The restriction contained in this clause 32 shall continue to bind each
     Bank after termination of, or after the termination of its participation
     in, the Facility, without limit in time.

     For the purpose of the above, "CONFIDENTIAL INFORMATION" shall exclude:

     (i)  information which at the time of disclosure to any Bank (or any of its
          advisers) is in the public domain (other than through a breach of this
          clause 32 by such Bank);

     (ii) information which, prior to such disclosure, becomes generally
          available to third parties or otherwise in the public domain by
          publication or through no fault of any Bank; and

     (iii) information which is lawfully in the possession of any Bank prior to
          such disclosure or subsequently comes into its possession, other than
          by reason of any breach of any confidentiality undertaking in favour
          of the Borrower.

     Nothing herein contained shall limit or restrict the liability or right of
     any Bank and any Bank shall be entitled, to disclose to any other Bank,
     confidential information concerning the Borrower, the Project, Fab 2 or any
     other matter relating to the Finance Documents and the Material Contracts,
     including regarding the bank accounts of the Borrower.

33.  BANKS REPRESENTATION

     Each of the Banks, with respect to itself only, hereby represents that the
     relevant committees and other bodies of the Banks have passed all
     resolutions necessary to approve the Loans granted to the Borrower under
     this Agreement.


for:   TOWER SEMICONDUCTOR LTD.

By:    ________________________

Title: ________________________



for:   BANK HAPOALIM B.M.                       for:   BANK LEUMI LE-ISRAEL B.M.

By:    ________________________                 By:    ________________________

Title: ________________________                 Title: ________________________


                                    - 149 -

                                                                    EXHIBIT 99.8

                              CONVERSION AGREEMENT

     This Conversion Agreement (this "AGREEMENT") is made and entered into
effective as of September 28th, 2006 by and between TOWER SEMICONDUCTOR LTD.
(the "COMPANY" or "TOWER"), a company organized under the laws of the State of
Israel and BANK HAPOALIM B.M., a banking corporation organized under the laws of
the State of Israel (the "BANK").

     WHEREAS, Tower is an independent manufacturer of wafers whose Ordinary
Shares are traded on the Nasdaq Stock Market ("NASDAQ") under the symbol TSEM
and whose Ordinary Shares and certain other securities are traded on the
Tel-Aviv Stock Exchange ("TASE") under the symbol TSEM;

     WHEREAS, the Bank and Bank Leumi Le-Israel B.M. (collectively, the "BANKS")
and Tower are parties to a Facility Agreement dated January 18, 2001, as amended
(the "FACILITY AGREEMENT"); and

     WHEREAS, at the request of Tower, the Banks and Tower have entered into an
Amending Agreement dated August 24, 2006 (the "AMENDING AGREEMENT"), the
conditions to the effectiveness of which include, INTER ALIA, the conversion by
each Bank of US $79,000,000 (seventy-nine million US dollars) of its loans made
to Tower pursuant to the Facility Agreement (the "LOANS") into an
equity-equivalent convertible capital note to be issued to the Bank (a "CAPITAL
NOTE") in the amount of US $39,500,000 (thirty-nine million five hundred
thousand US dollars) which will in turn be convertible, in whole or in part, by
the Bank at any time and from time to time into 25,986,842 (twenty-five million,
nine hundred and eighty-six thousand and eight hundred forty-two) ordinary
shares of Tower at a conversion price of US $1.52 (one US dollar and fifty-two
cents) per share (such number of shares and conversion price, in each case,
subject to adjustment from time to time as provided in the Capital Note) and the
entering into by the Bank and Tower of a Registration Rights Agreement (the
"REGISTRATION RIGHTS AGREEMENT") and of this Agreement, in each case, on the
date of the effectiveness of the Amending Agreement (the "AMENDMENT CLOSING
DATE"); and

     WHEREAS, clause 9.4 of the amended and restated Facility Agreement that
will become effective pursuant to the Amending Agreement on the Amendment
Closing Date, as the same may be further amended from time to time (the
"RESTATED FACILITY AGREEMENT") obligates the Company to make certain
compensatory payments in January, 2011 to the Banks or their nominees on account
of the Banks' agreement to reduce the rate of Interest on the Loans, which
payments may, subject to said clause 9.4 and this Agreement, be made in the form
of shares and/or Capital Notes and/or convertible debentures (the "CLAUSE 9.4
EQUITY ISSUANCES"), which issuances are subject, INTER ALIA, to the terms and
conditions of this Agreement;

     NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:

1.   INTERPRETATION.

     1.1. As used in Sections 3.8 and 5.1 of this Agreement:

          1.1.1. "CONTROL" (including the terms "CONTROLLING", "CONTROLLED BY"
               or "UNDER COMMON CONTROL WITH", means the possession direct or
               indirect, of the power to direct or cause the direction of the
               management and policies of a person, whether through the
               ownership of voting securities, by contract or otherwise; and




          1.1.2. "SUBSIDIARY" of a person means any company (a) in which such
               person, directly or indirectly, owns 25% (twenty-five percent) or
               more of a class of voting securities or (b) which is otherwise
               directly or indirectly controlled by such person. For the
               avoidance of doubt, a subsidiary need not be consolidated for
               financial statement purposes with such person in order to be
               deemed a subsidiary in this Agreement.

     1.2. DEFINITIONS. Except as otherwise defined herein, terms and expressions
defined in the Restated Facility Agreement shall have the same meanings when
used in this Agreement and all provisions of the Facility Agreement concerning
matters of construction and interpretation shall apply to this Agreement.

     1.3. PREAMBLE. The preamble to this Agreement constitutes an integral part
thereof.

2.   CONVERSION OF LOAN AND ISSUE OF CAPITAL NOTE ON THE AMENDMENT CLOSING DATE.

     The Company hereby:

     2.1. issues to the Bank, and the Bank hereby receives from the Company, in
conversion of US $79,000,000 (seventy-nine million US dollars) of the Loans, an
executed Capital Note in the principal amount of US $39,500,000 (thirty nine
million five hundred thousand US dollars) in the form attached as EXHIBIT 1
hereto. For the avoidance of doubt, as of the Amendment Closing Date, the
principal amount of Loans outstanding and owed by Tower to the Banks shall be as
set forth in the second sentence of clause 2.1 of the Restated Facility
Agreement;

     2.2. furnishes to the Bank a copy of the approval of the TASE for listing
the 25,986,842 (twenty-five million, nine hundred and eighty-six thousand, eight
hundred and forty-two) shares issuable upon conversion of said Capital Note; and

     2.3. confirms that the Company has recorded such issuance of the Capital
Note in the name of Bank on the records of the Company.

3.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

     The Company hereby represents and warrants to the Bank on the Amendment
Closing Date as follows:

     3.1. ORGANIZATION. The Company is duly organized and validly existing under
the laws of its jurisdiction of incorporation and has full corporate power and
authority to own, lease and operate its properties and assets and to conduct its
business as now being conducted and to perform all its obligations under this
Agreement.

     3.2. SHARE CAPITAL. All issued and outstanding share capital of the Company
has been duly authorized and is validly issued. The shares to be issued upon
conversion of any Capital Note or convertible debentures issued pursuant to this
Agreement (the "CONVERSION SHARES") and, if applicable, on the Clause 9.4
Closing Date, are duly authorized and reserved for issuance by the Company and,
when issued in accordance with the terms of such Capital Note or convertible
debentures or, as applicable, this Agreement and Clause 9.4 of the Restated
Facility Agreement, will be validly issued, fully paid, nonassessable and not
subject to any pledge, lien or restriction on transfer, except for restrictions
on transfer imposed by applicable securities laws. The entering into and
performance of this Agreement and the issuance of any shares, Capital Notes or
convertible debentures hereunder do not, and the issuance of any Conversion
Shares will not, conflict with the Memorandum of Association or the Articles of
Association of the Company nor with any outstanding convertible security,
warrant, option, call, preemptive right or commitment of any type relating to
the Company's capital stock (collectively, "EQUITY RIGHTS"). The entering into
and performance of this Agreement, the issuance of any shares or Capital Notes
hereunder and the issuance of the Conversion Shares do not require, or give any
holder of Equity Rights the right to have made, any adjustments to be made in
the conversion or exercise price, the number of shares issuable upon conversion
or exercise or any other provision of the aforegoing Equity Rights.


                                     - 2 -



     3.3. AUTHORIZATION; APPROVALS. All corporate action on the part of the
Company necessary for the execution, delivery and performance of this Agreement
and the issuance of any shares, Capital Notes, convertible debentures and
Conversion Shares has been taken. Except as set forth in Schedule 3.3 hereto,
save for any consents, approvals, authorisations or exemptions already obtained,
and filings already made, no consent, approval or authorization of, exemption
by, or filing with, any governmental or regulatory authority, including any
approval of, or filings with, the Israeli Securities Authority (the "ISA"), the
TASE or any third party is required in connection with the execution, delivery
and performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby, including the issuance by way
of private placement pursuant to this Agreement of any Capital Notes,
convertible debentures or shares. This Agreement and all Capital Notes or
convertible debentures issued hereunder on the date which this representation is
given have been executed and delivered by the Company, and each constitutes the
valid and legally binding obligations of the Company, legally enforceable
against the Company in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other laws relating to creditor's rights generally and general principles of
equity.

     3.4. CROSS-DEFAULT. No Default or Event of Default exists under the
Facility Agreement.

     3.5. NO CONFLICTS. Neither the execution and delivery of this Agreement by
Tower, nor the compliance with the terms and provisions of this Agreement on the
part of Tower, including the issuance of shares, Capital Notes, convertible
debentures or Conversion Shares, will: (i) violate any statute or regulation of
any governmental authority, domestic or foreign, affecting Tower; (ii) require
the issuance of any authorization, license, consent or approval of any
governmental agency, or any other person which has not been obtained, save as
set forth in Schedule 3.5 hereto; or (iii) conflict with or result in a breach
of any of the terms, conditions or provisions of any judgment, order,
injunction, decree, loan agreement or other material agreement or instrument to
which Tower is a party, or by which Tower is bound, or constitute a default
thereunder, the effect of which might have a material adverse effect on Tower.

     3.6. NO LITIGATION. There are no actions, suits, proceedings, or injunctive
orders, pending or threatened against or affecting Tower relating to the subject
matter of this Agreement.

     3.7. NO BROKERS. Except as set forth in Schedule 3.7 hereto, Tower has not
engaged any broker or finder in connection with the transactions contemplated by
this Agreement, and no broker or other person is entitled to any commission or
finder's fee in connection with such transactions.


                                     - 3 -




     3.8. ACTIVITIES IN THE UNITED STATES.

          3.8.1. More than 50% (fifty percent) of the consolidated assets of the
               Company as shown or would be shown on its consolidated financial
               statements (a) as of the last day of the immediately preceding
               calendar year and (b) as of the date hereof are, in each case,
               are located outside of the United States.

          3.8.2. More than 50% (fifty percent) of the consolidated revenues of
               the Company as shown or would be shown on its consolidated
               financial statements (a) for the immediately preceding calendar
               year; and (b) during the current calendar year to date, in each
               case, are derived from outside the United States.

          3.8.3. For the purposes of Section 3.8.1, Section 3.8.2, Section
               5.1.1, Section 5.1.2, Section 5.1.6, Section 5.1.7 and Section
               6.6 herein, assets and revenues of the Company will be deemed to
               be located or derived from "outside the United States" if they
               are recorded on the books of the Company or of any subsidiaries
               of the Company incorporated outside the United States ("NON-U.S.
               SUBSIDIARIES") (provided that such revenues are not recorded on
               the books of any offices of the Company or of its Non-U.S.
               Subsidiaries located in the United States ("U.S. OFFICES")) and
               will be deemed to be located in or derived from the United States
               if they are recorded on the books of any U.S. Offices or of any
               subsidiaries of the Company incorporated in the United States
               ("U.S. SUBSIDIARIES"). By way of example, revenues recorded on
               the books of the Company itself (but not on the books of any U.S.
               Offices) will be considered revenues derived from outside the
               United States, even if the revenues derive from a sale of the
               Company's products to a U.S. person and even if the Company's
               U.S. Subsidiary was involved in marketing, sales or post-sales
               support efforts.

          3.8.4. The activities, if any, of the Company and its Non-U.S.
               Subsidiaries within the United States and the activities of all
               U.S. Subsidiaries are the same kind as or support the Company's
               or its Non-U.S. Subsidiaries' activities outside of the United
               States. For purposes of this Section 3.8.4, Section 5.1.3,
               Section 5.1.6, Section 5.1.7 and Section 6.6 below (a) "the same
               kind as" shall mean activities that are within the same
               "establishment" categories of the North American Classification
               System published by the United States Census Bureau, and (b)
               "support" shall mean supply, distribution, sales, marketing,
               servicing, research and development, licensing, design, customer
               relations and/or similar activities.

          3.8.5. Neither the Company nor any of its subsidiaries conducts
               activities in the United States that consist of engaging in the
               business of banking, securities, insurance or real estate.

          3.8.6. Neither the Company nor any of its subsidiaries engages, nor do
               either own more than 5% (five percent) of a class of voting
               securities of a person that engages, in the business of
               securities underwriting or distribution in the United States.


                                     - 4 -



     3.9. The Company acknowledges that the Bank is acquiring the Capital Notes
on the Amendment Closing Date in full reliance upon the representations and
warranties made by the Company in this Agreement, including in Section 3.8
above.

4.   REPRESENTATIONS AND WARRANTIES OF THE BANK.

     The Bank hereby represents and warrants to the Company that it:

     4.1. is acquiring the securities issued and to be issued to the Bank
pursuant to this Agreement for investment and not with a view to distribution
without registration under the U.S. Securities Act of 1933 (the "Securities
Act");

     4.2. has requisite knowledge and experience in financial and business
matters to be capable of evaluating the merits and risks of an investment in the
Company and is an accredited investor as defined in Rule 501(a) under the
Securities Act;

     4.3. understands that none of the Capital Notes issued and to be issued
under this Agreement have been, or will be, registered under the Securities Act,
or the laws of any jurisdiction;

     4.4. agrees that none of the securities issued and to be issued to the Bank
pursuant to this Agreement may be sold, offered for sale, transferred, pledged,
hypothecated or otherwise disposed of except by registration under the
Securities Act or otherwise in compliance with the Securities Act, the Israeli
Securities Law or any applicable securities laws of any jurisdiction (including
pursuant to an exemption therefrom); and

     4.5. acknowledges that the securities, upon issuance, will, unless in the
reasonable opinion of counsel for the Company such legend is not required in
order to ensure compliance under the Securities Act, bear the following legend:

     THESE SECURITIES [(INCLUDING THE SECURITIES ISSUABLE PURSUANT HERETO)](1)
HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED, OR ANY U.S. STATE OR OTHER JURISDICTION'S SECURITIES LAWS. THESE
SECURITIES (INCLUDING THE SECURITIES ISSUABLE PURSUANT HERETO) MAY NOT BE SOLD,
OFFERED FOR SALE OR PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED, (THE "ACT") WITH RESPECT TO ANY SUCH SECURITIES OR AN OPINION
OF COUNSEL (REASONABLY SATISFACTORY TO THE COMPANY) THAT SUCH REGISTRATION IS
NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF THE ACT OR ON THE TEL-AVIV
STOCK EXCHANGE IN COMPLIANCE WITH REGULATION S UNDER THE ACT.

     For the avoidance of doubt, nothing in this Section 4 shall derogate from
the Company's obligations under the Registration Rights Agreement.


- ----------

(1) Following the effective date of the Registration Statement covering the
Conversion Shares, if applicable, bracketed language to be removed from all
future Capital Notes and convertible debentures to be issued and, at the request
of the holder, a substitute Capital Note omitting the bracketed language will
promptly be delivered to the holder. If shares are directly issued in the Clause
9.4 Equity Issuance, the first sentence of the legend and the first
parenthetical in the second sentence will be removed following the effective
date of the Registration Statement covering such shares.


                                     - 5 -



5.   UNDERTAKINGS BY THE COMPANY.

     5.1. For so long as (a) any shares or Capital Notes are issuable to the
Bank and/or its subsidiaries (for the avoidance of doubt, as defined in Section
1.1.2 above) pursuant to this Agreement and (b) any securities of the Company
(including Capital Notes, Warrants and shares), constituting or convertible into
5% or more of any class of voting securities (as defined in the United States
Code of Federal Regulations - 12 C.F.R. Section 225.2(q)) of the Company are
beneficially owned by the Bank and/or its subsidiaries (for the avoidance of
doubt, as defined in Section 1.1.2 above), the Company shall use its best
efforts in order:

          5.1.1. that more than 50% (fifty percent) of the consolidated assets
               of the Company as of December 31 of each calendar year are
               located outside of the United States (the "ASSET TEST");

          5.1.2. that more than 50% (fifty percent) of the consolidated revenues
               of the Company as of December 31 of each calendar year are
               derived from outside the United States (the "REVENUE TEST");

          5.1.3. that the activities of the Company within the United States and
               the activities of the U.S. Subsidiaries are of the same kind as
               or support the activities of the Company or its Non-U.S.
               Subsidiaries outside the United States (the "SAME LINE OF
               BUSINESS TEST");

          5.1.4. that neither the Company nor any of its subsidiaries will
               conduct activities in the United States that consist of engaging
               in the business of banking, securities, insurance or real estate
               (the "FINANCIAL ACTIVITIES TEST") (for the avoidance of doubt,
               nothing in the aforesaid shall derogate from the obligations of
               the Company under the Restated Facility Agreement);

          5.1.5. not to engage, or permit any of its subsidiaries to engage, or
               to own or permit any of its subsidiaries to own more than 5%
               (five percent) of a class of voting securities of a person that
               engages, in the business of securities' underwriting or
               distribution in the United States (the "NO UNDERWRITING Test")
               (for the avoidance of doubt, nothing in the aforesaid shall
               derogate from the obligations of the Company under the Restated
               Facility Agreement);

          5.1.6. Nothing in Sections 5.1, 5.1.1, 5.1.2, 5.1.3, 5.1.4 or 5.1.5
               above shall require the Company to prejudice the business or
               financial interests of the Company and the Company may take such
               actions or refrain from taking actions that may cause it not to
               satisfy the Asset Test, the Revenue Test, the Same Line of
               Business Test, the Financial Activities Test and/or the No
               Underwriting Test, provided that the taking of such actions, or
               refraining from taking such actions, are in the business or
               financial interests of the Company as reasonably determined by
               the Company;


                                     - 6 -



          5.1.7. furnish to the Bank and, subsequent to the Clause 9.4 Closing
               Date, any nominee of the Bank pursuant to clause 6 below, as soon
               as practicable (and, in any event, within thirty (30) days after
               the end of each calendar year), a certificate of the Chief
               Financial Officer of the Company, in a form reasonably
               satisfactory to the Bank (i) confirming whether the Company is in
               compliance with each of the Asset Test, the Revenue Test, the
               Same Line of Business Test, the Financial Activities Test and the
               No Underwriting Test, provided that if the Company is not in
               compliance with the Asset Test or the Revenue Test in a
               particular calendar year, the Chief Financial Officer shall
               describe the steps, if any, being taken by the Company to ensure
               compliance in the immediately following calendar year (for the
               removal of doubt, without derogating from Section 5.1.6 above);
               and (ii) setting out (a) the amount and percentage of the
               consolidated revenues of the Company derived from outside the
               United States during the immediately preceding calendar year, and
               (b) the amount and percentage of the consolidated assets of the
               Company located outside of the United States as of December 31 of
               such immediately preceding calendar year; and

          5.1.8. furnish promptly to the Bank and, subsequent to the Clause 9.4
               Closing Date, any nominee of the Bank pursuant to clause 6 below,
               such other information as such person may reasonably request in
               order to satisfy their obligations to file certain reports or
               assess its compliance with applicable legal or regulatory
               requirements relating to the transactions contemplated herein.

     5.2. The Company shall fulfil all of its obligations under the Equity
Documents, including the Capital Notes issued pursuant hereto and the
Registration Rights Agreement.

     5.3. In the event that the adjustment provisions of any Capital Notes
issued pursuant hereto result in additional Conversion Shares to be issued upon
conversion of the Capital Notes, the Company shall promptly furnish the Bank
with a copy of the approval of the TASE for listing such additional Conversion
Shares (if the Company's shares are then traded on the TASE).

     5.4. To the extent that ordinary shares (or other shares of capital stock
substituted therefor) of the Company are listed on one or more securities
exchanges, including the NASDAQ and the TASE, the Company shall maintain, at its
expense, the listing of the shares of the Company issued pursuant to this
Agreement (including upon conversion of Capital Notes issued pursuant to this
Agreement) on such exchanges or, in the event such shares of the Company are
listed on only one securities exchange, such exchange. Nothing in this Section
5.4 shall constitute an obligation of the Company to list or maintain the
listing of its ordinary shares (or other shares of capital stock substituted
therefor) on any securities exchanges, including the NASDAQ and the TASE.

