the " Israeli Securities Law "), we have received from the Securities Authority of the State of Israel an exemption from the reporting obligations as specified in Chapter Six of the Israeli Securities Law. We must, however, make available for public review at our offices in Israel a copy of each report that is filed in accordance with applicable U.S. law.  These documents are available for inspection at our offices at Shaul Amor Street, Ramat Gavriel Industrial Park, Migdal Haemek 2310502, Israel.

 

ANNUAL GENERAL MEETING OF SHAREHOLDERS OF

TOWER SEMICONDUCTOR LTD.

June 29, 2017

 

Please sign, date and mail

your proxy card in the

envelope provided as soon

as possible.

 

Please detach along perforated line and mail in the envelope provided.

 

 

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