6.   CLAUSE 9.4 CLOSING; CONDITIONS PRECEDENT.

     The issuance and allotment of the shares of the Company, or the issuance of
Capital Notes, pursuant to and in accordance with clause 9.4 of the Restated
Facility Agreement (such date, the "CLAUSE 9.4 CLOSING DATE"), to the Bank or
its nominee (which shall be an Affiliate of the Bank) shall be subject to the
conditions set forth in clause 9.4.6 of the Restated Facility Agreement and to
the conditions precedent that the Bank shall have received, by no later than 2
(two) Business Days prior to the Clause 9.4 Closing Date, all of the following
documents, matters and things in form and substance satisfactory to the Bank:


                                     - 7 -



     6.1. copies of all resolutions of the Board of Directors of the Company
and, if necessary, its Audit Committee and shareholders, authorizing all
agreements and acts to be performed by the Company as conditions precedent to,
or otherwise in connection with, the Clause 9.4 Equity Issuances, to the extent
not already authorized in the resolutions delivered on or about the Amendment
Closing Date;

     6.2. an opinion of the Company's external legal counsel, satisfactory to
the Bank, addressed to the Bank and, if applicable, its nominee, MUTATIS
MUTANDIS, to the Clause 9.4 Equity Issuances in the form of such opinion
delivered by Yigal Arnon & Co., Advocates to the Banks, on or about the
Amendment Closing Date, provided that paragraphs 4.7 (i) and 5.4 shall be
omitted;

     6.3. an opinion of U.S. counsel, satisfactory to the Bank, to the effect
that, based upon their review of United States federal or New York State
statutes, rules and regulations which, in their opinion, based on their
experience, are normally applicable to transactions of the types contemplated by
clause 9.4 of the Restated Facility Agreement ("UNITED STATES APPLICABLE LAWS"),
(i) subject to the effectiveness of the registration statement to be filed by
the Company with respect to the Clause 9.4 Equity Issuances pursuant to the
Registration Rights Agreement, no consent, approval, authorization, order,
registration or qualification of or with any United States federal or New York
State court or governmental agency or body is required for the sale in the
United States (including through the Nasdaq Stock Market) by the Bank or its
nominee of the ordinary shares to be issued or issuable upon conversion of
Capital Notes or convertible debentures to be issued to the Bank or its nominee
pursuant to clause 9.4 of the Restated Facility Agreement and this Agreement,
provided that no opinion need be expressed with respect to state securities or
Blue Sky laws; (ii) the acquisition and indefinite holding of the Capital Notes
or convertible debentures (provided that, with respect to the convertible
debentures, counsel shall assume, solely for purposes of rendering such opinion,
that the condition set forth in Section 6.6.2 has been satisfied and that if the
Company is, as of the Clause 9.4 Closing Date, satisfying the Tests (as set
forth in Section 6.6.1 below) that it shall continue to satisfy the Tests) or
the shares issuable in connection with the Clause 9.4 Equity Issuances by the
Bank or its nominee is permissible under United States Applicable Laws,
including under the Bank Holding Company Act of 1956, as amended; and (iii) the
acquisition and holding of either the Capital Notes or the shares issuable in
connection with the Clause 9.4 Equity Issuances by the Bank or its nominee will
not be subject to the notification and filing requirements under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. Such opinion
shall be based upon and subject to reasonable assumptions (without derogating
from the parenthetical phrase in subsection (ii) above) and limitations,
provided that, if such opinion cannot be delivered, at the request of the
Company, such counsel shall describe the legal basis or bases for why such
opinion cannot be delivered;

     6.4. all of the Company's (a) representations and warranties given pursuant
to this Agreement shall be repeated on the Clause 9.4 Closing Date as if made on
the Clause 9.4 Closing Date, other than the representations and warranties given
pursuant to the last sentence of Section 3.2 above and pursuant to Section 3.8
above, and (b) all of the Company's obligations under this Agreement and the
Registration Rights Agreement to be performed on or prior to the Clause 9.4
Closing Date shall have been fulfilled, and the Company shall have delivered a
certificate of its Chief Executive Officer or Chief Financial Officer to the
effect of (a) and (b) in form and substance satisfactory to the Bank;


                                     - 8 -



     6.5. all Governmental Authorisations and third party consents required to
be obtained by the Company in connection with the Clause 9.4 Equity Issuances
shall have been received, including, if applicable:

          6.5.1. confirmation of the Controller of Restrictive Trade Practices
               (the "CONTROLLER") that no approval is required in connection
               with the Clause 9.4 Equity Issuances or, if any such approval is
               considered by the Controller to be required, the unconditional
               receipt of same (provided that if the Controller shall refuse to
               provide such confirmation for the reason that the Controller does
               not see a reason to review the request for the same, such
               confirmation shall be deemed to have been obtained) (for the
               removal of doubt, if required, the Bank shall also make such a
               request);

          6.5.2. the consent of the Investment Centre to the issue of shares,
               capital notes or convertible debentures (and shares issuable upon
               conversion of the Capital Notes or convertible debentures) to the
               Bank and, if applicable, its nominee as contemplated under clause
               9.4 to the Restated Facility Agreement;

          6.5.3. the approval of the ILA under the Existing ILA Leases, and any
               other long term lease agreements between the Company and the ILA,
               to the issue of shares, capital notes or convertible debentures
               (and shares issuable upon conversion of the Capital Notes or
               convertible debentures) to the Bank and, if applicable, its
               nominee as contemplated under clause 9.4 to the Restated Facility
               Agreement; and

     6.6. provided that the first paragraph of Section 5.1 is applicable,
confirmation from the Chief Financial Officer of the Company, in form and
substance satisfactory to the Bank, that the Company:

          6.6.1. has satisfied the Asset Test, the Revenue Test, the Same Line
               of Business Test, the Financial Activities Test and the No
               Underwriting Test (collectively, the "TESTS") as of December 31
               in each of the two years immediately prior to the year in which
               the Clause 9.4 Closing Date falls, and meets, on the Clause 9.4
               Closing Date, the Same Line of Business Test, the Financial
               Activities Test and the No Underwriting Test; and

          6.6.2. is not aware of any reason why it would not continue to satisfy
               each of the Tests during the then current year and the
               immediately following year.


                                     - 9 -



In the event that the conditions precedent set out in this Section 6 above and
in clause 9.4.6 of the Restated Facility Agreement are not satisfied by no later
than 2 (two) Business Days prior to the Clause 9.4 Closing Date, including if a
representation and warranty that is to be repeated cannot be repeated, then the
Clause 9.4.1 Amount or the Clause 9.4.2 Amount, as applicable, shall be paid in
cash by the Company to the Bank or its nominee on the Clause 9.4 Closing Date,
(a) provided however, if said conditions precedent set out in this Section 6
above and in Clause 9.4.6 of the Restated Facility Agreement are otherwise
satisfied, by no later than 2 (two) Business Days prior to the Clause 9.4
Closing Date, with respect to the issuance of Capital Notes instead of shares,
then the Clause 9.4.1 Amount or the Clause 9.4.2 Amount, as applicable, will not
be paid in cash by the Company and Capital Notes shall be issued as contemplated
by Section 7.1 below; and (b) provided further that, if all said conditions
precedent, other than as set forth in Section 6.6.2 above, are satisfied by no
later than 2 (two) Business Days prior to the Clause 9.4 Closing Date, then the
Clause 9.4.1 Amount or the Clause 9.4.2 Amount, as applicable, will, at the
option of the Company, in its sole discretion, either be paid in cash or by way
of issue of convertible debentures that will (except for consequential changes
flowing from the redemption right described below) have the same terms as the
Capital Notes (including, for the removal of doubt, that such convertible
debentures will not bear interest or be linked to any index), save that the Bank
or its nominee or other Affiliate thereof holding said convertible debentures
(the "HOLDER") shall have the right to require the Company to redeem the
convertible debentures, in whole or in part, on the date which is 30 (thirty)
months after the Clause 9.4 Closing Date (or, if such date is not a Business
Day, on the Business Day immediately prior to such anniversary) (the "REDEMPTION
DATE"), for an amount in cash equal to the then principal amount thereof
submitted for redemption, upon the giving by the Holder to the Company of at
least 30 (thirty) days prior written notice. For the avoidance of doubt, if such
redemption right is not exercised by a Holder as aforesaid, said convertible
debentures shall remain convertible into shares of the Company and shall,
subsequent to the Redemption Date, only be payable in accordance with clause 2
of the Capital Note.

7.   TRANSACTIONS UPON THE CLAUSE 9.4 CLOSING.

     Subject to the fulfilment of the conditions precedent set out in Section 6
above and in clause 9.4.6 of the Restated Facility Agreement, on the Clause 9.4
Closing Date (unless cash is payable pursuant to Section 6 above or clause 9.4.6
of the Restated Facility Agreement):

     7.1. the Company shall issue (and, in the case of shares, allot) to the
Bank or its nominee either (a) such number of shares in the name of the Bank or
its nominee as provided in clause 9.4.1 or clause 9.4.2 (as adjusted, if
applicable, pursuant to clauses 9.4.7 and 9.4.9) of the Restated Facility
Agreement and shall send irrevocable instructions to its stock transfer agent to
issue a share certificate in respect of such shares (the Bank or its nominee may
elect to deliver to Tower an undertaking not to exercise means of control in
respect of such shares for a certain period) or (b) (i) at the election of the
Bank or its nominee, or if the proviso set forth in subsection (a) in the last
paragraph of Section 6 is applicable, Capital Notes or (ii) if the proviso set
forth in subsection (b) in the last paragraph of Section 6 is applicable (and
the Company has not elected to pay cash), convertible debentures, in each case,
substantially in the form attached as EXHIBIT 1 hereto (save that, in the case
of the convertible debentures, a provision granting the redemption right
described in subsection (b) in the last paragraph of Section 6 and consequential
changes flowing from such redemption right shall be made, in form and substance
satisfactory to the Holder), as the case may be, in the principal amounts
provided in clause 9.4.1 or clause 9.4.2 (as adjusted, if applicable, pursuant
to clauses 9.4.7 and 9.4.9) of the Restated Facility Agreement, as applicable,
convertible into shares at the Average Closing Price (as defined in clause 9.4.1
of the Restated Facility Agreement) (subject to adjustments as provided in the
Capital Notes);

     7.2. the Company shall deliver to the Bank or, if applicable, its nominee a
copy of the approval of the TASE for listing the shares issued or issuable
pursuant to clause 7.1 above (if the Company's shares are then traded on the
TASE); and

     7.3. the Company shall record such issuance of the shares or Capital Note
in the name of the Bank, or, if applicable, its nominee on the records of the
Company.


                                     - 10 -



8.   MISCELLANEOUS.

     8.1. GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and
shall be construed in accordance with Israeli law and the courts of
Tel-Aviv-Jaffa shall have exclusive jurisdiction to hear any matters, provided
that the Bank and any other Affiliate of the Bank party to this Agreement shall
be entitled to sue Tower in any jurisdiction in which it has an office or holds
assets.

     8.2. SUCCESSORS AND ASSIGNS; ASSIGNMENT. Except as otherwise expressly
limited herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors and permitted assigns of the parties hereto. This
Agreement may not be assigned by any party without the prior written consent of
the other party hereto, provided that the Bank may assign this Agreement, in
whole or in part, to any Affiliate of the Bank or add an Affiliate of the Bank
as an additional party hereto, including, for the avoidance of doubt, any
nominee of the Bank in connection with the Clause 9.4 Equity Issuances. Nothing
in this Agreement shall be deemed to restrict the (a) transferability of the
shares, convertible debentures and Capital Notes to be issued pursuant to this
Agreement or the Conversion Shares, in each case, in whole or in part at any
time and from time to time, except for restrictions on transfer imposed by
applicable securities laws or (b) the assignability of the registration rights
in accordance with the Registration Rights Agreement.

     8.3. EXPENSES. The Company shall bear the expenses and costs of all the
parties to the transactions contemplated hereby (including the fees and expenses
of counsel to the Bank and any nominee of the Bank that is an Affiliate of the
Bank in connection with the Clause 9.4 Equity Issuances).

     8.4. ENTIRE AGREEMENT; AMENDMENT AND WAIVER. This Agreement constitutes the
full and entire understanding and agreement between the parties with regard to
the subject matter hereof. Any term of this Agreement may be amended and the
observance of any term hereof may be waived (either prospectively or
retroactively and either generally or in a particular instance) only with the
written consent of the parties to this Agreement.

     8.5. NOTICES, ETC. All notices and other communications required or
permitted hereunder to be given to a party to this Agreement shall be in writing
and shall be faxed or mailed by registered or certified mail, postage prepaid,
or otherwise delivered by hand or by messenger, addressed to such party's
address as set forth below:

           If to the Bank:                    Corporate Division
                                              Migdal Levenstein
                                              23 Menachem Begin Road
                                              Tel-Aviv
                                              Israel
                                              Fax. 972-3-5672995
                                              Attn: Head of Corporate Division

           If to the Company:                 Tower Semiconductor Ltd.
                                              Ramat Gavriel Industrial Area
                                              P.O. Box 619
                                              Migdal Haemek
                                              Israel 23105
                                              Fax. 972-4-6047242
                                              Attn: Oren Shirazi, Acting CFO


                                     - 11 -



           with a copy to
           (which shall not
           constitute notice):                Yigal Arnon & Co.
                                              1 Azrieli Center
                                              46th Floor
                                              Tel-Aviv, Israel, 67021
                                              Fax: 972-3-6087714
                                              Attn:  David Schapiro, Adv.

     or such other address with respect to a party as such party shall notify
each other party in writing as above provided. Any notice sent in accordance
with this Section 8.5 shall be effective (i) if mailed, five (5) business days
after mailing, (ii) if sent by messenger, upon delivery, and (iii) if sent via
facsimile, one (1) business day following transmission and electronic
confirmation of receipt.

     8.6. DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power, or remedy accruing to any party upon any breach or default under this
Agreement, shall be deemed a waiver of any other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent, or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. Unless provided otherwise
herein, all remedies, either under this Agreement or by law or otherwise
afforded to any of the parties, shall be cumulative and not alternative.

     8.7. SEVERABILITY. If any provision of this Agreement is held by a court of
competent jurisdiction to be unenforceable under applicable law, then such
provision shall be excluded from this Agreement and the remainder of this
Agreement shall be interpreted as if such provision were so excluded and shall
be enforceable in accordance with its terms; provided, however, that in such
event this Agreement shall be interpreted so as to give effect, to the greatest
extent consistent with and permitted by applicable law, to the meaning and
intention of the excluded provision as determined by such court of competent
jurisdiction.

     8.8. COUNTERPARTS. This Agreement may be executed in any number of
counterparts (including facsimile counterparts), each of which shall be deemed
an original, and all of which together shall constitute one and the same
instrument.

     8.9. HEADINGS. The headings of the sections and paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.

     8.10. FURTHER ASSURANCES. Each of the parties hereto shall perform such
further acts and execute such further documents as may reasonably be necessary
to carry out and give full effect to the provisions of this Agreement and the
intentions of the parties as reflected thereby, including the provision by the
Bank to the Company of such information as shall be required in order to
determine the adjustments, if any, required under clause 9.4.7 of the Restated
Facility Agreement.


                                     - 12 -



     IN WITNESS WHEREOF, each of the parties has signed this Agreement as of the
date first hereinabove set forth.

TOWER SEMICONDUCTOR LTD.                   BANK HAPOALIM B.M.

By:      ________________________          By:      ________________________


Name:    ________________________          Name:    ________________________


Title:   ________________________          Title:   ________________________



                                     - 13 -

                                                                    EXHIBIT 99.9

                              CONVERSION AGREEMENT

     This Conversion Agreement (this "AGREEMENT") is made and entered into
effective as of September 28th, 2006 by and between TOWER SEMICONDUCTOR LTD.
(the "COMPANY" or "TOWER"), a company organized under the laws of the State of
Israel and BANK LEUMI LE-ISRAEL B.M., a banking corporation organized under the
laws of the State of Israel (the "BANK").

     WHEREAS, Tower is an independent manufacturer of wafers whose Ordinary
Shares are traded on the Nasdaq Stock Market ("NASDAQ") under the symbol TSEM
and whose Ordinary Shares and certain other securities are traded on the
Tel-Aviv Stock Exchange ("TASE") under the symbol TSEM;

     WHEREAS, the Bank and Bank Hapoalim B.M. (collectively, the "BANKS") and
Tower are parties to a Facility Agreement dated January 18, 2001, as amended
(the "FACILITY AGREEMENT"); and

     WHEREAS, at the request of Tower, the Banks and Tower have entered into an
Amending Agreement dated August 24, 2006 (the "AMENDING AGREEMENT"), the
conditions to the effectiveness of which include, INTER ALIA, the conversion by
each Bank of US $79,000,000 (seventy-nine million US dollars) of its loans made
to Tower pursuant to the Facility Agreement (the "LOANS") into an
equity-equivalent convertible capital note to be issued to the Bank (a "CAPITAL
NOTE") in the amount of US $39,500,000 (thirty-nine million five hundred
thousand US dollars) which will in turn be convertible, in whole or in part, by
the Bank at any time and from time to time into 25,986,842 (twenty-five million,
nine hundred and eighty-six thousand and eight hundred forty-two) ordinary
shares of Tower at a conversion price of US $1.52 (one US dollar and fifty-two
cents) per share (such number of shares and conversion price, in each case,
subject to adjustment from time to time as provided in the Capital Note) and the
entering into by the Bank and Tower of a Registration Rights Agreement (the
"REGISTRATION RIGHTS AGREEMENT") and of this Agreement, in each case, on the
date of the effectiveness of the Amending Agreement (the "AMENDMENT CLOSING
DATE"); and

     WHEREAS, clause 9.4 of the amended and restated Facility Agreement that
will become effective pursuant to the Amending Agreement on the Amendment
Closing Date, as the same may be further amended from time to time (the
"RESTATED FACILITY AGREEMENT") obligates the Company to make certain
compensatory payments in January, 2011 to the Banks or their nominees on account
of the Banks' agreement to reduce the rate of Interest on the Loans, which
payments may, subject to said clause 9.4 and this Agreement, be made in the form
of shares and/or Capital Notes and/or convertible debentures (the "CLAUSE 9.4
EQUITY ISSUANCES"), which issuances are subject, INTER ALIA, to the terms and
conditions of this Agreement;

     NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:

1.   INTERPRETATION.

     1.1. As used in Sections 3.8 and 5.1 of this Agreement:

          1.1.1. "CONTROL" (including the terms "CONTROLLING", "CONTROLLED BY"
               or "UNDER COMMON CONTROL WITH", means the possession direct or
               indirect, of the power to direct or cause the direction of the
               management and policies of a person, whether through the
               ownership of voting securities, by contract or otherwise; and




          1.1.2. "SUBSIDIARY" of a person means any company (a) in which such
               person, directly or indirectly, owns 25% (twenty-five percent) or
               more of a class of voting securities or (b) which is otherwise
               directly or indirectly controlled by such person. For the
               avoidance of doubt, a subsidiary need not be consolidated for
               financial statement purposes with such person in order to be
               deemed a subsidiary in this Agreement.

     1.2. DEFINITIONS. Except as otherwise defined herein, terms and expressions
defined in the Restated Facility Agreement shall have the same meanings when
used in this Agreement and all provisions of the Facility Agreement concerning
matters of construction and interpretation shall apply to this Agreement.

     1.3. PREAMBLE. The preamble to this Agreement constitutes an integral part
thereof.

2.   CONVERSION OF LOAN AND ISSUE OF CAPITAL NOTE ON THE AMENDMENT CLOSING DATE.

     The Company hereby:

     2.1. issues to the Bank, and the Bank hereby receives from the Company, in
conversion of US $79,000,000 (seventy-nine million US dollars) of the Loans, an
executed Capital Note in the principal amount of US $39,500,000 (thirty nine
million five hundred thousand US dollars) in the form attached as EXHIBIT 1
hereto. For the avoidance of doubt, as of the Amendment Closing Date, the
principal amount of Loans outstanding and owed by Tower to the Banks shall be as
set forth in the second sentence of clause 2.1 of the Restated Facility
Agreement;

     2.2. furnishes to the Bank a copy of the approval of the TASE for listing
the 25,986,842 (twenty-five million, nine hundred and eighty-six thousand, eight
hundred and forty-two) shares issuable upon conversion of said Capital Note; and

     2.3. confirms that the Company has recorded such issuance of the Capital
Note in the name of Bank on the records of the Company.

3.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

     The Company hereby represents and warrants to the Bank on the Amendment
Closing Date as follows:

     3.1. ORGANIZATION. The Company is duly organized and validly existing under
the laws of its jurisdiction of incorporation and has full corporate power and
authority to own, lease and operate its properties and assets and to conduct its
business as now being conducted and to perform all its obligations under this
Agreement.

     3.2. SHARE CAPITAL. All issued and outstanding share capital of the Company
has been duly authorized and is validly issued. The shares to be issued upon
conversion of any Capital Note or convertible debentures issued pursuant to this
Agreement (the "CONVERSION SHARES") and, if applicable, on the Clause 9.4
Closing Date, are duly authorized and reserved for issuance by the Company and,
when issued in accordance with the terms of such Capital Note or convertible
debentures or, as applicable, this Agreement and Clause 9.4 of the Restated
Facility Agreement, will be validly issued, fully paid, nonassessable and not
subject to any pledge, lien or restriction on transfer, except for restrictions
on transfer imposed by applicable securities laws. The entering into and
performance of this Agreement and the issuance of any shares, Capital Notes or
convertible debentures hereunder do not, and the issuance of any Conversion
Shares will not, conflict with the Memorandum of Association or the Articles of
Association of the Company nor with any outstanding convertible security,
warrant, option, call, preemptive right or commitment of any type relating to
the Company's capital stock (collectively, "EQUITY RIGHTS"). The entering into
and performance of this Agreement, the issuance of any shares or Capital Notes
hereunder and the issuance of the Conversion Shares do not require, or give any
holder of Equity Rights the right to have made, any adjustments to be made in
the conversion or exercise price, the number of shares issuable upon conversion
or exercise or any other provision of the aforegoing Equity Rights.


                                     - 2 -



     3.3. AUTHORIZATION; APPROVALS. All corporate action on the part of the
Company necessary for the execution, delivery and performance of this Agreement
and the issuance of any shares, Capital Notes, convertible debentures and
Conversion Shares has been taken. Except as set forth in Schedule 3.3 hereto,
save for any consents, approvals, authorisations or exemptions already obtained,
and filings already made, no consent, approval or authorization of, exemption
by, or filing with, any governmental or regulatory authority, including any
approval of, or filings with, the Israeli Securities Authority (the "ISA"), the
TASE or any third party is required in connection with the execution, delivery
and performance by the Company of this Agreement and the consummation by the
Company of the transactions contemplated hereby, including the issuance by way
of private placement pursuant to this Agreement of any Capital Notes,
convertible debentures or shares. This Agreement and all Capital Notes or
convertible debentures issued hereunder on the date which this representation is
given have been executed and delivered by the Company, and each constitutes the
valid and legally binding obligations of the Company, legally enforceable
against the Company in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other laws relating to creditor's rights generally and general principles of
equity.

     3.4. CROSS-DEFAULT. No Default or Event of Default exists under the
Facility Agreement.

     3.5. NO CONFLICTS. Neither the execution and delivery of this Agreement by
Tower, nor the compliance with the terms and provisions of this Agreement on the
part of Tower, including the issuance of shares, Capital Notes, convertible
debentures or Conversion Shares, will: (i) violate any statute or regulation of
any governmental authority, domestic or foreign, affecting Tower; (ii) require
the issuance of any authorization, license, consent or approval of any
governmental agency, or any other person which has not been obtained, save as
set forth in Schedule 3.5 hereto; or (iii) conflict with or result in a breach
of any of the terms, conditions or provisions of any judgment, order,
injunction, decree, loan agreement or other material agreement or instrument to
which Tower is a party, or by which Tower is bound, or constitute a default
thereunder, the effect of which might have a material adverse effect on Tower.

     3.6. NO LITIGATION. There are no actions, suits, proceedings, or injunctive
orders, pending or threatened against or affecting Tower relating to the subject
matter of this Agreement.

     3.7. NO BROKERS. Except as set forth in Schedule 3.7 hereto, Tower has not
engaged any broker or finder in connection with the transactions contemplated by
this Agreement, and no broker or other person is entitled to any commission or
finder's fee in connection with such transactions.


                                     - 3 -



     3.8. ACTIVITIES IN THE UNITED STATES.

          3.8.1. More than 50% (fifty percent) of the consolidated assets of the
               Company as shown or would be shown on its consolidated financial
               statements (a) as of the last day of the immediately preceding
               calendar year and (b) as of the date hereof are, in each case,
               are located outside of the United States.

          3.8.2. More than 50% (fifty percent) of the consolidated revenues of
               the Company as shown or would be shown on its consolidated
               financial statements (a) for the immediately preceding calendar
               year; and (b) during the current calendar year to date, in each
               case, are derived from outside the United States.

          3.8.3. For the purposes of Section 3.8.1, Section 3.8.2, Section
               5.1.1, Section 5.1.2, Section 5.1.6, Section 5.1.7 and Section
               6.6 herein, assets and revenues of the Company will be deemed to
               be located or derived from "outside the United States" if they
               are recorded on the books of the Company or of any subsidiaries
               of the Company incorporated outside the United States ("NON-U.S.
               SUBSIDIARIES") (provided that such revenues are not recorded on
               the books of any offices of the Company or of its Non-U.S.
               Subsidiaries located in the United States ("U.S. OFFICES")) and
               will be deemed to be located in or derived from the United States
               if they are recorded on the books of any U.S. Offices or of any
               subsidiaries of the Company incorporated in the United States
               ("U.S. SUBSIDIARIES"). By way of example, revenues recorded on
               the books of the Company itself (but not on the books of any U.S.
               Offices) will be considered revenues derived from outside the
               United States, even if the revenues derive from a sale of the
               Company's products to a U.S. person and even if the Company's
               U.S. Subsidiary was involved in marketing, sales or post-sales
               support efforts.

          3.8.4. The activities, if any, of the Company and its Non-U.S.
               Subsidiaries within the United States and the activities of all
               U.S. Subsidiaries are the same kind as or support the Company's
               or its Non-U.S. Subsidiaries' activities outside of the United
               States. For purposes of this Section 3.8.4, Section 5.1.3,
               Section 5.1.6, Section 5.1.7 and Section 6.6 below (a) "the same
               kind as" shall mean activities that are within the same
               "establishment" categories of the North American Classification
               System published by the United States Census Bureau, and (b)
               "support" shall mean supply, distribution, sales, marketing,
               servicing, research and development, licensing, design, customer
               relations and/or similar activities.

          3.8.5. Neither the Company nor any of its subsidiaries conducts
               activities in the United States that consist of engaging in the
               business of banking, securities, insurance or real estate.

          3.8.6. Neither the Company nor any of its subsidiaries engages, nor do
               either own more than 5% (five percent) of a class of voting
               securities of a person that engages, in the business of
               securities underwriting or distribution in the United States.


                                     - 4 -



     3.9. The Company acknowledges that the Bank is acquiring the Capital Notes
on the Amendment Closing Date in full reliance upon the representations and
warranties made by the Company in this Agreement, including in Section 3.8
above.

4.   REPRESENTATIONS AND WARRANTIES OF THE BANK.

     The Bank hereby represents and warrants to the Company that it:

     4.1. is acquiring the securities issued and to be issued to the Bank
pursuant to this Agreement for investment and not with a view to distribution
without registration under the U.S. Securities Act of 1933 (the "Securities
Act");

     4.2. has requisite knowledge and experience in financial and business
matters to be capable of evaluating the merits and risks of an investment in the
Company and is an accredited investor as defined in Rule 501(a) under the
Securities Act;

     4.3. understands that none of the Capital Notes issued and to be issued
under this Agreement have been, or will be, registered under the Securities Act,
or the laws of any jurisdiction;

     4.4. agrees that none of the securities issued and to be issued to the Bank
pursuant to this Agreement may be sold, offered for sale, transferred, pledged,
hypothecated or otherwise disposed of except by registration under the
Securities Act or otherwise in compliance with the Securities Act, the Israeli
Securities Law or any applicable securities laws of any jurisdiction (including
pursuant to an exemption therefrom); and

     4.5. acknowledges that the securities, upon issuance, will, unless in the
reasonable opinion of counsel for the Company such legend is not required in
order to ensure compliance under the Securities Act, bear the following legend:

     THESE SECURITIES [(INCLUDING THE SECURITIES ISSUABLE PURSUANT HERETO)](1)
HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED, OR ANY U.S. STATE OR OTHER JURISDICTION'S SECURITIES LAWS. THESE
SECURITIES (INCLUDING THE SECURITIES ISSUABLE PURSUANT HERETO) MAY NOT BE SOLD,
OFFERED FOR SALE OR PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED, (THE "ACT") WITH RESPECT TO ANY SUCH SECURITIES OR AN OPINION
OF COUNSEL (REASONABLY SATISFACTORY TO THE COMPANY) THAT SUCH REGISTRATION IS
NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE 144 OF THE ACT OR ON THE TEL-AVIV
STOCK EXCHANGE IN COMPLIANCE WITH REGULATION S UNDER THE ACT.

     For the avoidance of doubt, nothing in this Section 4 shall derogate from
the Company's obligations under the Registration Rights Agreement.

- ----------

(1) Following the effective date of the Registration Statement covering the
Conversion Shares, if applicable, bracketed language to be removed from all
future Capital Notes and convertible debentures to be issued and, at the request
of the holder, a substitute Capital Note omitting the bracketed language will
promptly be delivered to the holder. If shares are directly issued in the Clause
9.4 Equity Issuance, the first sentence of the legend and the first
parenthetical in the second sentence will be removed following the effective
date of the Registration Statement covering such shares.


                                     - 5 -



5.   UNDERTAKINGS BY THE COMPANY.

     5.1. For so long as (a) any shares or Capital Notes are issuable to the
Bank and/or its subsidiaries (for the avoidance of doubt, as defined in Section
1.1.2 above) pursuant to this Agreement and (b) any securities of the Company
(including Capital Notes, Warrants and shares), constituting or convertible into
5% or more of any class of voting securities (as defined in the United States
Code of Federal Regulations - 12 C.F.R. Section 225.2(q)) of the Company are
beneficially owned by the Bank and/or its subsidiaries (for the avoidance of
doubt, as defined in Section 1.1.2 above), the Company shall use its best
efforts in order:

          5.1.1. that more than 50% (fifty percent) of the consolidated assets
               of the Company as of December 31 of each calendar year are
               located outside of the United States (the "ASSET TEST");

          5.1.2. that more than 50% (fifty percent) of the consolidated revenues
               of the Company as of December 31 of each calendar year are
               derived from outside the United States (the "REVENUE TEST");

          5.1.3. that the activities of the Company within the United States and
               the activities of the U.S. Subsidiaries are of the same kind as
               or support the activities of the Company or its Non-U.S.
               Subsidiaries outside the United States (the "SAME LINE OF
               BUSINESS TEST");

          5.1.4. that neither the Company nor any of its subsidiaries will
               conduct activities in the United States that consist of engaging
               in the business of banking, securities, insurance or real estate
               (the "FINANCIAL ACTIVITIES TEST") (for the avoidance of doubt,
               nothing in the aforesaid shall derogate from the obligations of
               the Company under the Restated Facility Agreement);

          5.1.5. not to engage, or permit any of its subsidiaries to engage, or
               to own or permit any of its subsidiaries to own more than 5%
               (five percent) of a class of voting securities of a person that
               engages, in the business of securities' underwriting or
               distribution in the United States (the "NO UNDERWRITING Test")
               (for the avoidance of doubt, nothing in the aforesaid shall
               derogate from the obligations of the Company under the Restated
               Facility Agreement);

          5.1.6. Nothing in Sections 5.1, 5.1.1, 5.1.2, 5.1.3, 5.1.4 or 5.1.5
               above shall require the Company to prejudice the business or
               financial interests of the Company and the Company may take such
               actions or refrain from taking actions that may cause it not to
               satisfy the Asset Test, the Revenue Test, the Same Line of
               Business Test, the Financial Activities Test and/or the No
               Underwriting Test, provided that the taking of such actions, or
               refraining from taking such actions, are in the business or
               financial interests of the Company as reasonably determined by
               the Company;


                                     - 6 -



          5.1.7. furnish to the Bank and, subsequent to the Clause 9.4 Closing
               Date, any nominee of the Bank pursuant to clause 6 below, as soon
               as practicable (and, in any event, within thirty (30) days after
               the end of each calendar year), a certificate of the Chief
               Financial Officer of the Company, in a form reasonably
               satisfactory to the Bank (i) confirming whether the Company is in
               compliance with each of the Asset Test, the Revenue Test, the
               Same Line of Business Test, the Financial Activities Test and the
               No Underwriting Test, provided that if the Company is not in
               compliance with the Asset Test or the Revenue Test in a
               particular calendar year, the Chief Financial Officer shall
               describe the steps, if any, being taken by the Company to ensure
               compliance in the immediately following calendar year (for the
               removal of doubt, without derogating from Section 5.1.6 above);
               and (ii) setting out (a) the amount and percentage of the
               consolidated revenues of the Company derived from outside the
               United States during the immediately preceding calendar year, and
               (b) the amount and percentage of the consolidated assets of the
               Company located outside of the United States as of December 31 of
               such immediately preceding calendar year; and

          5.1.8. furnish promptly to the Bank and, subsequent to the Clause 9.4
               Closing Date, any nominee of the Bank pursuant to clause 6 below,
               such other information as such person may reasonably request in
               order to satisfy their obligations to file certain reports or
               assess its compliance with applicable legal or regulatory
               requirements relating to the transactions contemplated herein.

     5.2. The Company shall fulfil all of its obligations under the Equity
Documents, including the Capital Notes issued pursuant hereto and the
Registration Rights Agreement.

     5.3. In the event that the adjustment provisions of any Capital Notes
issued pursuant hereto result in additional Conversion Shares to be issued upon
conversion of the Capital Notes, the Company shall promptly furnish the Bank
with a copy of the approval of the TASE for listing such additional Conversion
Shares (if the Company's shares are then traded on the TASE).

     5.4. To the extent that ordinary shares (or other shares of capital stock
substituted therefor) of the Company are listed on one or more securities
exchanges, including the NASDAQ and the TASE, the Company shall maintain, at its
expense, the listing of the shares of the Company issued pursuant to this
Agreement (including upon conversion of Capital Notes issued pursuant to this
Agreement) on such exchanges or, in the event such shares of the Company are
listed on only one securities exchange, such exchange. Nothing in this Section
5.4 shall constitute an obligation of the Company to list or maintain the
listing of its ordinary shares (or other shares of capital stock substituted
therefor) on any securities exchanges, including the NASDAQ and the TASE.

6.   CLAUSE 9.4 CLOSING; CONDITIONS PRECEDENT.

     The issuance and allotment of the shares of the Company, or the issuance of
Capital Notes, pursuant to and in accordance with clause 9.4 of the Restated
Facility Agreement (such date, the "CLAUSE 9.4 CLOSING DATE"), to the Bank or
its nominee (which shall be an Affiliate of the Bank) shall be subject to the
conditions set forth in clause 9.4.6 of the Restated Facility Agreement and to
the conditions precedent that the Bank shall have received, by no later than 2
(two) Business Days prior to the Clause 9.4 Closing Date, all of the following
documents, matters and things in form and substance satisfactory to the Bank:


                                     - 7 -



     6.1. copies of all resolutions of the Board of Directors of the Company
and, if necessary, its Audit Committee and shareholders, authorizing all
agreements and acts to be performed by the Company as conditions precedent to,
or otherwise in connection with, the Clause 9.4 Equity Issuances, to the extent
not already authorized in the resolutions delivered on or about the Amendment
Closing Date;

     6.2. an opinion of the Company's external legal counsel, satisfactory to
the Bank, addressed to the Bank and, if applicable, its nominee, MUTATIS
MUTANDIS, to the Clause 9.4 Equity Issuances in the form of such opinion
delivered by Yigal Arnon & Co., Advocates to the Banks, on or about the
Amendment Closing Date, provided that paragraphs 4.7 (i) and 5.4 shall be
omitted;

     6.3. an opinion of U.S. counsel, satisfactory to the Bank, to the effect
that, based upon their review of United States federal or New York State
statutes, rules and regulations which, in their opinion, based on their
experience, are normally applicable to transactions of the types contemplated by
clause 9.4 of the Restated Facility Agreement ("UNITED STATES APPLICABLE LAWS"),
(i) subject to the effectiveness of the registration statement to be filed by
the Company with respect to the Clause 9.4 Equity Issuances pursuant to the
Registration Rights Agreement, no consent, approval, authorization, order,
registration or qualification of or with any United States federal or New York
State court or governmental agency or body is required for the sale in the
United States (including through the Nasdaq Stock Market) by the Bank or its
nominee of the ordinary shares to be issued or issuable upon conversion of
Capital Notes or convertible debentures to be issued to the Bank or its nominee
pursuant to clause 9.4 of the Restated Facility Agreement and this Agreement,
provided that no opinion need be expressed with respect to state securities or
Blue Sky laws; (ii) the acquisition and indefinite holding of the Capital Notes
or convertible debentures (provided that, with respect to the convertible
debentures, counsel shall assume, solely for purposes of rendering such opinion,
that the condition set forth in Section 6.6.2 has been satisfied and that if the
Company is, as of the Clause 9.4 Closing Date, satisfying the Tests (as set
forth in Section 6.6.1 below) that it shall continue to satisfy the Tests) or
the shares issuable in connection with the Clause 9.4 Equity Issuances by the
Bank or its nominee is permissible under United States Applicable Laws,
including under the Bank Holding Company Act of 1956, as amended; and (iii) the
acquisition and holding of either the Capital Notes or the shares issuable in
connection with the Clause 9.4 Equity Issuances by the Bank or its nominee will
not be subject to the notification and filing requirements under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. Such opinion
shall be based upon and subject to reasonable assumptions (without derogating
from the parenthetical phrase in subsection (ii) above) and limitations,
provided that, if such opinion cannot be delivered, at the request of the
Company, such counsel shall describe the legal basis or bases for why such
opinion cannot be delivered;

     6.4. all of the Company's (a) representations and warranties given pursuant
to this Agreement shall be repeated on the Clause 9.4 Closing Date as if made on
the Clause 9.4 Closing Date, other than the representations and warranties given
pursuant to the last sentence of Section 3.2 above and pursuant to Section 3.8
above, and (b) all of the Company's obligations under this Agreement and the
Registration Rights Agreement to be performed on or prior to the Clause 9.4
Closing Date shall have been fulfilled, and the Company shall have delivered a
certificate of its Chief Executive Officer or Chief Financial Officer to the
effect of (a) and (b) in form and substance satisfactory to the Bank;


                                     - 8 -



     6.5. all Governmental Authorisations and third party consents required to
be obtained by the Company in connection with the Clause 9.4 Equity Issuances
shall have been received, including, if applicable:

          6.5.1. confirmation of the Controller of Restrictive Trade Practices
               (the "CONTROLLER") that no approval is required in connection
               with the Clause 9.4 Equity Issuances or, if any such approval is
               considered by the Controller to be required, the unconditional
               receipt of same (provided that if the Controller shall refuse to
               provide such confirmation for the reason that the Controller does
               not see a reason to review the request for the same, such
               confirmation shall be deemed to have been obtained) (for the
               removal of doubt, if required, the Bank shall also make such a
               request);

          6.5.2. the consent of the Investment Centre to the issue of shares,
               capital notes or convertible debentures (and shares issuable upon
               conversion of the Capital Notes or convertible debentures) to the
               Bank and, if applicable, its nominee as contemplated under clause
               9.4 to the Restated Facility Agreement;

          6.5.3. the approval of the ILA under the Existing ILA Leases, and any
               other long term lease agreements between the Company and the ILA,
               to the issue of shares, capital notes or convertible debentures
               (and shares issuable upon conversion of the Capital Notes or
               convertible debentures) to the Bank and, if applicable, its
               nominee as contemplated under clause 9.4 to the Restated Facility
               Agreement; and

     6.6. provided that the first paragraph of Section 5.1 is applicable,
confirmation from the Chief Financial Officer of the Company, in form and
substance satisfactory to the Bank, that the Company:

          6.6.1. has satisfied the Asset Test, the Revenue Test, the Same Line
               of Business Test, the Financial Activities Test and the No
               Underwriting Test (collectively, the "TESTS") as of December 31
               in each of the two years immediately prior to the year in which
               the Clause 9.4 Closing Date falls, and meets, on the Clause 9.4
               Closing Date, the Same Line of Business Test, the Financial
               Activities Test and the No Underwriting Test; and

          6.6.2. is not aware of any reason why it would not continue to satisfy
               each of the Tests during the then current year and the
               immediately following year.


                                     - 9 -



In the event that the conditions precedent set out in this Section 6 above and
in clause 9.4.6 of the Restated Facility Agreement are not satisfied by no later
than 2 (two) Business Days prior to the Clause 9.4 Closing Date, including if a
representation and warranty that is to be repeated cannot be repeated, then the
Clause 9.4.1 Amount or the Clause 9.4.2 Amount, as applicable, shall be paid in
cash by the Company to the Bank or its nominee on the Clause 9.4 Closing Date,
(a) provided however, if said conditions precedent set out in this Section 6
above and in Clause 9.4.6 of the Restated Facility Agreement are otherwise
satisfied, by no later than 2 (two) Business Days prior to the Clause 9.4
Closing Date, with respect to the issuance of Capital Notes instead of shares,
then the Clause 9.4.1 Amount or the Clause 9.4.2 Amount, as applicable, will not
be paid in cash by the Company and Capital Notes shall be issued as contemplated
by Section 7.1 below; and (b) provided further that, if all said conditions
precedent, other than as set forth in Section 6.6.2 above, are satisfied by no
later than 2 (two) Business Days prior to the Clause 9.4 Closing Date, then the
Clause 9.4.1 Amount or the Clause 9.4.2 Amount, as applicable, will, at the
option of the Company, in its sole discretion, either be paid in cash or by way
of issue of convertible debentures that will (except for consequential changes
flowing from the redemption right described below) have the same terms as the
Capital Notes (including, for the removal of doubt, that such convertible
debentures will not bear interest or be linked to any index), save that the Bank
or its nominee or other Affiliate thereof holding said convertible debentures
(the "HOLDER") shall have the right to require the Company to redeem the
convertible debentures, in whole or in part, on the date which is 30 (thirty)
months after the Clause 9.4 Closing Date (or, if such date is not a Business
Day, on the Business Day immediately prior to such anniversary) (the "REDEMPTION
DATE"), for an amount in cash equal to the then principal amount thereof
submitted for redemption, upon the giving by the Holder to the Company of at
least 30 (thirty) days prior written notice. For the avoidance of doubt, if such
redemption right is not exercised by a Holder as aforesaid, said convertible
debentures shall remain convertible into shares of the Company and shall,
subsequent to the Redemption Date, only be payable in accordance with clause 2
of the Capital Note.

7.   TRANSACTIONS UPON THE CLAUSE 9.4 CLOSING.

     Subject to the fulfilment of the conditions precedent set out in Section 6
above and in clause 9.4.6 of the Restated Facility Agreement, on the Clause 9.4
Closing Date (unless cash is payable pursuant to Section 6 above or clause 9.4.6
of the Restated Facility Agreement):

     7.1. the Company shall issue (and, in the case of shares, allot) to the
Bank or its nominee either (a) such number of shares in the name of the Bank or
its nominee as provided in clause 9.4.1 or clause 9.4.2 (as adjusted, if
applicable, pursuant to clauses 9.4.7 and 9.4.9) of the Restated Facility
Agreement and shall send irrevocable instructions to its stock transfer agent to
issue a share certificate in respect of such shares (the Bank or its nominee may
elect to deliver to Tower an undertaking not to exercise means of control in
respect of such shares for a certain period) or (b) (i) at the election of the
Bank or its nominee, or if the proviso set forth in subsection (a) in the last
paragraph of Section 6 is applicable, Capital Notes or (ii) if the proviso set
forth in subsection (b) in the last paragraph of Section 6 is applicable (and
the Company has not elected to pay cash), convertible debentures, in each case,
substantially in the form attached as EXHIBIT 1 hereto (save that, in the case
of the convertible debentures, a provision granting the redemption right
described in subsection (b) in the last paragraph of Section 6 and consequential
changes flowing from such redemption right shall be made, in form and substance
satisfactory to the Holder), as the case may be, in the principal amounts
provided in clause 9.4.1 or clause 9.4.2 (as adjusted, if applicable, pursuant
to clauses 9.4.7 and 9.4.9) of the Restated Facility Agreement, as applicable,
convertible into shares at the Average Closing Price (as defined in clause 9.4.1
of the Restated Facility Agreement) (subject to adjustments as provided in the
Capital Notes);

     7.2. the Company shall deliver to the Bank or, if applicable, its nominee a
copy of the approval of the TASE for listing the shares issued or issuable
pursuant to clause 7.1 above (if the Company's shares are then traded on the
TASE); and

     7.3. the Company shall record such issuance of the shares or Capital Note
in the name of the Bank, or, if applicable, its nominee on the records of the
Company.


                                     - 10 -



8.   MISCELLANEOUS.

     8.1. GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and
shall be construed in accordance with Israeli law and the courts of
Tel-Aviv-Jaffa shall have exclusive jurisdiction to hear any matters, provided
that the Bank and any other Affiliate of the Bank party to this Agreement shall
be entitled to sue Tower in any jurisdiction in which it has an office or holds
assets.

     8.2. SUCCESSORS AND ASSIGNS; ASSIGNMENT. Except as otherwise expressly
limited herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors and permitted assigns of the parties hereto. This
Agreement may not be assigned by any party without the prior written consent of
the other party hereto, provided that the Bank may assign this Agreement, in
whole or in part, to any Affiliate of the Bank or add an Affiliate of the Bank
as an additional party hereto, including, for the avoidance of doubt, any
nominee of the Bank in connection with the Clause 9.4 Equity Issuances. Nothing
in this Agreement shall be deemed to restrict the (a) transferability of the
shares, convertible debentures and Capital Notes to be issued pursuant to this
Agreement or the Conversion Shares, in each case, in whole or in part at any
time and from time to time, except for restrictions on transfer imposed by
applicable securities laws or (b) the assignability of the registration rights
in accordance with the Registration Rights Agreement.

     8.3. EXPENSES. The Company shall bear the expenses and costs of all the
parties to the transactions contemplated hereby (including the fees and expenses
of counsel to the Bank and any nominee of the Bank that is an Affiliate of the
Bank in connection with the Clause 9.4 Equity Issuances).

     8.4. ENTIRE AGREEMENT; AMENDMENT AND WAIVER. This Agreement constitutes the
full and entire understanding and agreement between the parties with regard to
the subject matter hereof. Any term of this Agreement may be amended and the
observance of any term hereof may be waived (either prospectively or
retroactively and either generally or in a particular instance) only with the
written consent of the parties to this Agreement.

     8.5. NOTICES, ETC. All notices and other communications required or
permitted hereunder to be given to a party to this Agreement shall be in writing
and shall be faxed or mailed by registered or certified mail, postage prepaid,
or otherwise delivered by hand or by messenger, addressed to such party's
address as set forth below:

          If to the Bank:           Corporate Division
                                    34 Yehuda Halevi Street
                                    Tel-Aviv
                                    Israel
                                    Fax. 972-3-5149278
                                    Attn: Manager of Hi-Tech Industries Section

          with a copy to
          (which shall not
          constitute notice):       Leumi and Co. Investment House Ltd.
                                    25 Kalisher Street
                                    Tel-Aviv 65165
                                    Israel
                                    Fax: 972-3-5141215
                                    Attn: Head of Investment Sector


                                     - 11 -



          If to the Company:        Tower Semiconductor Ltd.
                                    Ramat Gavriel Industrial Area
                                    P.O. Box 619
                                    Migdal Haemek
                                    Israel 23105
                                    Fax. 972-4-6047242
                                    Attn: Oren Shirazi, Acting CFO
          with a copy to
          (which shall not
          constitute notice):       Yigal Arnon & Co.
                                    1 Azrieli Center
                                    46th Floor
                                    Tel-Aviv, Israel, 67021
                                    Fax: 972-3-6087714
                                    Attn:  David Schapiro, Adv.

     or such other address with respect to a party as such party shall notify
each other party in writing as above provided. Any notice sent in accordance
with this Section 8.5 shall be effective (i) if mailed, five (5) business days
after mailing, (ii) if sent by messenger, upon delivery, and (iii) if sent via
facsimile, one (1) business day following transmission and electronic
confirmation of receipt.

     8.6. DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power, or remedy accruing to any party upon any breach or default under this
Agreement, shall be deemed a waiver of any other breach or default theretofore
or thereafter occurring. Any waiver, permit, consent, or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. Unless provided otherwise
herein, all remedies, either under this Agreement or by law or otherwise
afforded to any of the parties, shall be cumulative and not alternative.

     8.7. SEVERABILITY. If any provision of this Agreement is held by a court of
competent jurisdiction to be unenforceable under applicable law, then such
provision shall be excluded from this Agreement and the remainder of this
Agreement shall be interpreted as if such provision were so excluded and shall
be enforceable in accordance with its terms; provided, however, that in such
event this Agreement shall be interpreted so as to give effect, to the greatest
extent consistent with and permitted by applicable law, to the meaning and
intention of the excluded provision as determined by such court of competent
jurisdiction.

     8.8. COUNTERPARTS. This Agreement may be executed in any number of
counterparts (including facsimile counterparts), each of which shall be deemed
an original, and all of which together shall constitute one and the same
instrument.

     8.9. HEADINGS. The headings of the sections and paragraphs of this
Agreement are inserted for convenience only and shall not be deemed to
constitute part of this Agreement or to affect the construction hereof.

     8.10. FURTHER ASSURANCES. Each of the parties hereto shall perform such
further acts and execute such further documents as may reasonably be necessary
to carry out and give full effect to the provisions of this Agreement and the
intentions of the parties as reflected thereby, including the provision by the
Bank to the Company of such information as shall be required in order to
determine the adjustments, if any, required under clause 9.4.7 of the Restated
Facility Agreement.


                                     - 12 -



     IN WITNESS WHEREOF, each of the parties has signed this Agreement as of the
date first hereinabove set forth.

TOWER SEMICONDUCTOR LTD.                  BANK LEUMI LE-ISRAEL B.M.

By:      ________________________         By:      ________________________


Name:    ________________________         Name:    ________________________


Title:   ________________________         Title:   ________________________



                                     - 13 -

                                                                   EXHIBIT 99.10

                          REGISTRATION RIGHTS AGREEMENT

     This Registration Rights Agreement (this "AGREEMENT") is made and entered
into effective as of September 28, 2006 by and between TOWER SEMICONDUCTOR LTD.
(the "COMPANY" or "TOWER"), a company organized under the laws of the State of
Israel, and BANK HAPOALIM B.M., a banking corporation organized under the laws
of the State of Israel (the "BANK").

     WHEREAS, Tower is an independent manufacturer of wafers whose Ordinary
Shares are traded on the Nasdaq Stock Market ("NASDAQ") under the symbol "TSEM"
and whose Ordinary Shares and certain other securities are traded on the
Tel-Aviv Stock Exchange ("TASE") under the symbol "TSEM"; and

     WHEREAS, the Bank and Bank Leumi Le-Israel B.M. (collectively, the "BANKS")
and Tower are parties to a Facility Agreement dated January 18, 2001, as amended
(the "FACILITY AGREEMENT"); and

     WHEREAS, at the request of Tower, the Banks and Tower have entered into an
Amending Agreement dated August 24, 2006 (the "AMENDING AGREEMENT"), the
conditions to the effectiveness of which include, INTER ALIA, the issuance to
each of the Banks or its nominee, of an equity-equivalent convertible capital
note which will in turn be convertible, in whole or in part, by the Bank at any
time and from time to time into shares of Tower and the entering into by the
Bank and Tower of a conversion agreement (the "CONVERSION AGREEMENT") and this
Agreement, in each case, on the date of the effectiveness of the Amending
Agreement (the "AMENDMENT CLOSING DATE"); and

     WHEREAS, clause 9.4 of the Facility Agreement, as amended by the Amending
Agreement, obligates the Company, under certain circumstances, to make a payment
to the Banks which, subject to said clause 9.4 and the Conversion Agreement, can
be paid in the form of shares, capital notes or convertible debentures and the
parties intend that the registration rights set forth in this Agreement also be
applicable with respect to such shares and/or shares issuable upon conversion of
any such capital notes or convertible debentures (the "CLAUSE 9.4 EQUITY
ISSUANCES"),

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Bank hereby
agree as follows:





1.   DEFINITIONS AND INTERPRETATION.

     As used in this Agreement, the following terms shall have the following
     meanings:

     (a)  "CAPITAL NOTE" means any capital note that is convertible into shares
          of Tower.

     (b)  "HOLDER" means the Bank, Tarshish, any nominee of the Bank to hold the
          Clause 9.4 Equity Issuances (the "NOMINEE"), any transferee or
          assignee to whom the Bank or the Nominee assigns its rights, in whole
          or in part, and any transferee or assignee thereof to whom a
          transferee or assignee assigns its rights, in accordance with Section
          9.

     (c)  "ISA" means the Israel Securities Authority or any similar or
          successor agency of Israel administering the Israel Securities Law.

     (d)  "ISRAEL SECURITIES LAW" means the Israel Securities Law, 5728-1968
          (including the regulations promulgated thereunder), as amended.

     (e)  "1933 ACT" means the U.S. Securities Act of 1933, as amended, and the
          rules and regulations thereunder, or any similar successor statute.

     (f)  "1934 ACT" means the U.S. Securities Exchange Act of 1934, as amended,
          and the rules and regulations thereunder, or any similar successor
          statute.

     (g)  "REGISTER", "REGISTERED", and "REGISTRATION" refer to a registration
          effected by preparing and filing a registration statement in
          compliance with the 1933 Act and the effectiveness of such
          registration statement in accordance with the 1933 Act or the
          equivalent actions under the laws of another jurisdiction.

     (h)  "REGISTRABLE SECURITIES" means (i) the ordinary shares of the Company
          issued or issuable upon conversion of any Capital Note by any Holder,
          (ii) any ordinary shares issued as part of the Clause 9.4 Equity
          Issuances, including shares issued or issuable upon conversion of
          Capital Notes or convertible debentures issued as part of the Clause
          9.4 Equity Issuances, which are held by a Holder (iii) ordinary shares
          of the Company issued or issuable upon exercise of a Warrant and (iv)
          any shares of capital stock issued or issuable with respect to the
          ordinary shares of the Company as a result of any stock split, stock
          dividend, rights offering, recapitalization, merger, exchange or
          similar event or otherwise, including as described in any Capital
          Note.


                                     - 2 -



     (i)  "REGISTRATION STATEMENT" means a registration statement or
          registration statements of the Company covering Registrable Securities
          filed with (a) the SEC under the 1933 Act, including the Form F-3
          Registration Statement No. 333-131315 previously filed by the Company
          covering ordinary shares issuable upon the exercise of Warrants, and
          (b) the ISA under the Israel Securities Law, to the extent required
          under the Israel Securities Law, so as to allow the Holder to freely
          resell the Registrable Securities in Israel, including on the TASE.

     (j)  "SEC" means the United States Securities and Exchange Commission or
          any similar or successor agency of the United States administering the
          1933 Act.

     (k)  "TARSHISH" means Tarshish Hahzakot Vehashkaot Hapoalim Ltd., a company
          organized under the laws of the State of Israel and an affiliate of
          the Bank.

     (l)  "WARRANT" means the warrants issued to the Bank and to Tarshish by the
          Company prior to the Amendment Closing Date and which are amended on
          the Amendment Closing Date.

     In this Agreement:

     (a)  Words importing the singular shall include the plural and VICE VERSA
          and words importing any gender shall include all other genders and
          references to persons shall include partnerships, corporations and
          unincorporated associations.

     (b)  Any reference in this Agreement to a specific form or to any rule or
          regulation adopted by the SEC shall also include any successor form or
          amended or successor rule or regulation subsequently adopted by the
          SEC, all as the same may be in effect at the time.

     (c)  Any reference in this Agreement to a statute, act or law shall be
          construed as a reference to such statute, act or law as the same may
          have been, or may from time to time be, amended or reenacted.

     (d)  A "PERSON" shall be construed as a reference to any person, firm,
          company, corporation, government, state or agency of a state or any
          association or partnership (whether or not having separate legal
          personality) or two or more of the aforegoing.


                                     - 3 -



     (e)  "INCLUDING" and "INCLUDES" means, including, without limiting the
          generality of any description preceding such terms.

     (f)  The headings herein are for convenience only, do not constitute a part
          of this Agreement and shall not be deemed to limit or affect any of
          the provisions hereof.

2.   REGISTRATION.

     (a)  The Company shall prepare, and, as soon as practicable but in no event
          later than (a) 45 days after the date of this Agreement and (b) the
          date of the Clause 9.4 Equity Issuances, in each case file with the
          SEC a Registration Statement on Form F-3 and make all required filings
          with the ISA covering the resale of all of the then Registrable
          Securities that are not already registered. The Company shall use its
          best efforts to have the Registration Statement declared effective by
          the SEC and the ISA as soon as possible after such filing with the SEC
          and the ISA.

     (b)  In the event that Form F-3 shall not be available for the registration
          of the resale of Registrable Securities hereunder, the Company shall
          (i) register the resale of the Registrable Securities on another
          appropriate form reasonably acceptable to the Holders of the
          Registrable Securities to be registered on such Registration Statement
          and (ii) undertake to register the Registrable Securities on Form F-3
          as soon as such form is available, provided that, in each such event,
          the Company shall maintain the effectiveness of the Registration
          Statement then in effect until such time as a Registration Statement
          on Form F-3 covering the Registrable Securities has been declared
          effective by the SEC.

3.   RELATED OBLIGATIONS.

     (a)  Following the filing and effectiveness of each Registration Statement
          with the SEC pursuant to Section 2(a), the Company shall keep the
          Registration Statement effective pursuant to Rule 415 of the 1933 Act
          and under the Israel Securities Law at all times until the earlier of
          (i) the date as of which all of the Holders confirm to the Company in
          writing that they may sell all of the Registrable Securities covered
          by such Registration Statement without restriction pursuant to all of
          the following: (x) Rule 144(k) under the 1933 Act, (y) the Israel
          Securities Law and (z) other securities or "blue sky" laws of each
          jurisdiction in which the Company obtained a registration or
          qualification in accordance with Section 3(d) below or (ii) the date
          on which the Holders shall have sold all the Registrable Securities
          covered by such Registration Statement (A) in accordance with such
          Registration Statement (except to another Holder pursuant to Section
          9) or (B) to the public pursuant to Rule 144 under the 1933 Act (the
          "REGISTRATION PERIOD"), the Company to ensure that such Registration
          Statement (including any amendments or supplements thereto and
          prospectuses contained therein) shall not contain any untrue statement
          of a material fact or omit to state a material fact required to be
          stated therein, or necessary to make the statements therein, in light
          of the circumstances in which they were made, not misleading, subject
          to Section 3(e) below.


                                     - 4 -



     (b)  The Company shall prepare and file with the SEC and the ISA (to the
          extent required) such amendments (including post-effective amendments)
          and supplements to each Registration Statement and the prospectus used
          in connection with such Registration Statement, which prospectus is to
          be filed pursuant to Rule 424 under the 1933 Act or under the Israel
          Securities Law, as may be necessary to keep such Registration
          Statement effective at all times during the Registration Period, and,
          during such period, comply with the provisions of the 1933 Act and the
          Israel Securities Law with respect to the disposition of all
          Registrable Securities of the Company covered by such Registration
          Statement until such time as all of such Registrable Securities shall
          have been disposed of in accordance with the intended methods of
          disposition by the seller or sellers thereof as set forth in such
          Registration Statement, which, for the avoidance of doubt, shall
          include sales on the Nasdaq Stock Market and the TASE, as well as
          sales not made on such exchanges. In the case of amendments and
          supplements to a Registration Statement which are required to be filed
          pursuant to the Agreement (including pursuant to this Section 3(b) by
          reason of the Company filing a report on Form 20-F, Form 6-K or any
          analogous report under the 1934 Act), the Company shall have
          incorporated such report by reference into the Registration Statement,
          if applicable, or shall file such amendments or supplements with the
          SEC and the ISA on the same day on which the 1934 Act report is filed
          which created the requirement for the Company to amend or supplement
          the Registration Statement.

     (c)  The Company shall furnish each Holder whose Registrable Securities are
          included in any Registration Statement, without charge, (i) promptly
          after the same is prepared and filed with the SEC, at least three (3)
          copies of such Registration Statement and any amendment(s) thereto,
          including financial statements and schedules, all documents
          incorporated therein by reference, all exhibits and each preliminary
          prospectus (or such other number of copies as such Holder may
          reasonably request), (ii) upon the effectiveness of any Registration
          Statement, at least ten (10) copies of the prospectus included in such
          Registration Statement and all amendments and supplements thereto (or
          such other number of copies as such Holder may reasonably request) and
          (iii) such other documents, including copies of any preliminary or
          final prospectus and of any Registration Statements and prospectuses
          filed with the ISA, as such Holder may reasonably request from time to
          time in order to facilitate the disposition of the Registrable
          Securities owned by such Holder.


                                     - 5 -



     (d)  The Company shall use its best efforts to (i) register and qualify,
          unless an exemption from registration and qualification applies, the
          resale by the Holders of the Registrable Securities covered by a
          Registration Statement under such other securities or "blue sky" laws
          of all the states of the United States, (ii) prepare and file in those
          jurisdictions, such amendments (including post-effective amendments)
          and supplements to such registrations and qualifications as may be
          necessary to maintain the effectiveness thereof during the
          Registration Period, (iii) take such other actions as may be necessary
          to maintain such registrations and qualifications in effect at all
          times during the Registration Period, and (iv) take all other actions
          reasonably necessary or advisable to qualify the Registrable
          Securities for sale in such jurisdictions; provided, however, that the
          Company shall not be required in connection therewith or as a
          condition thereto to (x) qualify to do business in any jurisdiction
          where it would not otherwise be required to qualify but for this
          Section 3(d), or (y) file a general consent to service of process in
          any such jurisdiction. The Company shall promptly notify each Holder
          who holds Registrable Securities of the receipt by the Company of any
          notification with respect to the suspension of the registration or
          qualification of any of the Registrable Securities for sale under the
          securities or "blue sky" laws of any jurisdiction in the United States
          or its receipt of actual notice of the initiation or threatening of
          any proceeding for such purpose.


                                     - 6 -



     (e)  The Company shall notify each Holder in writing of the happening of
          any event, as promptly as practicable after becoming aware of such
          event, as a result of which the prospectus included in a Registration
          Statement, as then in effect, includes an untrue statement of a
          material fact or omission to state a material fact required to be
          stated therein or necessary to make the statements therein, in light
          of the circumstances under which they were made, not misleading. The
          Company shall use its best efforts to minimize the period of time
          during which a Registration Statement includes an untrue statement of
          a material fact or omission to state a material fact required to be
          stated therein or necessary to make the statements therein, in light
          of the circumstances under which they were made, not misleading. The
          Company shall promptly notify each Holder in writing (i) when a
          prospectus or any prospectus supplement or post-effective amendment
          has been filed so that the Registration Statement does not include an
          untrue statement of a material fact or omission to state a material
          fact required to be stated therein or necessary to make the statements
          therein, in light of the circumstances under which they were made, not
          misleading, and when a Registration Statement or any post-effective
          amendment has become effective (notification of such effectiveness
          shall be delivered to each Holder by facsimile on the same day of such
          effectiveness and by overnight mail), (ii) of any request by the SEC
          or the ISA for amendments or supplements to a Registration Statement
          or related prospectus or related information, and (iii) of the
          Company's reasonable determination that a post-effective amendment to
          a Registration Statement would be appropriate.

     (f)  The Company shall use its best efforts to prevent the issuance of any
          stop order or other suspension of effectiveness of a Registration
          Statement, or the suspension of the qualification of any of the
          Registrable Securities for sale in any jurisdiction and, if such an
          order or suspension is issued, to obtain the withdrawal of such order
          or suspension at the earliest possible moment and to notify each
          Holder who holds Registrable Securities being sold of the issuance of
          such order and the resolution thereof or its receipt of actual notice
          of the initiation or threat of any proceeding for such purpose.

     (g)  The Company shall cause all the Registrable Securities covered by a
          Registration Statement to be listed on each securities exchange on
          which securities of the same class or series issued by the Company are
          then listed, including the NASDAQ and the TASE and the Company shall,
          not later than the effective date of a Registration Statement, deliver
          to the Holders a copy of the approvals of the TASE and the NASDAQ
          (and/or any other exchange, if applicable) to the listing of the
          Registrable Securities covered by such Registration Statement on such
          exchange.


                                     - 7 -



     (h)  The Company shall cooperate with the Holders who hold Registrable
          Securities being offered and, to the extent applicable, facilitate the
          timely preparation and delivery of certificates (not bearing any
          restrictive legend) representing the Registrable Securities to be
          offered pursuant to a Registration Statement and enable such
          certificates to be in such denominations or amounts, as the case may
          be, as the Holders may reasonably request and registered in such names
          as the Holders may request.

     (i)  The Company shall provide a transfer agent and registrar of all
          Registrable Securities and a CUSIP number not later than the effective
          date of the applicable Registration Statement.

     (j)  If requested by a Holder, the Company shall (i) as soon as practicable
          incorporate in a prospectus supplement or post-effective amendment
          such information as a Holder requests to be included therein,
          information with respect to the number of Registrable Securities being
          offered or sold, the purchase price being paid therefor and any other
          terms of the offering of the Registrable Securities to be sold in such
          offering; (ii) as soon as practicable make all required filings of
          such prospectus supplement or post-effective amendment after being
          notified of the matters to be incorporated in such prospectus
          supplement or post-effective amendment; and (iii) as soon as
          practicable, supplement or make amendments to any Registration
          Statement if reasonably requested by a Holder of such Registrable
          Securities.

     (k)  In the event of any underwritten public offering of the Registrable
          Securities, enter into and perform its obligations under an
          underwriting agreement with usual and customary terms that are
          generally satisfactory to the managing underwriter of such offering.
          The Holder shall also enter into and perform its obligations under
          such an agreement (the terms of which must be satisfactory to the
          Holder if the Holder is to participate in such offering).

     (l)  The Company shall afford the Holder and its representatives (including
          counsel) the opportunity at any time and from time to time during the
          Registration Period to make such examinations of the business affairs
          and other material financial and corporate documents of the Company
          and its subsidiaries as the Holder may reasonably deem necessary to
          satisfy itself as to the accuracy of the registration statement
          (subject to a reasonable confidentiality undertaking on the part of
          the Holder and its representatives).


                                     - 8 -



     (m)  The Company shall furnish, at the request of the Holder in connection
          with the registration of Registrable Shares pursuant to this
          Agreement, on the date that such Registrable Shares are delivered to
          the underwriters for sale, if such securities are being sold through
          underwriters, or, if such securities are not being sold through
          underwriters, on the date that the Registration Statement with respect
          to such securities becomes effective and on the date of each
          post-effective amendment thereof: (i) an opinion, dated such date, of
          the counsel representing the Company for the purposes of such
          registration, in form and substance as is customarily given to
          underwriters in an underwritten public offering, addressed to the
          underwriters, if any, and to the Holder; and (ii) a letter, dated such
          date, from the independent certified public accountants of the
          Company, in form and substance as is customarily given by independent
          certified public accountants to underwriters in an underwritten public
          offering, addressed to the underwriters, if any, and to the Holder.

     (n)  The Company shall comply with all applicable rules and regulations of
          the SEC and shall make generally available to its security holders an
          earnings statement satisfying the provisions of Section 11(a) of the
          1933 Act as soon as practicable after the effective date of the
          Registration Statement and in any event no later than 45 days after
          the end of a 12-month period (or 90 days, if such period is a fiscal
          year) beginning with the first month of the Company's first fiscal
          quarter commencing after the effective date of the Registration
          Statement.

4.   OBLIGATIONS OF THE HOLDERS.

     Each Holder agrees that, upon receipt of any notice from the Company of the
     happening of any event of the kind described in the first sentence of
     Section 3(e) or in Section 3(f), such Holder will immediately discontinue
     disposition of Registrable Securities pursuant to any Registration
     Statement(s) covering such Registrable Securities until such Holder's
     receipt of the copies of the supplemented or amended prospectus
     contemplated by the first sentence of Section 3(e) or receipt of notice
     that no supplement or amendment is required.

5.   EXPENSES OF REGISTRATION.

     All expenses, other than underwriting discounts and commissions, incurred
     in connection with registrations, filings or qualifications pursuant to
     Sections 2 and 3, including, without limitation, all registration, listing
     and qualifications fees, printers and accounting fees, fees and
     disbursements of counsel to the Company and the Holders, including in
     connection with such examinations described in Section 3(l) above, shall be
     paid by the Company.


                                     - 9 -



6.   INDEMNIFICATION.

     In the event any Registrable Securities are included in a Registration
     Statement under this Agreement:

     (a)  To the fullest extent permitted by law, the Company will, and hereby
          does, indemnify, hold harmless and defend each Holder, the directors,
          officers, partners, employees, agents, representatives of, and each
          Person, if any, who controls any Holder within the meaning of the 1933
          Act or 1934 Act (each, an "INDEMNIFIED PERSON"), against any losses,
          claims, damages, liabilities, judgments, fines, penalties, charges,
          costs, reasonable attorneys' fees, amounts paid in settlement or
          expenses, joint or several, (collectively, "CLAIMS") incurred in
          investigating, preparing or defending any action, claim, suit,
          inquiry, proceeding, investigation or appeal taken from the foregoing
          by or before any court or governmental, administrative or other
          regulatory agency, body or the SEC or the ISA, whether pending or
          threatened, whether or not a person to be indemnified is or may be a
          party thereto ("INDEMNIFIED DAMAGES"), to which any of them may become
          subject insofar as such Claims (or actions or proceedings, whether
          commenced or threatened, in respect thereof) arise out of or are based
          upon: (i) any untrue statement or alleged untrue statement of a
          material fact in a Registration Statement or any post-effective
          amendment thereto or in any filing made in connection with the
          qualification of the offering under the securities or other "blue sky"
          laws of any jurisdiction in which Registrable Securities are offered
          ("BLUE SKY FILING"), or the omission or alleged omission to state a
          material fact required to be stated therein or necessary to make the
          statements therein not misleading, (ii) any untrue statement or
          alleged untrue statement of a material fact contained in any
          Registration Statement, preliminary prospectus, final prospectus or
          "free writing prospectus" (as such term is defined in Rule 405 under
          the 1933 Act) or any amendment or supplement to any such prospectus or
          the omission or alleged omission to state therein any material fact
          necessary to make the statements made therein, in light of the
          circumstances under which the statements therein were made, not
          misleading, (iii) any violation or alleged violation by the Company of
          the 1933 Act, the 1934 Act, any other law, including, without
          limitation, any state securities law, the Israel Securities Law or any
          rule or regulation thereunder relating to the offer or sale of the
          Registrable Securities pursuant to a Registration Statement or (iv)
          any material violation of this Agreement (the matters in the foregoing
          clauses (i) through (iv) being, collectively, "VIOLATIONS"). Subject
          to Section 6(c), the Company shall reimburse the Indemnified Persons
          promptly as such expenses are incurred and are due and payable, for
          any legal fees or other reasonable expenses incurred by them in
          connection with investigating or defending any such Claim.
          Notwithstanding anything to the contrary contained herein, the
          indemnification agreement contained in this Section 6(a): (i) shall
          not apply to a Claim by an Indemnified Person arising out of or based
          upon a Violation which occurs in reliance upon and in conformity with
          information furnished in writing to the Company by such Indemnified
          Person expressly for inclusion in any such Registration Statement,
          preliminary prospectus, final prospectus or free writing prospectus or
          any such amendment thereof or supplement thereto and (ii) shall not
          apply to amounts paid in settlement of any Claim if such settlement is
          effected without the prior written consent of the Company, which
          consent shall not be unreasonably withheld. Such indemnity shall
          remain in full force and effect regardless of any investigation made
          by or on behalf of the Indemnified Person and shall survive the
          transfer of the Registrable Securities by the Holders pursuant to
          Section 9.


                                     - 10 -



     (b)  In connection with any Registration Statement in which a Holder is
          participating, each such Holder agrees, severally and not jointly, to
          indemnify, hold harmless and defend, to the same extent and in the
          same manner as is set forth in Section 6(a), the Company, each of its
          directors, each of its officers who signs the Registration Statement,
          each Person, if any, who controls the Company within the meaning of
          the 1933 Act or the 1934 Act (each an "INDEMNIFIED PARTY"), against
          any Claim or Indemnified Damages to which any of them may become
          subject, under the 1933 Act, the 1934 Act or otherwise, insofar as
          such Claim or Indemnified Damages arise out of or are based upon any
          Violation, in each case to the extent, and only to the extent, that
          such Violation occurs in reliance upon and in conformity with written
          information furnished to the Company by such Holder expressly for
          inclusion in Registration Statement, preliminary prospectus, final
          prospectus or free writing prospectus and, subject to Section 6(c),
          such Holder will reimburse any legal or other expenses reasonably
          incurred by an Indemnified Party in connection with investigating or
          defending any such Claim; provided, however, that the indemnity
          agreement contained in this Section 6(b) and the agreement with
          respect to contribution contained in Section 7 shall not apply to
          amounts paid in settlement of any Claim if such settlement is effected
          without the prior written consent of such Holder; provided, further,
          however, that the Holder shall be liable under this Section 6 for only
          that amount of a Claim or Indemnified Damages as does not exceed the
          net proceeds to such Holder as a result of the sale of Registrable
          Securities pursuant to such Registration Statement. Such indemnity
          shall remain in full force and effect regardless of any investigation
          made by or on behalf of such Indemnified Party and shall survive the
          transfer of the Registrable Securities by the Holders pursuant to
          Section 9.


                                     - 11 -



     (c)  Promptly after receipt by an Indemnified Person or Indemnified Party
          under this Section 6 of notice of the commencement of any action or
          proceeding (including any governmental action or proceeding) involving
          a Claim, such Indemnified Person or Indemnified Party shall, if a
          Claim in respect thereof is to be made against any indemnifying party
          under this Section 6, deliver to the indemnifying party a written
          notice of the commencement thereof, and the indemnifying party shall
          have the right to participate in, and, to the extent the indemnifying
          party so desires, jointly with any other indemnifying party similarly
          noticed, to assume control of the defense thereof with counsel
          mutually satisfactory to the indemnifying party and the Indemnified
          Person or the Indemnified Party, as the case may be; provided,
          however, that an Indemnified Person or Indemnified Party shall have
          the right to retain its own counsel with the fees and expenses of not
          more than one counsel for such Indemnified Person or Indemnified Party
          to be paid by the indemnifying party, if, the representation by such
          counsel of the Indemnified Person or Indemnified Party and the
          indemnifying party would be inappropriate due to actual or potential
          differing interests between such Indemnified Person or Indemnified
          Party and any other party represented by such counsel in such
          proceeding. In the case of an Indemnified Person, legal counsel
          referred to in the immediately preceding sentence shall be selected by
          the Holders holding a majority in interest of the Registrable
          Securities included in the Registration Statement to which the Claim
          relates. The Indemnified Party or Indemnified Person shall cooperate
          with the indemnifying party in connection with any negotiation or
          defense of any such action or Claim by the indemnifying party and
          shall furnish to the indemnifying party all information reasonably
          available to the Indemnified Party or Indemnified Person which relates
          to such action or Claim. The failure to deliver written notice to the
          indemnifying party within a reasonable time of the commencement of any
          such action shall not relieve such indemnifying party of any liability
          to the Indemnified Person or Indemnified Party under this Section 6,
          except to the extent that the indemnifying party is prejudiced in its
          ability to defend such action but the omission to so notify the
          indemnifying party will not relieve such indemnifying party of any
          liability that it may have to any Indemnified Person or Party
          otherwise than under this Section 6(c), including under Section 6(e).


                                     - 12 -



     (d)  The indemnification required by this Section 6 shall be made by
          periodic payments of the amount thereof during the course of the
          investigation or defense, as and when bills are received or
          Indemnified Damages are incurred.

     (e)  The indemnity agreements contained herein shall be in addition to (i)
          any cause of action or similar right of the Indemnified Party or
          Indemnified Person against the indemnifying party or others, and (ii)
          any liabilities the indemnifying party may be subject to pursuant to
          the law.

7.   CONTRIBUTION.

     To the extent any indemnification by an indemnifying party is prohibited or
     limited by law or insufficient to hold an Indemnified Person or an
     Indemnified Party, as the case may be, harmless, then the indemnifying
     party, in lieu of indemnifying such Indemnified Person or Indemnified Party
     hereunder, shall contribute to the amount paid or payable by such
     Indemnified Person or Indemnified Party as a result of such Claims and
     Indemnified Damages (each as defined in Section 6(a) above) in such
     proportion as is appropriate to reflect the relative fault of the
     indemnifying party on the one hand and of the Indemnified Person or
     Indemnified Party, as the case may be, on the other in connection with the
     statements or omissions that resulted in such loss, liability, claim,
     damage, or expense as well as any other relevant equitable considerations.
     The relative fault of the indemnifying party and of the Indemnified Person
     or Indemnified Party, as the case may be, shall be determined by reference
     to, among other things, whether the untrue or alleged untrue statement of a
     material fact or the omission to state a material fact relates to
     information supplied by the indemnifying party or by the Indemnified Person
     or Indemnified Party and the parties' relative intent, knowledge, access to
     information, and opportunity to correct or prevent such statement or
     omission.


                                     - 13 -



     Notwithstanding the foregoing, (i) no person involved in the sale of
     Registrable Securities, which person is guilty of fraudulent
     misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in
     connection with such sale, shall be entitled to contribution from any
     person involved in such sale of Registrable Securities who was not guilty
     of fraudulent misrepresentation; and (ii) contribution by any seller of
     Registrable Securities shall be limited in amount to the net amount of
     proceeds received by such seller from the sale of such Registrable
     Securities pursuant to such Registration Statement.

8.   REPORTS UNDER THE 1934 ACT.

     With a view to making available to the Holders the benefits of Rule 144
     promulgated under the 1933 Act or any other similar rule or regulation of
     the SEC that may at any time permit the Holders to sell securities of the
     Company to the public without registration ("RULE 144"), the Company agrees
     to:

     (a)  make and keep public information available, as those terms are
          understood and defined in Rule 144;

     (b)  file with the SEC in a timely manner all reports and other documents
          required by the Company under the 1993 Act and the 1934 Act so long as
          the Company remains subject to such requirements and the filing of
          such reports and other documents is required for the applicable
          provisions of Rule 144; and

     (c)  furnish to each Holder so long as such Holder owns Registrable
          Securities, promptly upon request, (i) a written statement by the
          Company that it has complied with the reporting requirements of Rule
          144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent
          annual or quarterly report of the Company and such other reports and
          documents so filed by the Company, and (iii) such other information as
          may be reasonably requested to permit the Holders to sell such
          securities pursuant to any rule or regulation of the SEC allowing the
          Holder to sell any securities without registration.


                                     - 14 -



9.   ASSIGNMENT OF REGISTRATION RIGHTS.

     The rights under this Agreement shall be freely assignable, in whole or in
     part at any time and from time to time during the Registration Period, by
     the Holder to any transferee of all or any portion of a Capital Note or of
     the Registrable Securities (provided that, in the case of the transfer of
     Registrable Securities only, the rights under the Agreement may be
     transferred only if the Holder reasonably believes that such transferee
     cannot immediately make a public distribution of such Registrable
     Securities without restriction under the 1933 Act, the Israel Securities
     Law or other applicable securities laws) if: (i) the Holder agrees in
     writing with the transferee or assignee to assign such rights, and a copy
     of such agreement is furnished to the Company within a reasonable time
     after such transfer or assignment; (ii) the Company is, within a reasonable
     time after such transfer or assignment, furnished with written notice of
     (a) the name and address of such transferee or assignee, and (b) the
     securities with respect to which such registration rights are being
     transferred or assigned; and (iii) within a reasonable period of time after
     such transfer or assignment, the transferee or assignee agrees in writing
     with the Company to be bound by all of the provisions contained herein. At
     the transferee's request, the Company shall promptly prepare and file any
     required prospectus supplement under Rule 424(b)(3) of the 1933 Act or
     other applicable provision of the 1933 Act and/or the Israel Securities Law
     to appropriately amend the list of selling shareholders thereunder to
     include such transferee.

10.  AMENDMENT OF REGISTRATION RIGHTS.

     Provisions of this Agreement may be amended and the observance thereof may
     be waived (either generally or in a particular instance and either
     retroactively or prospectively), only with the written consent of the
     Company and the Holders. Any amendment or waiver effected in accordance
     with this Section 10 shall be binding upon each Holder and the Company. No
     such amendment shall be effective to the extent that it applies to less
     than all of the Holders of the Registrable Securities. No consideration
     shall be offered or paid to any Person to amend or consent to a waiver or
     modification of any provision of any of this Agreement unless the same
     consideration also is offered to all of the parties to this Agreement.


                                     - 15 -



11.  OTHER REGISTRATION STATEMENTS; DEMAND AND INCIDENTAL REGISTRATIONS; NO
     CONFLICTING AGREEMENTS.

     (a)  From and after the time of filing of any Registration Statement filed
          pursuant hereto and prior to the effectiveness thereof, the Company
          shall not file a registration statement (including any shelf
          registration statements) (other than on Form S-8) with the SEC with
          respect to any securities of the Company, provided that nothing herein
          shall limit the filing of any registration statement demanded to be
          filed pursuant to a "demand" right granted by the Company prior to the
          filing of any such Registration Statement.

     (b)  If at any time during the Registration Period there is not an
          effective Registration Statement covering all of the then Registrable
          Securities, the Company shall, upon the demand of any Holder,
          immediately file a registration statement covering all of the then
          Registrable Securities and the provisions of this Agreement shall
          apply to such Registration Statement, MUTATIS MUTANDIS.

     (c)  If at any time the Company shall determine to prepare and file with
          the SEC and/or the ISA a registration statement relating to an
          underwritten offering for its own account or the account of others
          under the 1933 Act and/or the Israel Securities Law of any of its
          equity securities, other than on Form F-4 or Form S-8 (each as
          promulgated under the 1933 Act) or their then equivalents relating to
          equity securities to be issued solely in connection with any
          acquisition of any entity or business or equity securities issuable in
          connection with stock option or other employee benefit plans, then the
          Company shall send each Holder written notice of such determination
          and, if within twenty days after receipt of such notice, any such
          Holder shall so request in writing, the Company shall include in such
          registration statement all or any part of such Registrable Securities
          such Holder requests to be registered, subject to customary
          underwriter cutbacks applicable on a basis consistent with the
          Company's obligation to other existing holders of registration rights.

     (d)  The Company represents and warrants to the Holder that the Company is
          not a party to any agreement that conflicts in any manner with the
          Holder's rights to cause the Company to register Registrable Shares
          pursuant to this Agreement.


                                     - 16 -



12.  MISCELLANEOUS.

     (a)  Any notices, consents, waivers or other communications required or
          permitted to be given under the terms of this Agreement must be in
          writing and will be deemed to have been delivered: (i) upon receipt,
          when delivered personally; (ii) upon receipt, when sent by facsimile
          (provided confirmation of transmission is mechanically or
          electronically generated and kept on file by the sending party); or
          (iii) three business days after deposit if deposited in the mail for
          mailing by certified mail, postage prepaid, in each case properly
          addressed to the party to receive the same. The addresses and
          facsimile numbers for such communications shall be:

          to the Borrower at:      Tower Semiconductor Ltd.
                                   P.O. Box 619
                                   Migdal Haemek
                                   Israel
                                   Facsimile: (04) 604 7242
                                   Attention: Oren Shirazi
                                              Acting Chief Financial Officer

          WITH A COPY TO:          Yigal Arnon & Co.
                                   1 Azrieli Center
                                   46th Floor, The Round Tower
                                   Tel-Aviv, Israel 67021
                                   Facsimile: (03) 608 7714
                                   Attention: David H. Schapiro, Adv./
                                              Ari Fried, Adv.

          to the Bank at:          Corporate Division
                                   Migdal Levenstein
                                   23 Menachem Begin Road
                                   Tel-Aviv, Israel
                                   Facsimile: (03) 567 2995
                                   Attention: Head of Corporate Division

          to any other Holder at:  such address as shall be notified to the
                                   Company pursuant to Section 9 above.

     (b)  Failure of any party to exercise any right or remedy under this
          Agreement or otherwise, or delay by a party in exercising such right
          or remedy, shall not operate as a waiver thereof.

     (c)  This Agreement shall be governed by and construed in accordance with
          the laws of the State of Israel as applicable to contracts between two
          residents of the State of Israel entered into and to be performed
          entirely within the State of Israel. Any dispute arising under or in
          relation to this Agreement shall be resolved in the competent court
          for Tel Aviv-Jaffa district, and each of the parties hereby submits
          irrevocably to the jurisdiction of such court.

                                     - 17 -



     (d)  This Agreement constitutes the entire agreement among the parties
          hereto with respect to the subject matter hereof and thereof. There
          are no restrictions, promises, warranties or undertakings, other than
          those set forth or referred to herein and therein. This Agreement
          supersedes all prior agreements and understandings among the parties
          hereto with respect to the subject matter hereof and thereof.

     (e)  Neither this Agreement, nor any of Tower's obligations hereunder, may
          be assigned by Tower, except with the prior written consent of all the
          Holders. Subject to the requirements of Section 9, this Agreement
          shall inure to the benefit of and be binding upon the successors and
          permitted assigns of each of the parties hereto.

     (f)  The headings in this Agreement are for convenience of reference only
          and shall not limit or otherwise affect the meaning hereof.

     (g)  This Agreement may be executed in identical counterparts, each of
          which shall be deemed an original but all of which shall constitute
          one and the same agreement. This Agreement, once executed by a party,
          may be delivered to the other parties hereto by facsimile transmission
          of a copy of this Agreement bearing the signature of the party so
          delivering this Agreement.

     (h)  Each party shall do and perform, or cause to be done and performed,
          all such further acts and things, and shall execute and deliver all
          such other agreements, certificates, instruments and documents, as
          another party may reasonably request in order to carry out the intent
          and accomplish the purposes of this Agreement and the consummation of
          the transactions contemplated hereby.

     (i)  The language used in this Agreement will be deemed to be the language
          chosen by the parties to express their mutual intent and no rules of
          strict construction will be applied against any party.

     (j)  This Agreement is intended for the benefit of the parties hereto and
          their respective successors and permitted assigns, and is not for the
          benefit of, nor may any provision hereof be enforced by, any other
          person.


                                     - 18 -



     IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the day and year first above written.

                                           TOWER SEMICONDUCTOR LTD.

                                           By: ______________________________

                                           Name: ____________________________

                                           Its: _______________________________


                                           BANK HAPOALIM B.M.

                                           By: ______________________________

                                           Name: ____________________________

                                           Its: _______________________________


                                     - 19 -

                                                                   EXHIBIT 99.11

                          REGISTRATION RIGHTS AGREEMENT

     This Registration Rights Agreement (this "AGREEMENT") is made and entered
into effective as of September 28, 2006 by and between TOWER SEMICONDUCTOR LTD.
(the "COMPANY" or "TOWER"), a company organized under the laws of the State of
Israel, and BANK LEUMI LE-ISRAEL B.M., a banking corporation organized under the
laws of the State of Israel (the "BANK").

     WHEREAS, Tower is an independent manufacturer of wafers whose Ordinary
Shares are traded on the Nasdaq Stock Market ("NASDAQ") under the symbol "TSEM"
and whose Ordinary Shares and certain other securities are traded on the
Tel-Aviv Stock Exchange ("TASE") under the symbol "TSEM"; and

     WHEREAS, the Bank and Bank Hapoalim B.M. (collectively, the "BANKS") and
Tower are parties to a Facility Agreement dated January 18, 2001, as amended
(the "FACILITY AGREEMENT"); and

     WHEREAS, at the request of Tower, the Banks and Tower have entered into an
Amending Agreement dated August 24, 2006 (the "AMENDING AGREEMENT"), the
conditions to the effectiveness of which include, INTER ALIA, the issuance to
each of the Banks or its nominee, of an equity-equivalent convertible capital
note which will in turn be convertible, in whole or in part, by the Bank at any
time and from time to time into shares of Tower and the entering into by the
Bank and Tower of a conversion agreement (the "CONVERSION AGREEMENT") and this
Agreement, in each case, on the date of the effectiveness of the Amending
Agreement (the "AMENDMENT CLOSING DATE"); and

     WHEREAS, clause 9.4 of the Facility Agreement, as amended by the Amending
Agreement, obligates the Company, under certain circumstances, to make a payment
to the Banks which, subject to said clause 9.4 and the Conversion Agreement, can
be paid in the form of shares, capital notes or convertible debentures and the
parties intend that the registration rights set forth in this Agreement also be
applicable with respect to such shares and/or shares issuable upon conversion of
any such capital notes or convertible debentures (the "CLAUSE 9.4 EQUITY
ISSUANCES"),

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Bank hereby
agree as follows:





1.   DEFINITIONS AND INTERPRETATION.

     As used in this Agreement, the following terms shall have the following
     meanings:

     (a)  "CAPITAL NOTE" means any capital note that is convertible into shares
          of Tower.

     (b)  "HOLDER" means the Bank, any nominee of the Bank to hold the Clause
          9.4 Equity Issuances (the "NOMINEE"), any transferee or assignee to
          whom the Bank or the Nominee assigns its rights, in whole or in part,
          and any transferee or assignee thereof to whom a transferee or
          assignee assigns its rights, in accordance with Section 9.

     (c)  "ISA" means the Israel Securities Authority or any similar or
          successor agency of Israel administering the Israel Securities Law.

     (d)  "ISRAEL SECURITIES LAW" means the Israel Securities Law, 5728-1968
          (including the regulations promulgated thereunder), as amended.

     (e)  "1933 ACT" means the U.S. Securities Act of 1933, as amended, and the
          rules and regulations thereunder, or any similar successor statute.

     (f)  "1934 ACT" means the U.S. Securities Exchange Act of 1934, as amended,
          and the rules and regulations thereunder, or any similar successor
          statute.

     (g)  "REGISTER", "REGISTERED", and "REGISTRATION" refer to a registration
          effected by preparing and filing a registration statement in
          compliance with the 1933 Act and the effectiveness of such
          registration statement in accordance with the 1933 Act or the
          equivalent actions under the laws of another jurisdiction.

     (h)  "REGISTRABLE SECURITIES" means (i) the ordinary shares of the Company
          issued or issuable upon conversion of any Capital Note by any Holder,
          (ii) any ordinary shares issued as part of the Clause 9.4 Equity
          Issuances, including shares issued or issuable upon conversion of
          Capital Notes or convertible debentures issued as part of the Clause
          9.4 Equity Issuances, which are held by a Holder (iii) ordinary shares
          of the Company issued or issuable upon exercise of a Warrant and (iv)
          any shares of capital stock issued or issuable with respect to the
          ordinary shares of the Company as a result of any stock split, stock
          dividend, rights offering, recapitalization, merger, exchange or
          similar event or otherwise, including as described in any Capital
          Note.

                                     - 2 -




     (i)  "REGISTRATION STATEMENT" means a registration statement or
          registration statements of the Company covering Registrable Securities
          filed with (a) the SEC under the 1933 Act, including the Form F-3
          Registration Statement No. 333-131315 previously filed by the Company
          covering ordinary shares issuable upon the exercise of Warrants, and
          (b) the ISA under the Israel Securities Law, to the extent required
          under the Israel Securities Law, so as to allow the Holder to freely
          resell the Registrable Securities in Israel, including on the TASE.

     (j)  "SEC" means the United States Securities and Exchange Commission or
          any similar or successor agency of the United States administering the
          1933 Act.

     (k)  "WARRANT" means the warrants issued to the Bank by the Company prior
          to the Amendment Closing Date and which are amended on the Amendment
          Closing Date.

     In this Agreement:

     (a)  Words importing the singular shall include the plural and VICE VERSA
          and words importing any gender shall include all other genders and
          references to persons shall include partnerships, corporations and
          unincorporated associations.

     (b)  Any reference in this Agreement to a specific form or to any rule or
          regulation adopted by the SEC shall also include any successor form or
          amended or successor rule or regulation subsequently adopted by the
          SEC, all as the same may be in effect at the time.

     (c)  Any reference in this Agreement to a statute, act or law shall be
          construed as a reference to such statute, act or law as the same may
          have been, or may from time to time be, amended or reenacted.

     (d)  A "PERSON" shall be construed as a reference to any person, firm,
          company, corporation, government, state or agency of a state or any
          association or partnership (whether or not having separate legal
          personality) or two or more of the aforegoing.


                                     - 3 -



     (e)  "INCLUDING" and "INCLUDES" means, including, without limiting the
          generality of any description preceding such terms.

     (f)  The headings herein are for convenience only, do not constitute a part
          of this Agreement and shall not be deemed to limit or affect any of
          the provisions hereof.

2.   REGISTRATION.

     (a)  The Company shall prepare, and, as soon as practicable but in no event
          later than (a) 45 days after the date of this Agreement and (b) the
          date of the Clause 9.4 Equity Issuances, in each case file with the
          SEC a Registration Statement on Form F-3 and make all required filings
          with the ISA covering the resale of all of the then Registrable
          Securities that are not already registered. The Company shall use its
          best efforts to have the Registration Statement declared effective by
          the SEC and the ISA as soon as possible after such filing with the SEC
          and the ISA.

     (b)  In the event that Form F-3 shall not be available for the registration
          of the resale of Registrable Securities hereunder, the Company shall
          (i) register the resale of the Registrable Securities on another
          appropriate form reasonably acceptable to the Holders of the
          Registrable Securities to be registered on such Registration Statement
          and (ii) undertake to register the Registrable Securities on Form F-3
          as soon as such form is available, provided that, in each such event,
          the Company shall maintain the effectiveness of the Registration
          Statement then in effect until such time as a Registration Statement
          on Form F-3 covering the Registrable Securities has been declared
          effective by the SEC.

3.   RELATED OBLIGATIONS.

     (a)  Following the filing and effectiveness of each Registration Statement
          with the SEC pursuant to Section 2(a), the Company shall keep the
          Registration Statement effective pursuant to Rule 415 of the 1933 Act
          and under the Israel Securities Law at all times until the earlier of
          (i) the date as of which all of the Holders confirm to the Company in
          writing that they may sell all of the Registrable Securities covered
          by such Registration Statement without restriction pursuant to all of
          the following: (x) Rule 144(k) under the 1933 Act, (y) the Israel
          Securities Law and (z) other securities or "blue sky" laws of each
          jurisdiction in which the Company obtained a registration or
          qualification in accordance with Section 3(d) below or (ii) the date
          on which the Holders shall have sold all the Registrable Securities
          covered by such Registration Statement (A) in accordance with such
          Registration Statement (except to another Holder pursuant to Section
          9) or (B) to the public pursuant to Rule 144 under the 1933 Act (the
          "REGISTRATION PERIOD"), the Company to ensure that such Registration
          Statement (including any amendments or supplements thereto and
          prospectuses contained therein) shall not contain any untrue statement
          of a material fact or omit to state a material fact required to be
          stated therein, or necessary to make the statements therein, in light
          of the circumstances in which they were made, not misleading, subject
          to Section 3(e) below.


                                     - 4 -



     (b)  The Company shall prepare and file with the SEC and the ISA (to the
          extent required) such amendments (including post-effective amendments)
          and supplements to each Registration Statement and the prospectus used
          in connection with such Registration Statement, which prospectus is to
          be filed pursuant to Rule 424 under the 1933 Act or under the Israel
          Securities Law, as may be necessary to keep such Registration
          Statement effective at all times during the Registration Period, and,
          during such period, comply with the provisions of the 1933 Act and the
          Israel Securities Law with respect to the disposition of all
          Registrable Securities of the Company covered by such Registration
          Statement until such time as all of such Registrable Securities shall
          have been disposed of in accordance with the intended methods of
          disposition by the seller or sellers thereof as set forth in such
          Registration Statement, which, for the avoidance of doubt, shall
          include sales on the Nasdaq Stock Market and the TASE, as well as
          sales not made on such exchanges. In the case of amendments and
          supplements to a Registration Statement which are required to be filed
          pursuant to the Agreement (including pursuant to this Section 3(b) by
          reason of the Company filing a report on Form 20-F, Form 6-K or any
          analogous report under the 1934 Act), the Company shall have
          incorporated such report by reference into the Registration Statement,
          if applicable, or shall file such amendments or supplements with the
          SEC and the ISA on the same day on which the 1934 Act report is filed
          which created the requirement for the Company to amend or supplement
          the Registration Statement.


                                     - 5 -



     (c)  The Company shall furnish each Holder whose Registrable Securities are
          included in any Registration Statement, without charge, (i) promptly
          after the same is prepared and filed with the SEC, at least three (3)
          copies of such Registration Statement and any amendment(s) thereto,
          including financial statements and schedules, all documents
          incorporated therein by reference, all exhibits and each preliminary
          prospectus (or such other number of copies as such Holder may
          reasonably request), (ii) upon the effectiveness of any Registration
          Statement, at least ten (10) copies of the prospectus included in such
          Registration Statement and all amendments and supplements thereto (or
          such other number of copies as such Holder may reasonably request) and
          (iii) such other documents, including copies of any preliminary or
          final prospectus and of any Registration Statements and prospectuses
          filed with the ISA, as such Holder may reasonably request from time to
          time in order to facilitate the disposition of the Registrable
          Securities owned by such Holder.

     (d)  The Company shall use its best efforts to (i) register and qualify,
          unless an exemption from registration and qualification applies, the
          resale by the Holders of the Registrable Securities covered by a
          Registration Statement under such other securities or "blue sky" laws
          of all the states of the United States, (ii) prepare and file in those
          jurisdictions, such amendments (including post-effective amendments)
          and supplements to such registrations and qualifications as may be
          necessary to maintain the effectiveness thereof during the
          Registration Period, (iii) take such other actions as may be necessary
          to maintain such registrations and qualifications in effect at all
          times during the Registration Period, and (iv) take all other actions
          reasonably necessary or advisable to qualify the Registrable
          Securities for sale in such jurisdictions; provided, however, that the
          Company shall not be required in connection therewith or as a
          condition thereto to (x) qualify to do business in any jurisdiction
          where it would not otherwise be required to qualify but for this
          Section 3(d), or (y) file a general consent to service of process in
          any such jurisdiction. The Company shall promptly notify each Holder
          who holds Registrable Securities of the receipt by the Company of any
          notification with respect to the suspension of the registration or
          qualification of any of the Registrable Securities for sale under the
          securities or "blue sky" laws of any jurisdiction in the United States
          or its receipt of actual notice of the initiation or threatening of
          any proceeding for such purpose.


                                     - 6 -



     (e)  The Company shall notify each Holder in writing of the happening of
          any event, as promptly as practicable after becoming aware of such
          event, as a result of which the prospectus included in a Registration
          Statement, as then in effect, includes an untrue statement of a
          material fact or omission to state a material fact required to be
          stated therein or necessary to make the statements therein, in light
          of the circumstances under which they were made, not misleading. The
          Company shall use its best efforts to minimize the period of time
          during which a Registration Statement includes an untrue statement of
          a material fact or omission to state a material fact required to be
          stated therein or necessary to make the statements therein, in light
          of the circumstances under which they were made, not misleading. The
          Company shall promptly notify each Holder in writing (i) when a
          prospectus or any prospectus supplement or post-effective amendment
          has been filed so that the Registration Statement does not include an
          untrue statement of a material fact or omission to state a material
          fact required to be stated therein or necessary to make the statements
          therein, in light of the circumstances under which they were made, not
          misleading, and when a Registration Statement or any post-effective
          amendment has become effective (notification of such effectiveness
          shall be delivered to each Holder by facsimile on the same day of such
          effectiveness and by overnight mail), (ii) of any request by the SEC
          or the ISA for amendments or supplements to a Registration Statement
          or related prospectus or related information, and (iii) of the
          Company's reasonable determination that a post-effective amendment to
          a Registration Statement would be appropriate.

     (f)  The Company shall use its best efforts to prevent the issuance of any
          stop order or other suspension of effectiveness of a Registration
          Statement, or the suspension of the qualification of any of the
          Registrable Securities for sale in any jurisdiction and, if such an
          order or suspension is issued, to obtain the withdrawal of such order
          or suspension at the earliest possible moment and to notify each
          Holder who holds Registrable Securities being sold of the issuance of
          such order and the resolution thereof or its receipt of actual notice
          of the initiation or threat of any proceeding for such purpose.

     (g)  The Company shall cause all the Registrable Securities covered by a
          Registration Statement to be listed on each securities exchange on
          which securities of the same class or series issued by the Company are
          then listed, including the NASDAQ and the TASE and the Company shall,
          not later than the effective date of a Registration Statement, deliver
          to the Holders a copy of the approvals of the TASE and the NASDAQ
          (and/or any other exchange, if applicable) to the listing of the
          Registrable Securities covered by such Registration Statement on such
          exchange.


                                     - 7 -



     (h)  The Company shall cooperate with the Holders who hold Registrable
          Securities being offered and, to the extent applicable, facilitate the
          timely preparation and delivery of certificates (not bearing any
          restrictive legend) representing the Registrable Securities to be
          offered pursuant to a Registration Statement and enable such
          certificates to be in such denominations or amounts, as the case may
          be, as the Holders may reasonably request and registered in such names
          as the Holders may request.

     (i)  The Company shall provide a transfer agent and registrar of all
          Registrable Securities and a CUSIP number not later than the effective
          date of the applicable Registration Statement.

     (j)  If requested by a Holder, the Company shall (i) as soon as practicable
          incorporate in a prospectus supplement or post-effective amendment
          such information as a Holder requests to be included therein,
          information with respect to the number of Registrable Securities being
          offered or sold, the purchase price being paid therefor and any other
          terms of the offering of the Registrable Securities to be sold in such
          offering; (ii) as soon as practicable make all required filings of
          such prospectus supplement or post-effective amendment after being
          notified of the matters to be incorporated in such prospectus
          supplement or post-effective amendment; and (iii) as soon as
          practicable, supplement or make amendments to any Registration
          Statement if reasonably requested by a Holder of such Registrable
          Securities.

     (k)  In the event of any underwritten public offering of the Registrable
          Securities, enter into and perform its obligations under an
          underwriting agreement with usual and customary terms that are
          generally satisfactory to the managing underwriter of such offering.
          The Holder shall also enter into and perform its obligations under
          such an agreement (the terms of which must be satisfactory to the
          Holder if the Holder is to participate in such offering).

     (l)  The Company shall afford the Holder and its representatives (including
          counsel) the opportunity at any time and from time to time during the
          Registration Period to make such examinations of the business affairs
          and other material financial and corporate documents of the Company
          and its subsidiaries as the Holder may reasonably deem necessary to
          satisfy itself as to the accuracy of the registration statement
          (subject to a reasonable confidentiality undertaking on the part of
          the Holder and its representatives).


                                     - 8 -



     (m)  The Company shall furnish, at the request of the Holder in connection
          with the registration of Registrable Shares pursuant to this
          Agreement, on the date that such Registrable Shares are delivered to
          the underwriters for sale, if such securities are being sold through
          underwriters, or, if such securities are not being sold through
          underwriters, on the date that the Registration Statement with respect
          to such securities becomes effective and on the date of each
          post-effective amendment thereof: (i) an opinion, dated such date, of
          the counsel representing the Company for the purposes of such
          registration, in form and substance as is customarily given to
          underwriters in an underwritten public offering, addressed to the
          underwriters, if any, and to the Holder; and (ii) a letter, dated such
          date, from the independent certified public accountants of the
          Company, in form and substance as is customarily given by independent
          certified public accountants to underwriters in an underwritten public
          offering, addressed to the underwriters, if any, and to the Holder.

     (n)  The Company shall comply with all applicable rules and regulations of
          the SEC and shall make generally available to its security holders an
          earnings statement satisfying the provisions of Section 11(a) of the
          1933 Act as soon as practicable after the effective date of the
          Registration Statement and in any event no later than 45 days after
          the end of a 12-month period (or 90 days, if such period is a fiscal
          year) beginning with the first month of the Company's first fiscal
          quarter commencing after the effective date of the Registration
          Statement.

4.   OBLIGATIONS OF THE HOLDERS.

     Each Holder agrees that, upon receipt of any notice from the Company of the
     happening of any event of the kind described in the first sentence of
     Section 3(e) or in Section 3(f), such Holder will immediately discontinue
     disposition of Registrable Securities pursuant to any Registration
     Statement(s) covering such Registrable Securities until such Holder's
     receipt of the copies of the supplemented or amended prospectus
     contemplated by the first sentence of Section 3(e) or receipt of notice
     that no supplement or amendment is required.


                                     - 9 -



5.   EXPENSES OF REGISTRATION.

     All expenses, other than underwriting discounts and commissions, incurred
     in connection with registrations, filings or qualifications pursuant to
     Sections 2 and 3, including, without limitation, all registration, listing
     and qualifications fees, printers and accounting fees, fees and
     disbursements of counsel to the Company and the Holders, including in
     connection with such examinations described in Section 3(l) above, shall be
     paid by the Company.

6.   INDEMNIFICATION.

     In the event any Registrable Securities are included in a Registration
     Statement under this Agreement:


                                     - 10 -



     (a)  To the fullest extent permitted by law, the Company will, and hereby
          does, indemnify, hold harmless and defend each Holder, the directors,
          officers, partners, employees, agents, representatives of, and each
          Person, if any, who controls any Holder within the meaning of the 1933
          Act or 1934 Act (each, an "INDEMNIFIED PERSON"), against any losses,
          claims, damages, liabilities, judgments, fines, penalties, charges,
          costs, reasonable attorneys' fees, amounts paid in settlement or
          expenses, joint or several, (collectively, "CLAIMS") incurred in
          investigating, preparing or defending any action, claim, suit,
          inquiry, proceeding, investigation or appeal taken from the foregoing
          by or before any court or governmental, administrative or other
          regulatory agency, body or the SEC or the ISA, whether pending or
          threatened, whether or not a person to be indemnified is or may be a
          party thereto ("INDEMNIFIED DAMAGES"), to which any of them may become
          subject insofar as such Claims (or actions or proceedings, whether
          commenced or threatened, in respect thereof) arise out of or are based
          upon: (i) any untrue statement or alleged untrue statement of a
          material fact in a Registration Statement or any post-effective
          amendment thereto or in any filing made in connection with the
          qualification of the offering under the securities or other "blue sky"
          laws of any jurisdiction in which Registrable Securities are offered
          ("BLUE SKY FILING"), or the omission or alleged omission to state a
          material fact required to be stated therein or necessary to make the
          statements therein not misleading, (ii) any untrue statement or
          alleged untrue statement of a material fact contained in any
          Registration Statement, preliminary prospectus, final prospectus or
          "free writing prospectus" (as such term is defined in Rule 405 under
          the 1933 Act) or any amendment or supplement to any such prospectus or
          the omission or alleged omission to state therein any material fact
          necessary to make the statements made therein, in light of the
          circumstances under which the statements therein were made, not
          misleading, (iii) any violation or alleged violation by the Company of
          the 1933 Act, the 1934 Act, any other law, including, without
          limitation, any state securities law, the Israel Securities Law or any
          rule or regulation thereunder relating to the offer or sale of the
          Registrable Securities pursuant to a Registration Statement or (iv)
          any material violation of this Agreement (the matters in the foregoing
          clauses (i) through (iv) being, collectively, "VIOLATIONS"). Subject
          to Section 6(c), the Company shall reimburse the Indemnified Persons
          promptly as such expenses are incurred and are due and payable, for
          any legal fees or other reasonable expenses incurred by them in
          connection with investigating or defending any such Claim.
          Notwithstanding anything to the contrary contained herein, the
          indemnification agreement contained in this Section 6(a): (i) shall
          not apply to a Claim by an Indemnified Person arising out of or based
          upon a Violation which occurs in reliance upon and in conformity with
          information furnished in writing to the Company by such Indemnified
          Person expressly for inclusion in any such Registration Statement,
          preliminary prospectus, final prospectus or free writing prospectus or
          any such amendment thereof or supplement thereto and (ii) shall not
          apply to amounts paid in settlement of any Claim if such settlement is
          effected without the prior written consent of the Company, which
          consent shall not be unreasonably withheld. Such indemnity shall
          remain in full force and effect regardless of any investigation made
          by or on behalf of the Indemnified Person and shall survive the
          transfer of the Registrable Securities by the Holders pursuant to
          Section 9.

     (b)  In connection with any Registration Statement in which a Holder is
          participating, each such Holder agrees, severally and not jointly, to
          indemnify, hold harmless and defend, to the same extent and in the
          same manner as is set forth in Section 6(a), the Company, each of its
          directors, each of its officers who signs the Registration Statement,
          each Person, if any, who controls the Company within the meaning of
          the 1933 Act or the 1934 Act (each an "INDEMNIFIED PARTY"), against
          any Claim or Indemnified Damages to which any of them may become
          subject, under the 1933 Act, the 1934 Act or otherwise, insofar as
          such Claim or Indemnified Damages arise out of or are based upon any
          Violation, in each case to the extent, and only to the extent, that
          such Violation occurs in reliance upon and in conformity with written
          information furnished to the Company by such Holder expressly for
          inclusion in Registration Statement, preliminary prospectus, final
          prospectus or free writing prospectus and, subject to Section 6(c),
          such Holder will reimburse any legal or other expenses reasonably
          incurred by an Indemnified Party in connection with investigating or
          defending any such Claim; provided, however, that the indemnity
          agreement contained in this Section 6(b) and the agreement with
          respect to contribution contained in Section 7 shall not apply to
          amounts paid in settlement of any Claim if such settlement is effected
          without the prior written consent of such Holder; provided, further,
          however, that the Holder shall be liable under this Section 6 for only
          that amount of a Claim or Indemnified Damages as does not exceed the
          net proceeds to such Holder as a result of the sale of Registrable
          Securities pursuant to such Registration Statement. Such indemnity
          shall remain in full force and effect regardless of any investigation
          made by or on behalf of such Indemnified Party and shall survive the
          transfer of the Registrable Securities by the Holders pursuant to
          Section 9.


                                     - 11 -



     (c)  Promptly after receipt by an Indemnified Person or Indemnified Party
          under this Section 6 of notice of the commencement of any action or
          proceeding (including any governmental action or proceeding) involving
          a Claim, such Indemnified Person or Indemnified Party shall, if a
          Claim in respect thereof is to be made against any indemnifying party
          under this Section 6, deliver to the indemnifying party a written
          notice of the commencement thereof, and the indemnifying party shall
          have the right to participate in, and, to the extent the indemnifying
          party so desires, jointly with any other indemnifying party similarly
          noticed, to assume control of the defense thereof with counsel
          mutually satisfactory to the indemnifying party and the Indemnified
          Person or the Indemnified Party, as the case may be; provided,
          however, that an Indemnified Person or Indemnified Party shall have
          the right to retain its own counsel with the fees and expenses of not
          more than one counsel for such Indemnified Person or Indemnified Party
          to be paid by the indemnifying party, if, the representation by such
          counsel of the Indemnified Person or Indemnified Party and the
          indemnifying party would be inappropriate due to actual or potential
          differing interests between such Indemnified Person or Indemnified
          Party and any other party represented by such counsel in such
          proceeding. In the case of an Indemnified Person, legal counsel
          referred to in the immediately preceding sentence shall be selected by
          the Holders holding a majority in interest of the Registrable
          Securities included in the Registration Statement to which the Claim
          relates. The Indemnified Party or Indemnified Person shall cooperate
          with the indemnifying party in connection with any negotiation or
          defense of any such action or Claim by the indemnifying party and
          shall furnish to the indemnifying party all information reasonably
          available to the Indemnified Party or Indemnified Person which relates
          to such action or Claim. The failure to deliver written notice to the
          indemnifying party within a reasonable time of the commencement of any
          such action shall not relieve such indemnifying party of any liability
          to the Indemnified Person or Indemnified Party under this Section 6,
          except to the extent that the indemnifying party is prejudiced in its
          ability to defend such action but the omission to so notify the
          indemnifying party will not relieve such indemnifying party of any
          liability that it may have to any Indemnified Person or Party
          otherwise than under this Section 6(c), including under Section 6(e).


                                     - 12 -



     (d)  The indemnification required by this Section 6 shall be made by
          periodic payments of the amount thereof during the course of the
          investigation or defense, as and when bills are received or
          Indemnified Damages are incurred.

     (e)  The indemnity agreements contained herein shall be in addition to (i)
          any cause of action or similar right of the Indemnified Party or
          Indemnified Person against the indemnifying party or others, and (ii)
          any liabilities the indemnifying party may be subject to pursuant to
          the law.

7.   CONTRIBUTION.

     To the extent any indemnification by an indemnifying party is prohibited or
     limited by law or insufficient to hold an Indemnified Person or an
     Indemnified Party, as the case may be, harmless, then the indemnifying
     party, in lieu of indemnifying such Indemnified Person or Indemnified Party
     hereunder, shall contribute to the amount paid or payable by such
     Indemnified Person or Indemnified Party as a result of such Claims and
     Indemnified Damages (each as defined in Section 6(a) above) in such
     proportion as is appropriate to reflect the relative fault of the
     indemnifying party on the one hand and of the Indemnified Person or
     Indemnified Party, as the case may be, on the other in connection with the
     statements or omissions that resulted in such loss, liability, claim,
     damage, or expense as well as any other relevant equitable considerations.
     The relative fault of the indemnifying party and of the Indemnified Person
     or Indemnified Party, as the case may be, shall be determined by reference
     to, among other things, whether the untrue or alleged untrue statement of a
     material fact or the omission to state a material fact relates to
     information supplied by the indemnifying party or by the Indemnified Person
     or Indemnified Party and the parties' relative intent, knowledge, access to
     information, and opportunity to correct or prevent such statement or
     omission.


                                     - 13 -



     Notwithstanding the foregoing, (i) no person involved in the sale of
     Registrable Securities, which person is guilty of fraudulent
     misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in
     connection with such sale, shall be entitled to contribution from any
     person involved in such sale of Registrable Securities who was not guilty
     of fraudulent misrepresentation; and (ii) contribution by any seller of
     Registrable Securities shall be limited in amount to the net amount of
     proceeds received by such seller from the sale of such Registrable
     Securities pursuant to such Registration Statement.

8.   REPORTS UNDER THE 1934 ACT.

     With a view to making available to the Holders the benefits of Rule 144
     promulgated under the 1933 Act or any other similar rule or regulation of
     the SEC that may at any time permit the Holders to sell securities of the
     Company to the public without registration ("RULE 144"), the Company agrees
     to:

     (a)  make and keep public information available, as those terms are
          understood and defined in Rule 144;

     (b)  file with the SEC in a timely manner all reports and other documents
          required by the Company under the 1993 Act and the 1934 Act so long as
          the Company remains subject to such requirements and the filing of
          such reports and other documents is required for the applicable
          provisions of Rule 144; and

     (c)  furnish to each Holder so long as such Holder owns Registrable
          Securities, promptly upon request, (i) a written statement by the
          Company that it has complied with the reporting requirements of Rule
          144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent
          annual or quarterly report of the Company and such other reports and
          documents so filed by the Company, and (iii) such other information as
          may be reasonably requested to permit the Holders to sell such
          securities pursuant to any rule or regulation of the SEC allowing the
          Holder to sell any securities without registration.


                                     - 14 -



9.   ASSIGNMENT OF REGISTRATION RIGHTS.

     The rights under this Agreement shall be freely assignable, in whole or in
     part at any time and from time to time during the Registration Period, by
     the Holder to any transferee of all or any portion of a Capital Note or of
     the Registrable Securities (provided that, in the case of the transfer of
     Registrable Securities only, the rights under the Agreement may be
     transferred only if the Holder reasonably believes that such transferee
     cannot immediately make a public distribution of such Registrable
     Securities without restriction under the 1933 Act, the Israel Securities
     Law or other applicable securities laws) if: (i) the Holder agrees in
     writing with the transferee or assignee to assign such rights, and a copy
     of such agreement is furnished to the Company within a reasonable time
     after such transfer or assignment; (ii) the Company is, within a reasonable
     time after such transfer or assignment, furnished with written notice of
     (a) the name and address of such transferee or assignee, and (b) the
     securities with respect to which such registration rights are being
     transferred or assigned; and (iii) within a reasonable period of time after
     such transfer or assignment, the transferee or assignee agrees in writing
     with the Company to be bound by all of the provisions contained herein. At
     the transferee's request, the Company shall promptly prepare and file any
     required prospectus supplement under Rule 424(b)(3) of the 1933 Act or
     other applicable provision of the 1933 Act and/or the Israel Securities Law
     to appropriately amend the list of selling shareholders thereunder to
     include such transferee.

10.  AMENDMENT OF REGISTRATION RIGHTS.

     Provisions of this Agreement may be amended and the observance thereof may
     be waived (either generally or in a particular instance and either
     retroactively or prospectively), only with the written consent of the
     Company and the Holders. Any amendment or waiver effected in accordance
     with this Section 10 shall be binding upon each Holder and the Company. No
     such amendment shall be effective to the extent that it applies to less
     than all of the Holders of the Registrable Securities. No consideration
     shall be offered or paid to any Person to amend or consent to a waiver or
     modification of any provision of any of this Agreement unless the same
     consideration also is offered to all of the parties to this Agreement.


                                     - 15 -



11.  OTHER REGISTRATION STATEMENTS; DEMAND AND INCIDENTAL REGISTRATIONS; NO
     CONFLICTING AGREEMENTS.

     (a)  From and after the time of filing of any Registration Statement filed
          pursuant hereto and prior to the effectiveness thereof, the Company
          shall not file a registration statement (including any shelf
          registration statements) (other than on Form S-8) with the SEC with
          respect to any securities of the Company, provided that nothing herein
          shall limit the filing of any registration statement demanded to be
          filed pursuant to a "demand" right granted by the Company prior to the
          filing of any such Registration Statement.

     (b)  If at any time during the Registration Period there is not an
          effective Registration Statement covering all of the then Registrable
          Securities, the Company shall, upon the demand of any Holder,
          immediately file a registration statement covering all of the then
          Registrable Securities and the provisions of this Agreement shall
          apply to such Registration Statement, MUTATIS MUTANDIS.

     (c)  If at any time the Company shall determine to prepare and file with
          the SEC and/or the ISA a registration statement relating to an
          underwritten offering for its own account or the account of others
          under the 1933 Act and/or the Israel Securities Law of any of its
          equity securities, other than on Form F-4 or Form S-8 (each as
          promulgated under the 1933 Act) or their then equivalents relating to
          equity securities to be issued solely in connection with any
          acquisition of any entity or business or equity securities issuable in
          connection with stock option or other employee benefit plans, then the
          Company shall send each Holder written notice of such determination
          and, if within twenty days after receipt of such notice, any such
          Holder shall so request in writing, the Company shall include in such
          registration statement all or any part of such Registrable Securities
          such Holder requests to be registered, subject to customary
          underwriter cutbacks applicable on a basis consistent with the
          Company's obligation to other existing holders of registration rights.

     (d)  The Company represents and warrants to the Holder that the Company is
          not a party to any agreement that conflicts in any manner with the
          Holder's rights to cause the Company to register Registrable Shares
          pursuant to this Agreement.


                                     - 16 -



12.  MISCELLANEOUS.

     (a)  Any notices, consents, waivers or other communications required or
          permitted to be given under the terms of this Agreement must be in
          writing and will be deemed to have been delivered: (i) upon receipt,
          when delivered personally; (ii) upon receipt, when sent by facsimile
          (provided confirmation of transmission is mechanically or
          electronically generated and kept on file by the sending party); or
          (iii) three business days after deposit if deposited in the mail for
          mailing by certified mail, postage prepaid, in each case properly
          addressed to the party to receive the same. The addresses and
          facsimile numbers for such communications shall be:

          to the Borrower at:  Tower Semiconductor Ltd.
                               P.O. Box 619
                               Migdal Haemek
                               Israel
                               Facsimile: (04) 604 7242
                               Attention: Oren Shirazi
                                          Acting Chief Financial Officer

          WITH A COPY TO:      Yigal Arnon & Co.
                               1 Azrieli Center
                               46th Floor, The Round Tower
                               Tel-Aviv, Israel 67021
                               Facsimile: (03) 608 7714
                               Attention: David H. Schapiro, Adv./
                                          Ari Fried, Adv.

          to the Bank at:      Corporate Division
                               34 Yehuda Halevi Street
                               Tel-Aviv, Israel
                               Facsimile: (03) 514 9278
                               Attention: Manager of Hi-Tech Industries Section

         with a copy to
         (which shall not
         constitute notice):   Leumi and Co. Investment House Ltd.
                               25 Kalisher Street
                               Tel-Aviv 65165
                               Israel
                               Fax: 972-3-5141215
                               Attn: Head of Investment Sector

         to any other Holder at:   such address as shall be notified to the
                                   Company pursuant to Section 9 above.


                                     - 17 -



     (b)  Failure of any party to exercise any right or remedy under this
          Agreement or otherwise, or delay by a party in exercising such right
          or remedy, shall not operate as a waiver thereof.

     (c)  This Agreement shall be governed by and construed in accordance with
          the laws of the State of Israel as applicable to contracts between two
          residents of the State of Israel entered into and to be performed
          entirely within the State of Israel. Any dispute arising under or in
          relation to this Agreement shall be resolved in the competent court
          for Tel Aviv-Jaffa district, and each of the parties hereby submits
          irrevocably to the jurisdiction of such court.

     (d)  This Agreement constitutes the entire agreement among the parties
          hereto with respect to the subject matter hereof and thereof. There
          are no restrictions, promises, warranties or undertakings, other than
          those set forth or referred to herein and therein. This Agreement
          supersedes all prior agreements and understandings among the parties
          hereto with respect to the subject matter hereof and thereof.

     (e)  Neither this Agreement, nor any of Tower's obligations hereunder, may
          be assigned by Tower, except with the prior written consent of all the
          Holders. Subject to the requirements of Section 9, this Agreement
          shall inure to the benefit of and be binding upon the successors and
          permitted assigns of each of the parties hereto.

     (f)  The headings in this Agreement are for convenience of reference only
          and shall not limit or otherwise affect the meaning hereof.

     (g)  This Agreement may be executed in identical counterparts, each of
          which shall be deemed an original but all of which shall constitute
          one and the same agreement. This Agreement, once executed by a party,
          may be delivered to the other parties hereto by facsimile transmission
          of a copy of this Agreement bearing the signature of the party so
          delivering this Agreement.

     (h)  Each party shall do and perform, or cause to be done and performed,
          all such further acts and things, and shall execute and deliver all
          such other agreements, certificates, instruments and documents, as
          another party may reasonably request in order to carry out the intent
          and accomplish the purposes of this Agreement and the consummation of
          the transactions contemplated hereby.


                                     - 18 -



     (i)  The language used in this Agreement will be deemed to be the language
          chosen by the parties to express their mutual intent and no rules of
          strict construction will be applied against any party.

     (j)  This Agreement is intended for the benefit of the parties hereto and
          their respective successors and permitted assigns, and is not for the
          benefit of, nor may any provision hereof be enforced by, any other
          person.

     IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of the day and year first above written.


                                    TOWER SEMICONDUCTOR LTD.

                                    By: ______________________________

                                    Name: ____________________________

                                    Its: _______________________________


                                    BANK LEUMI LE-ISRAEL B.M.

                                    By: ______________________________

                                    Name: ____________________________

                                    Its: _______________________________


                                     - 19 -

                                                                   EXHIBIT 99.12

          THESE SECURITIES [(INCLUDING THE SECURITIES ISSUABLE PURSUANT
          HERETO)](1) HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE U.S.
          SECURITIES ACT OF 1933, AS AMENDED ("THE ACT"), OR ANY U.S. STATE OR
          OTHER JURISDICTION'S SECURITIES LAWS. THESE SECURITIES (INCLUDING THE
          SECURITIES ISSUABLE PURSUANT HERETO) MAY NOT BE SOLD, OFFERED FOR SALE
          OR PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
          REGISTRATION STATEMENT IN EFFECT UNDER THE ACT WITH RESPECT TO ANY
          SUCH SECURITIES OR AN OPINION OF COUNSEL (REASONABLY SATISFACTORY TO
          THE COMPANY) THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD
          PURSUANT TO RULE 144 OF THE ACT OR ON THE TEL-AVIV STOCK EXCHANGE IN
          COMPLIANCE WITH REGULATION S UNDER THE ACT.

                   EQUITY EQUIVALENT CONVERTIBLE CAPITAL NOTE
                      (PRINCIPAL AMOUNT OF US $39,500,000)

THIS EQUITY EQUIVALENT CONVERTIBLE CAPITAL NOTE ("THIS CAPITAL NOTE") in the
principal amount of US $39,500,000 (thirty-nine million five hundred thousand
United States Dollars) ("THE PRINCIPAL AMOUNT") has been issued by Tower
Semiconductor Ltd., an Israeli company ("THE COMPANY"), whose shares are
currently traded on The Nasdaq National Market ("NASDAQ") and the Tel-Aviv Stock
Exchange ("TASE"), to Bank Hapoalim B.M. ("THE HOLDER"). This Capital Note was
originally issued by the Company in exchange for the conversion by the original
Holder of this Capital Note of loans to the Company in a principal amount equal
to twice the Principal Amount and represents the obligation of the Company to
pay the Principal Amount to the Holder in accordance with and subject to the
terms set forth in this Capital Note.

1.   DEFINITIONS

     In this Capital Note, the following terms have the meanings given to them
     in this clause 1:

     1.1. "COMPANY" includes any person that shall succeed to or assume the
          obligations of the Company under this Capital Note; and

     1.2. "HOLDER" shall mean any person who at the time shall be the registered
          holder of this Capital Note or any part thereof.

- ----------
(1)  Following the effective date of the Registration Statement covering the
     Conversion Shares, bracketed language to be removed from all future Capital
     Notes to be issued and, at the request of the Holder, a substitute Capital
     Note omitting the bracketed language will promptly be delivered to the
     Holder.





     1.3. "ORDINARY SHARES" means the ordinary shares, nominal value NIS 1.00
          (one New Israel Sheqel) per share, of the Company (and any shares of
          capital stock substituted for the ordinary shares as a result of any
          stock split, stock dividend, recapitalisation, rights offering,
          exchange, merger or similar event or otherwise, including as described
          in this Capital Note).

2.   TERMS

     The Principal Amount shall neither bear interest nor be linked to any index
     and shall be subordinated to all liabilities of the Company having priority
     over the Ordinary Shares.

     The Principal Amount shall only be payable by the Company to the Holder out
     of distributions made upon the winding-up (whether solvent or insolvent),
     liquidation or dissolution of the Company and, in such event, on a PARI
     PASSU and pro rata basis with the Ordinary Shares after payment of all
     liabilities of the Company having priority over the Ordinary Shares. For
     the purposes only of calculation of the allocation of such distributions
     between holders of the Capital Note and holders of Ordinary Shares, the
     holder of this Capital Note shall be deemed to own the number of Ordinary
     Shares into which this Capital Note may then be converted. The Company
     shall not be entitled to prepay or redeem this Capital Note.

     This Capital Note shall be convertible into Ordinary Shares as set forth
     below and, for the removal of doubt, no such conversion shall be deemed a
     redemption or prepayment of this Capital Note.

3.   CONVERSION

     3.1. CONVERSION RIGHT

          The Holder of this Capital Note has the right, at the Holder's option,
          at any time and from time to time, to convert this Capital Note,
          without payment of any additional consideration, in accordance with
          the provisions of this clause 3, in whole or in part, into fully-paid
          and non-assessable Ordinary Shares. The number of Ordinary Shares into
          which this Capital Note may be converted ("THE CONVERSION SHARES")
          shall be determined by dividing the aggregate Principal Amount of this
          Capital Note by the conversion price in effect at the time of such
          conversion ("THE CONVERSION PRICE"). The Conversion Price initially
          shall be US $1.52 (one United States Dollar and fifty-two cents), as
          adjusted at any time and from time to time in accordance with clause 7
          below.

                                     - 2 -



     3.2. CONVERSION PROCEDURE

          This Capital Note may be converted in whole or in part at any time and
          from time to time by the surrender of this Capital Note to the Company
          at its principal office together with written notice of the election
          to convert all or any portion of the Principal Amount thereof, duly
          signed on behalf of the Holder. The Company shall, on such surrender
          date or as soon as practicable thereafter, issue irrevocable
          instructions to its stock transfer agent to deliver to the Holder a
          certificate or certificates for the number of Conversion Shares to
          which the Holder shall be entitled as a result of such conversion as
          aforesaid. Such conversion, the issue and allotment of such Conversion
          Shares and the registration of the Holder in the register of members
          of the Company as the holder of such Conversion Shares shall be deemed
          to have been made immediately prior to the close of business on the
          date of such surrender of this Capital Note or portion thereof and the
          person or persons entitled to receive the Conversion Shares issuable
          upon such conversion shall be treated for all purposes as the record
          holder or holders as of such date of such number of Conversion Shares
          to which the Holder shall be entitled as a result of such conversion
          as aforesaid. In the event of a partial conversion, the Company shall
          concurrently issue to the Holder a replacement Capital Note of like
          tenor as this Capital Note, but representing the Principal Amount
          remaining after such partial conversion. For the avoidance of doubt,
          the Company confirms that the terms of this Capital Note, including,
          without limitation, this clause 3, constitute the issue terms of the
          Conversion Shares and that, accordingly, the right of the Company
          pursuant to clauses 16.1 and 16.2 of the Company's Articles of
          Association to delay the issuance of stock certificates for up to 6
          (six) months after the allotment and registration of transfer is
          inapplicable. For the further removal of doubt, nothing herein shall
          derogate from the second sentence of clause 16.1 of the Company's
          Articles of Association.

4.   FRACTIONAL INTEREST

     No fractional shares will be issued in connection with any conversion
     hereunder. The Company shall round-down, to the nearest whole number, the
     number of Conversion Shares issuable in connection with any conversion
     hereunder.


                                     - 3 -



5.   CAPITAL NOTE CONFERS NO RIGHTS OF SHAREHOLDER

     The Holder shall not, by virtue of this Capital Note, have any rights as a
     shareholder of the Company prior to actual conversion into Conversion
     Shares in accordance with clause 3.2 above.

6.   ACQUISITION FOR INVESTMENT

     This Capital Note [, including the Conversion Shares,(2)] has not been
     registered under the Securities Act of 1933, as amended ("THE SECURITIES
     ACT"), or any other securities laws. The Holder acknowledges by acceptance
     of this Capital Note that it has acquired this Capital Note for investment
     and not with a view to distribution. [The Holder agrees that, unless the
     Conversion Shares have been registered under the Securities Act, any
     Conversion Shares issuable upon conversion of this Capital Note will be
     acquired for investment and not with a view to distribution in a manner
     inconsistent with the registration requirements of the U.S. securities laws
     and may have to be held indefinitely unless they are subsequently
     registered under the Securities Act or, based on an opinion of counsel
     reasonably satisfactory to the Company, an exemption from such registration
     is available; provided, however, that no opinion shall be required if sold
     pursuant to Rule 144 of the Securities Act or the transfer will be effected
     on the TASE and the Holder represents that the applicable conditions under
     Regulation S under the Securities Act have been satisfied.(3)] The Holder,
     by acceptance hereof, consents to the placement of legend(s) on this
     Capital Note and also on the Conversion Shares issuable upon conversion of
     this Capital Note, as to the applicable restrictions on transferability in
     order to ensure compliance with the Securities Act, unless in the
     reasonable opinion of counsel for the Company such legend is not required
     in order to ensure compliance with the Securities Act. The Company may
     issue stop transfer instructions to its transfer agent in connection with
     such restrictions.

     Nothing in this clause 6 shall derogate from any obligations of the Company
     under any Registration Rights Agreement to which the Company and the Holder
     are parties.

- ----------
(2)  Following the effective date of the Registration Statement covering the
     Conversion Shares, bracketed language to be removed from all future Capital
     Notes to be issued and, at the request of the Holder, a substitute Capital
     Note omitting the bracketed language will promptly be delivered to the
     Holder.

(3)  Following the effective date of the Registration Statement covering the
     Conversion Shares, bracketed language to be replaced with the following:
     "The Conversion Shares have been registered under the Securities Act on
     Form F-3 Registration Statement No. [INSERT RELEVANT REGISTRATION NUMBER]."
     on all future Capital Notes to be issued, and, at the request of the
     Holder, a substitute Capital Note having such replacement language will
     promptly be delivered to the Holder.


                                     - 4 -



7.   ADJUSTMENT OF CONVERSION PRICE AND NUMBER OF CONVERSION SHARES

     The number and kind of securities issuable initially upon the conversion of
     this Capital Note and the Conversion Price shall be subject to adjustment
     at any time and from time to time upon the occurrence of certain events, as
     follows:

     7.1. ADJUSTMENT FOR SHARES SPLITS AND COMBINATIONS

          If the Company at any time or from time to time effects a subdivision
          of the outstanding Ordinary Shares, the number of Conversion Shares
          issuable upon conversion of this Capital Note immediately before the
          subdivision shall be proportionately increased, and conversely, if the
          Company at any time or from time to time combines the outstanding
          Ordinary Shares, the number of Conversion Shares issuable upon
          conversion of this Capital Note immediately before the combination
          shall be proportionately decreased. Any adjustment under this clause
          7.1 shall become effective at the close of business on the date the
          subdivision or combination becomes effective.

     7.2. ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS

          In the event the Company at any time, or from time to time, makes or
          fixes a record date for the determination of holders of Ordinary
          Shares entitled to receive a dividend or other distribution payable in
          additional Ordinary Shares, then and in each such event, the number of
          Ordinary Shares issuable upon conversion of this Capital Note shall be
          increased as of the time of such issuance or, in the event such a
          record date is fixed, as of the close of business on such record date,
          by multiplying the number of Ordinary Shares issuable upon conversion
          of this Capital Note by a fraction: (i) the numerator of which shall
          be the total number of Ordinary Shares issued and outstanding
          immediately prior to the time of such issuance or the close of
          business on such record date, as applicable, plus the number of
          Ordinary Shares issuable in payment of such dividend or distribution;
          and (ii) the denominator of which is the total number of Ordinary
          Shares issued and outstanding immediately prior to the time of such
          issuance or the close of business on such record date, as applicable;
          provided, however, that if such record date is fixed and such dividend
          is not fully paid or if such distribution is not fully made on the
          date fixed therefor, the number of Ordinary Shares issuable upon
          conversion of this Capital Note shall be recomputed accordingly as of
          the close of business on such record date and thereafter the number of
          Ordinary Shares issuable upon conversion of this Capital Note shall be
          adjusted pursuant to this clause 7.2 as of the time of the actual
          payment of such dividends or distribution.


                                     - 5 -



     7.3. ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS

          In the event the Company at any time or from time to time makes, or
          fixes a record date for the determination of holders of Ordinary
          Shares entitled to receive a dividend or other distribution payable in
          securities of the Company other than Ordinary Shares (for the
          avoidance of doubt, other than in a rights offering as to which clause
          7.7 shall be applicable), then in each such event provision shall be
          made so that the Holder shall receive upon conversion of this Capital
          Note and for no additional consideration, in addition to the number of
          Ordinary Shares receivable thereupon, the amount of securities of the
          Company that the Holder would have received had this Capital Note been
          converted immediately prior to such event, or the record date for such
          event, as applicable.

     7.4. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION

          If the Ordinary Shares issuable upon conversion of this Capital Note
          are changed into the same or a different number of shares of any class
          or classes of shares, whether by recapitalization, reclassification,
          exchange, substitution or otherwise (other than a subdivision or
          combination of shares, dividends payable in Ordinary Shares or other
          securities of the Company or a reorganization, merger, consolidation
          or sale of assets, provided for elsewhere in this clause 7), then and
          in any such event the Holder shall have the right thereafter to
          exercise this Capital Note into the kind and amount of shares and
          other securities receivable upon such recapitalization,
          reclassification, exchange, substitution or other change, by holders
          of the number of Ordinary Shares for which this Capital Note might
          have been converted immediately prior to such recapitalization,
          reclassification, exchange, substitution or other change (or the
          record date for such event), all subject to further adjustment as
          provided herein and under the Company's Articles of Association.


                                     - 6 -



     7.5. REORGANIZATION, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS

          If at any time or from time to time there is a capital reorganization
          of the Ordinary Shares (other than a recapitalization, subdivision,
          combination, reclassification, exchange or substitution of shares as
          provided for elsewhere in this clause 7), or a merger or consolidation
          of the Company with or into another corporation, or the sale of all or
          substantially all of the Company's properties and assets to any other
          person, then, as a part of such reorganization, merger, consolidation
          or sale, provision shall be made so that the Holder shall thereafter
          be entitled to receive upon conversion of this Capital Note and for no
          additional consideration, the number of shares or other securities or
          property (including, without limitation, cash) of the Company, or of
          the successor corporation resulting from such merger or consolidation
          or sale, to which a holder of the number of Ordinary Shares issuable
          upon conversion of this Capital Note would have been entitled on such
          capital reorganization, merger, consolidation or sale.

     7.6. OTHER TRANSACTIONS

          In the event that the Company shall issue shares to its shareholders
          as a result of a split-off, spin-off or the like, then the Company
          shall only complete such issuance or other action if, as part thereof,
          allowance is made to protect the economic interest of the Holder
          either by increasing the number of Conversion Shares or by procuring
          that the Holder shall be entitled, on terms economically proportionate
          to those provided to its shareholders, to acquire additional shares of
          the spun-off or split-off entities.

     7.7. RIGHTS OFFERINGS

          If the Company, at any time and from time to time, shall fix a record
          date for, or shall make a distribution to, its shareholders of rights
          or warrants to subscribe for or purchase any security (collectively,
          "RIGHTS"), then, in each such event, the Company will provide the
          Holder, concurrently with the distribution of the Rights to its
          shareholders, identical rights, having terms and conditions identical
          to the Rights (for the avoidance of doubt, exercisable at the same
          time as the Rights), in such number to which the Holder would be
          entitled had the Holder converted this Capital Note into Conversion
          Shares immediately prior to the record date for such distribution, or
          if no record date shall be fixed, then immediately prior to such
          distribution , as applicable. Nothing in this clause 7.7 shall require
          the Company to complete any such distribution of Rights to its
          shareholders, including following the record date thereof, unless
          required pursuant to the terms of such distribution and, if such
          distribution of Rights to its shareholders is not completed in
          conformity with the terms of such distribution, then the Company shall
          be entitled not to complete the provision of rights to the Holder
          pursuant to this clause 7.7 above.


                                     - 7 -



     7.8. ADJUSTMENT FOR CASH DIVIDENDS AND DISTRIBUTIONS

          In the event the Company, at any time or from time to time until
          September 28, 2021, makes or fixes a record date for the determination
          of holders of Ordinary Shares entitled to receive a cash dividend or
          distribution, then and in each such event, the number of Ordinary
          Shares issuable upon conversion of this Capital Note shall be adjusted
          (for the avoidance of doubt, never decreased but either shall remain
          the same or increased), as of the close of business on such record
          date, by multiplying the number of Ordinary Shares issuable upon
          conversion of this Capital Note by a fraction: (i) the numerator of
          which shall be the closing price per share of the Ordinary Shares on
          the TASE on the determining date ("HAYOM HAKOVAYA") for such dividend
          or distribution; and (ii) the denominator of which shall be the
          adjusted "ex-dividend" price of the Ordinary Shares as such prices set
          out in (i) and (ii) are determined in each case by the TASE in
          accordance with its rules.

     7.9. GENERAL PROTECTION

          The Company will not, by amendment of its Articles of Association or
          other charter document or through any reorganization,
          recapitalization, transfer of assets, consolidation, merger,
          dissolution, issue or sale of securities or any other voluntary
          action, avoid or seek to avoid the observance or performance of any of
          the terms to be observed or performed hereunder, or impair the
          economic interest of the Holder, but will at all times in good faith
          assist in the carrying out of all the provisions hereof and in taking
          of all such actions and making all such adjustments as may be
          necessary or appropriate in order to protect the rights and the
          economic interests of the Holder against impairment.


                                     - 8 -



     7.10. NOTICE OF CAPITAL CHANGES

          If at any time the Company shall declare any dividend or distribution
          of any kind, or offer for subscription pro rata to the holders of
          Ordinary Shares any additional shares of any class, other rights or
          any security of any kind, or there shall be any capital reorganization
          or reclassification of the capital shares of the Company, or
          consolidation or merger of the Company with, or sale of all or
          substantially all of its assets to another company or there shall be a
          voluntary or involuntary dissolution, liquidation or winding-up of the
          Company, or other transaction described in this clause 7, then, in any
          one or more of the said cases, the Company shall give the Holder prior
          written notice, by registered or certified mail, postage prepaid, of
          the date on which: (i) a record shall be taken for such dividend,
          distribution or subscription rights; or (ii) such reorganization,
          reclassification, consolidation, merger, sale, dissolution,
          liquidation or winding-up shall take place, as the case may be. Such
          notice shall also specify the date as of which the holders of record
          of Ordinary Shares shall participate in such dividend or distribution,
          subscription rights, or shall be entitled to exchange their Ordinary
          Shares for securities or other property deliverable upon such
          reorganization, reclassification, consolidation, merger, sale,
          dissolution, liquidation or winding-up, as the case may be. Such
          written notice shall be given at least 14 (fourteen) days prior to the
          action in question and not less than 14 (fourteen) days prior to the
          record date in respect thereto.

     7.11. ADJUSTMENT OF CONVERSION PRICE

          Upon each adjustment in the number of Ordinary Shares purchasable
          hereunder, the Conversion Price shall be proportionately increased or
          decreased, as the case may be, in a manner that is the inverse of the
          manner in which the number of Ordinary Shares purchasable hereunder
          shall be adjusted.

     7.12. NOTICE OF ADJUSTMENTS

          Whenever the Conversion Price or the number of Ordinary Shares
          issuable upon conversion of this Capital Note shall be adjusted
          pursuant to this clause 7, the Company shall prepare a certificate
          signed by the chief financial officer of the Company setting forth, in
          reasonable detail, the event requiring the adjustment, the amount of
          the adjustment, the method by which such adjustment was calculated,
          and the Conversion Price and the number of Conversion Shares issuable
          upon conversion of this Capital Note after giving effect to such
          adjustment, and shall cause copies of such certificate to be mailed
          (by first class mail, postage prepaid) to the Holder.

8.   OTHER TRANSACTIONS

     In the event that the Company or its shareholders receive an offer to
     transfer all or substantially all of the shares in the Company, or to
     effect a merger or acquisition or sale of all or substantially all of the
     assets of the Company, then the Company shall promptly inform the Holder in
     writing of such offer.


                                     - 9 -



9.   TRANSFER OF THIS CAPITAL NOTE BY THE HOLDER

     This Capital Note shall be freely transferable or assignable by the Holder
     in whole or in part, at any time and from time to time, subject to the
     provisions of this clause 9. With respect to any transfer of this Capital
     Note, in whole or in part, the Holder shall surrender the Capital Note,
     together with a written request to transfer all or a portion of the
     Principal Amount of this Capital Note to the transferee, as well as, if
     reasonably requested by the Company, a written opinion of such Holder's
     counsel, to the effect that such offer, sale or other distribution may be
     effected without registration under the Securities Act. Upon surrender of
     such Capital Note (and delivery of such opinion, if so requested) by the
     Holder, the Company shall immediately register such transferee as the
     Holder of this Capital Note, or the portion thereof, transferred to such
     transferee, such registration shall be deemed to have been made immediately
     prior to the close of business on the date of such surrender and delivery
     (if applicable), and such transferee or transferees shall be treated for
     all purposes as the record holder or holders as of such date of a Capital
     Note in that portion of the Principal Amount of this Capital Note so
     transferred. The Company shall, as promptly as practicable, deliver to the
     Holder one or more Capital Notes, of like tenor as this Capital Note,
     except that the Principal Amount thereof shall be the amount transferred to
     such transferee, for delivery to the transferee or transferees (or, if the
     Holder requests, deliver such Capital Note directly to such transferee or
     transferees) and shall, if only a portion of the Principal Amount of this
     Capital Note is being transferred, concurrently deliver to the Holder one
     or more replacement Capital Notes to represent the portion of the Principal
     Amount of this Capital Note not so transferred. For the avoidance of doubt,
     the Company confirms that no approval by the Board of Directors of the
     Company of any transfer of this Capital Note or the Conversion Shares is
     required.

10.  REPRESENTATIONS, WARRANTIES AND COVENANTS

     The Company represents, warrants and covenants to the Holder as follows:

     10.1. this Capital Note has been duly authorized and executed by the
          Company and is a valid and binding obligation of the Company
          enforceable in accordance with its terms;


                                     - 10 -



     10.2. the Conversion Shares are duly authorized and are, and will be,
          reserved (for the avoidance of doubt, without the need for further
          corporate action by the Company) for issuance by the Company and, when
          issued in accordance with the terms hereof, will be validly issued,
          fully paid and non-assessable and not subject to any pre-emptive
          rights;

     10.3. the execution and delivery of this Capital Note are not, and the
          issuance of the Conversion Shares upon conversion of this Capital Note
          in accordance with the terms hereof will not be, inconsistent with the
          Company's Certificate of Incorporation, Memorandum of Association or
          Articles of Association, do not and will not contravene any law,
          governmental or regulatory rule or regulation, including NASDAQ and
          TASE rules and regulations, judgment or order applicable to the
          Company, do not and will not conflict with or contravene any provision
          of, or constitute a default under, any indenture, mortgage, contract
          or other instrument of which the Company is a party or by which it is
          bound or, except for consents that have already been obtained and
          filings already made, require the consent or approval of, the giving
          of notice to, the registration with or the taking of any action in
          respect of or by, any Israeli or foreign governmental authority or
          agency or other person; and

     10.4. the Conversion Shares have been approved for listing and trading on
          TASE.

11.  LOSS, THEFT, DESTRUCTION OR MUTILATION OF CAPITAL NOTE

     Upon receipt by the Company of evidence reasonably satisfactory to it of
     the loss, theft, destruction or mutilation of any Capital Note or
     Conversion Shares certificate, and in case of loss, theft or destruction,
     of indemnity, or security reasonably satisfactory to it, and upon
     reimbursement to the Company of all reasonable expenses incidental thereto,
     and upon surrender and cancellation of such Capital Note or Conversion
     Shares certificate, if mutilated, the Company will make and deliver a new
     Capital Note or Conversion Shares certificate of like tenor and dated as of
     such cancellation, in lieu of such Capital Note or Conversion Shares
     certificate.

12.  NOTICES

     All notices and other communications required or permitted hereunder to be
     given to a party to this Agreement shall be in writing and shall be faxed
     or mailed by registered or certified mail, postage prepaid, or otherwise
     delivered by hand or by messenger, addressed to such party's address as set
     forth below:


                                     - 11 -



         If to the Holder:   Bank Hapoalim B.M.
                             Corporate Division
                             Migdal Levenstein
                             23 Menachem Begin Road
                             Tel Aviv, Israel
                             ATTENTION: HEAD OF CORPORATE DIVISION
                             FACSIMILE: (03) 567 2995

         If to the Company:  Tower Semiconductor Ltd.
                             P.O. Box 619
                             Ramat Gabriel Industrial Zone
                             Migdal Haemek 23105
                             ATTENTION: OREN SHIRAZI, ACTING
                                        CHIEF FINANCIAL OFFICER
                             FACSIMILE: (04) 604 7242

         WITH A COPY TO:     Yigal Arnon & Co.
                             1 Azrieli Center
                             Tel Aviv
                             Israel
                             ATTENTION: DAVID H. SCHAPIRO, ADV./
                                        ARI FRIED, ADV.
                             FACSIMILE: (03) 608 7714

     or such other address with respect to a party as such party shall notify
     each other party in writing as above provided. Any notice sent in
     accordance with this clause 12 shall be effective: (a) if mailed, 5 (five)
     business days after mailing; (b) if sent by messenger, upon delivery; and
     (c) if sent via facsimile, 1 (one) business day following transmission and
     electronic confirmation of receipt.


                                     - 12 -



13.  APPLICABLE LAW; JURISDICTION

     This Capital Note shall be governed by and construed in accordance with the
     laws of the State of Israel as applicable to contracts between two
     residents of the State of Israel entered into and to be performed entirely
     within the State of Israel. Any dispute arising under or in relation to
     this Capital Note shall be resolved in the competent court for Tel
     Aviv-Jaffa district, and the Company and the Holder hereby submits
     irrevocably to the jurisdiction of such court.

Dated: September 28, 2006

for  TOWER SEMICONDUCTOR LTD.

By:     _______________________

Title:  _______________________



                                     - 13 -

                                                                   EXHIBIT 99.13

          THESE SECURITIES [(INCLUDING THE SECURITIES ISSUABLE PURSUANT
          HERETO)](1) HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE U.S.
          SECURITIES ACT OF 1933, AS AMENDED ("THE ACT"), OR ANY U.S. STATE OR
          OTHER JURISDICTION'S SECURITIES LAWS. THESE SECURITIES (INCLUDING THE
          SECURITIES ISSUABLE PURSUANT HERETO) MAY NOT BE SOLD, OFFERED FOR SALE
          OR PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A
          REGISTRATION STATEMENT IN EFFECT UNDER THE ACT WITH RESPECT TO ANY
          SUCH SECURITIES OR AN OPINION OF COUNSEL (REASONABLY SATISFACTORY TO
          THE COMPANY) THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD
          PURSUANT TO RULE 144 OF THE ACT OR ON THE TEL-AVIV STOCK EXCHANGE IN
          COMPLIANCE WITH REGULATION S UNDER THE ACT.

                   EQUITY EQUIVALENT CONVERTIBLE CAPITAL NOTE
                      (PRINCIPAL AMOUNT OF US $39,500,000)

THIS EQUITY EQUIVALENT CONVERTIBLE CAPITAL NOTE ("THIS CAPITAL NOTE") in the
principal amount of US $39,500,000 (thirty-nine million five hundred thousand
United States Dollars) ("THE PRINCIPAL AMOUNT") has been issued by Tower
Semiconductor Ltd., an Israeli company ("THE COMPANY"), whose shares are
currently traded on The Nasdaq National Market ("NASDAQ") and the Tel-Aviv Stock
Exchange ("TASE"), to Bank Leumi Le-Israel B.M. ("THE HOLDER"). This Capital
Note was originally issued by the Company in exchange for the conversion by the
original Holder of this Capital Note of loans to the Company in a principal
amount equal to twice the Principal Amount and represents the obligation of the
Company to pay the Principal Amount to the Holder in accordance with and subject
to the terms set forth in this Capital Note.

1.   DEFINITIONS

     In this Capital Note, the following terms have the meanings given to them
     in this clause 1:

     1.1. "COMPANY" includes any person that shall succeed to or assume the
          obligations of the Company under this Capital Note;

     1.2. "HOLDER" shall mean any person who at the time shall be the registered
          holder of this Capital Note or any part thereof; and


- ----------
(1)  Following the effective date of the Registration Statement covering the
     Conversion Shares, bracketed language to be removed from all future Capital
     Notes to be issued and, at the request of the Holder, a substitute Capital
     Note omitting the bracketed language will promptly be delivered to the
     Holder.





     1.3. "ORDINARY SHARES" means the ordinary shares, nominal value NIS 1.00
          (one New Israel Sheqel) per share, of the Company (and any shares of
          capital stock substituted for the ordinary shares as a result of any
          stock split, stock dividend, recapitalisation, rights offering,
          exchange, merger or similar event or otherwise, including as described
          in this Capital Note).

2.   TERMS

     The Principal Amount shall neither bear interest nor be linked to any index
     and shall be subordinated to all liabilities of the Company having priority
     over the Ordinary Shares.

     The Principal Amount shall only be payable by the Company to the Holder out
     of distributions made upon the winding-up (whether solvent or insolvent),
     liquidation or dissolution of the Company and, in such event, on a PARI
     PASSU and pro rata basis with the Ordinary Shares after payment of all
     liabilities of the Company having priority over the Ordinary Shares. For
     the purposes only of calculation of the allocation of such distributions
     between holders of the Capital Note and holders of Ordinary Shares, the
     holder of this Capital Note shall be deemed to own the number of Ordinary
     Shares into which this Capital Note may then be converted. The Company
     shall not be entitled to prepay or redeem this Capital Note.

     This Capital Note shall be convertible into Ordinary Shares as set forth
     below and, for the removal of doubt, no such conversion shall be deemed a
     redemption or prepayment of this Capital Note.

3.   CONVERSION

     3.1. CONVERSION RIGHT

          The Holder of this Capital Note has the right, at the Holder's option,
          at any time and from time to time, to convert this Capital Note,
          without payment of any additional consideration, in accordance with
          the provisions of this clause 3, in whole or in part, into fully-paid
          and non-assessable Ordinary Shares. The number of Ordinary Shares into
          which this Capital Note may be converted ("THE CONVERSION SHARES")
          shall be determined by dividing the aggregate Principal Amount of this
          Capital Note by the conversion price in effect at the time of such
          conversion ("THE CONVERSION PRICE"). The Conversion Price initially
          shall be US $1.52 (one United States Dollar and fifty-two cents), as
          adjusted at any time and from time to time in accordance with clause 7
          below.


                                     - 2 -



     3.2. CONVERSION PROCEDURE

          This Capital Note may be converted in whole or in part at any time and
          from time to time by the surrender of this Capital Note to the Company
          at its principal office together with written notice of the election
          to convert all or any portion of the Principal Amount thereof, duly
          signed on behalf of the Holder. The Company shall, on such surrender
          date or as soon as practicable thereafter, issue irrevocable
          instructions to its stock transfer agent to deliver to the Holder a
          certificate or certificates for the number of Conversion Shares to
          which the Holder shall be entitled as a result of such conversion as
          aforesaid. Such conversion, the issue and allotment of such Conversion
          Shares and the registration of the Holder in the register of members
          of the Company as the holder of such Conversion Shares shall be deemed
          to have been made immediately prior to the close of business on the
          date of such surrender of this Capital Note or portion thereof and the
          person or persons entitled to receive the Conversion Shares issuable
          upon such conversion shall be treated for all purposes as the record
          holder or holders as of such date of such number of Conversion Shares
          to which the Holder shall be entitled as a result of such conversion
          as aforesaid. In the event of a partial conversion, the Company shall
          concurrently issue to the Holder a replacement Capital Note of like
          tenor as this Capital Note, but representing the Principal Amount
          remaining after such partial conversion. For the avoidance of doubt,
          the Company confirms that the terms of this Capital Note, including,
          without limitation, this clause 3, constitute the issue terms of the
          Conversion Shares and that, accordingly, the right of the Company
          pursuant to clauses 16.1 and 16.2 of the Company's Articles of
          Association to delay the issuance of stock certificates for up to 6
          (six) months after the allotment and registration of transfer is
          inapplicable. For the further removal of doubt, nothing herein shall
          derogate from the second sentence of clause 16.1 of the Company's
          Articles of Association.

4.   FRACTIONAL INTEREST

     No fractional shares will be issued in connection with any conversion
     hereunder. The Company shall round-down, to the nearest whole number, the
     number of Conversion Shares issuable in connection with any conversion
     hereunder.


                                     - 3 -



5.   CAPITAL NOTE CONFERS NO RIGHTS OF SHAREHOLDER

     The Holder shall not, by virtue of this Capital Note, have any rights as a
     shareholder of the Company prior to actual conversion into Conversion
     Shares in accordance with clause 3.2 above.

6.   ACQUISITION FOR INVESTMENT

     This Capital Note [, including the Conversion Shares,(2)] has not been
     registered under the Securities Act of 1933, as amended ("THE SECURITIES
     ACT"), or any other securities laws. The Holder acknowledges by acceptance
     of this Capital Note that it has acquired this Capital Note for investment
     and not with a view to distribution. [The Holder agrees that, unless the
     Conversion Shares have been registered under the Securities Act, any
     Conversion Shares issuable upon conversion of this Capital Note will be
     acquired for investment and not with a view to distribution in a manner
     inconsistent with the registration requirements of the U.S. securities laws
     and may have to be held indefinitely unless they are subsequently
     registered under the Securities Act or, based on an opinion of counsel
     reasonably satisfactory to the Company, an exemption from such registration
     is available; provided, however, that no opinion shall be required if sold
     pursuant to Rule 144 of the Securities Act or the transfer will be effected
     on the TASE and the Holder represents that the applicable conditions under
     Regulation S under the Securities Act have been satisfied.(3)] The Holder,
     by acceptance hereof, consents to the placement of legend(s) on this
     Capital Note and also on the Conversion Shares issuable upon conversion of
     this Capital Note, as to the applicable restrictions on transferability in
     order to ensure compliance with the Securities Act, unless in the
     reasonable opinion of counsel for the Company such legend is not required
     in order to ensure compliance with the Securities Act. The Company may
     issue stop transfer instructions to its transfer agent in connection with
     such restrictions.

     Nothing in this clause 6 shall derogate from any obligations of the Company
     under any Registration Rights Agreement to which the Company and the Holder
     are parties.

- ----------
(2)  Following the effective date of the Registration Statement covering the
     Conversion Shares, bracketed language to be removed from all future Capital
     Notes to be issued and, at the request of the Holder, a substitute Capital
     Note omitting the bracketed language will promptly be delivered to the
     Holder.

(3)  Following the effective date of the Registration Statement covering the
     Conversion Shares, bracketed language to be replaced with the following:
     "The Conversion Shares have been registered under the Securities Act on
     Form F-3 Registration Statement No. [INSERT RELEVANT REGISTRATION NUMBER]."
     on all future Capital Notes to be issued, and, at the request of the
     Holder, a substitute Capital Note having such replacement language will
     promptly be delivered to the Holder.


                                     - 4 -



7.   ADJUSTMENT OF CONVERSION PRICE AND NUMBER OF CONVERSION SHARES

     The number and kind of securities issuable initially upon the conversion of
     this Capital Note and the Conversion Price shall be subject to adjustment
     at any time and from time to time upon the occurrence of certain events, as
     follows:

     7.1  ADJUSTMENT FOR SHARES SPLITS AND COMBINATIONS

          If the Company at any time or from time to time effects a subdivision
          of the outstanding Ordinary Shares, the number of Conversion Shares
          issuable upon conversion of this Capital Note immediately before the
          subdivision shall be proportionately increased, and conversely, if the
          Company at any time or from time to time combines the outstanding
          Ordinary Shares, the number of Conversion Shares issuable upon
          conversion of this Capital Note immediately before the combination
          shall be proportionately decreased. Any adjustment under this clause
          7.1 shall become effective at the close of business on the date the
          subdivision or combination becomes effective.

     7.2. ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS

          In the event the Company at any time, or from time to time, makes or
          fixes a record date for the determination of holders of Ordinary
          Shares entitled to receive a dividend or other distribution payable in
          additional Ordinary Shares, then and in each such event, the number of
          Ordinary Shares issuable upon conversion of this Capital Note shall be
          increased as of the time of such issuance or, in the event such a
          record date is fixed, as of the close of business on such record date,
          by multiplying the number of Ordinary Shares issuable upon conversion
          of this Capital Note by a fraction: (i) the numerator of which shall
          be the total number of Ordinary Shares issued and outstanding
          immediately prior to the time of such issuance or the close of
          business on such record date, as applicable, plus the number of
          Ordinary Shares issuable in payment of such dividend or distribution;
          and (ii) the denominator of which is the total number of Ordinary
          Shares issued and outstanding immediately prior to the time of such
          issuance or the close of business on such record date, as applicable;
          provided, however, that if such record date is fixed and such dividend
          is not fully paid or if such distribution is not fully made on the
          date fixed therefor, the number of Ordinary Shares issuable upon
          conversion of this Capital Note shall be recomputed accordingly as of
          the close of business on such record date and thereafter the number of
          Ordinary Shares issuable upon conversion of this Capital Note shall be
          adjusted pursuant to this clause 7.2 as of the time of the actual
          payment of such dividends or distribution.


                                     - 5 -



     7.3. ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS

          In the event the Company at any time or from time to time makes, or
          fixes a record date for the determination of holders of Ordinary
          Shares entitled to receive a dividend or other distribution payable in
          securities of the Company other than Ordinary Shares (for the
          avoidance of doubt, other than in a rights offering as to which clause
          7.7 shall be applicable), then in each such event provision shall be
          made so that the Holder shall receive upon conversion of this Capital
          Note and for no additional consideration, in addition to the number of
          Ordinary Shares receivable thereupon, the amount of securities of the
          Company that the Holder would have received had this Capital Note been
          converted immediately prior to such event, or the record date for such
          event, as applicable.

     7.4. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION

          If the Ordinary Shares issuable upon conversion of this Capital Note
          are changed into the same or a different number of shares of any class
          or classes of shares, whether by recapitalization, reclassification,
          exchange, substitution or otherwise (other than a subdivision or
          combination of shares, dividends payable in Ordinary Shares or other
          securities of the Company or a reorganization, merger, consolidation
          or sale of assets, provided for elsewhere in this clause 7), then and
          in any such event the Holder shall have the right thereafter to
          exercise this Capital Note into the kind and amount of shares and
          other securities receivable upon such recapitalization,
          reclassification, exchange, substitution or other change, by holders
          of the number of Ordinary Shares for which this Capital Note might
          have been converted immediately prior to such recapitalization,
          reclassification, exchange, substitution or other change (or the
          record date for such event), all subject to further adjustment as
          provided herein and under the Company's Articles of Association.


                                     - 6 -



     7.5. REORGANIZATION, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS

          If at any time or from time to time there is a capital reorganization
          of the Ordinary Shares (other than a recapitalization, subdivision,
          combination, reclassification, exchange or substitution of shares as
          provided for elsewhere in this clause 7), or a merger or consolidation
          of the Company with or into another corporation, or the sale of all or
          substantially all of the Company's properties and assets to any other
          person, then, as a part of such reorganization, merger, consolidation
          or sale, provision shall be made so that the Holder shall thereafter
          be entitled to receive upon conversion of this Capital Note and for no
          additional consideration, the number of shares or other securities or
          property (including, without limitation, cash) of the Company, or of
          the successor corporation resulting from such merger or consolidation
          or sale, to which a holder of the number of Ordinary Shares issuable
          upon conversion of this Capital Note would have been entitled on such
          capital reorganization, merger, consolidation or sale.

     7.6. OTHER TRANSACTIONS

          In the event that the Company shall issue shares to its shareholders
          as a result of a split-off, spin-off or the like, then the Company
          shall only complete such issuance or other action if, as part thereof,
          allowance is made to protect the economic interest of the Holder
          either by increasing the number of Conversion Shares or by procuring
          that the Holder shall be entitled, on terms economically proportionate
          to those provided to its shareholders, to acquire additional shares of
          the spun-off or split-off entities.

     7.7. RIGHTS OFFERINGS

          If the Company, at any time and from time to time, shall fix a record
          date for, or shall make a distribution to, its shareholders of rights
          or warrants to subscribe for or purchase any security (collectively,
          "RIGHTS"), then, in each such event, the Company will provide the
          Holder, concurrently with the distribution of the Rights to its
          shareholders, identical rights, having terms and conditions identical
          to the Rights (for the avoidance of doubt, exercisable at the same
          time as the Rights), in such number to which the Holder would be
          entitled had the Holder converted this Capital Note into Conversion
          Shares immediately prior to the record date for such distribution, or
          if no record date shall be fixed, then immediately prior to such
          distribution , as applicable. Nothing in this clause 7.7 shall require
          the Company to complete any such distribution of Rights to its
          shareholders, including following the record date thereof, unless
          required pursuant to the terms of such distribution and, if such
          distribution of Rights to its shareholders is not completed in
          conformity with the terms of such distribution, then the Company shall
          be entitled not to complete the provision of rights to the Holder
          pursuant to this clause 7.7 above.


                                     - 7 -



     7.8. ADJUSTMENT FOR CASH DIVIDENDS AND DISTRIBUTIONS

          In the event the Company, at any time or from time to time until
          September 28, 2021, makes or fixes a record date for the determination
          of holders of Ordinary Shares entitled to receive a cash dividend or
          distribution, then and in each such event, the number of Ordinary
          Shares issuable upon conversion of this Capital Note shall be adjusted
          (for the avoidance of doubt, never decreased but either shall remain
          the same or increased), as of the close of business on such record
          date, by multiplying the number of Ordinary Shares issuable upon
          conversion of this Capital Note by a fraction: (i) the numerator of
          which shall be the closing price per share of the Ordinary Shares on
          the TASE on the determining date ("HAYOM HAKOVAYA") for such dividend
          or distribution; and (ii) the denominator of which shall be the
          adjusted "ex-dividend" price of the Ordinary Shares as such prices set
          out in (i) and (ii) are determined in each case by the TASE in
          accordance with its rules.

     7.9. GENERAL PROTECTION

          The Company will not, by amendment of its Articles of Association or
          other charter document or through any reorganization,
          recapitalization, transfer of assets, consolidation, merger,
          dissolution, issue or sale of securities or any other voluntary
          action, avoid or seek to avoid the observance or performance of any of
          the terms to be observed or performed hereunder, or impair the
          economic interest of the Holder, but will at all times in good faith
          assist in the carrying out of all the provisions hereof and in taking
          of all such actions and making all such adjustments as may be
          necessary or appropriate in order to protect the rights and the
          economic interests of the Holder against impairment.


                                     - 8 -



     7.10. NOTICE OF CAPITAL CHANGES

          If at any time the Company shall declare any dividend or distribution
          of any kind, or offer for subscription pro rata to the holders of
          Ordinary Shares any additional shares of any class, other rights or
          any security of any kind, or there shall be any capital reorganization
          or reclassification of the capital shares of the Company, or
          consolidation or merger of the Company with, or sale of all or
          substantially all of its assets to another company or there shall be a
          voluntary or involuntary dissolution, liquidation or winding-up of the
          Company, or other transaction described in this clause 7, then, in any
          one or more of the said cases, the Company shall give the Holder prior
          written notice, by registered or certified mail, postage prepaid, of
          the date on which: (i) a record shall be taken for such dividend,
          distribution or subscription rights; or (ii) such reorganization,
          reclassification, consolidation, merger, sale, dissolution,
          liquidation or winding-up shall take place, as the case may be. Such
          notice shall also specify the date as of which the holders of record
          of Ordinary Shares shall participate in such dividend or distribution,
          subscription rights, or shall be entitled to exchange their Ordinary
          Shares for securities or other property deliverable upon such
          reorganization, reclassification, consolidation, merger, sale,
          dissolution, liquidation or winding-up, as the case may be. Such
          written notice shall be given at least 14 (fourteen) days prior to the
          action in question and not less than 14 (fourteen) days prior to the
          record date in respect thereto.

     7.11. ADJUSTMENT OF CONVERSION PRICE

          Upon each adjustment in the number of Ordinary Shares purchasable
          hereunder, the Conversion Price shall be proportionately increased or
          decreased, as the case may be, in a manner that is the inverse of the
          manner in which the number of Ordinary Shares purchasable hereunder
          shall be adjusted.

     7.12. NOTICE OF ADJUSTMENTS

          Whenever the Conversion Price or the number of Ordinary Shares
          issuable upon conversion of this Capital Note shall be adjusted
          pursuant to this clause 7, the Company shall prepare a certificate
          signed by the chief financial officer of the Company setting forth, in
          reasonable detail, the event requiring the adjustment, the amount of
          the adjustment, the method by which such adjustment was calculated,
          and the Conversion Price and the number of Conversion Shares issuable
          upon conversion of this Capital Note after giving effect to such
          adjustment, and shall cause copies of such certificate to be mailed
          (by first class mail, postage prepaid) to the Holder.

8.   OTHER TRANSACTIONS

     In the event that the Company or its shareholders receive an offer to
     transfer all or substantially all of the shares in the Company, or to
     effect a merger or acquisition or sale of all or substantially all of the
     assets of the Company, then the Company shall promptly inform the Holder in
     writing of such offer.


                                     - 9 -



9.   TRANSFER OF THIS CAPITAL NOTE BY THE HOLDER

     This Capital Note shall be freely transferable or assignable by the Holder
     in whole or in part, at any time and from time to time, subject to the
     provisions of this clause 9. With respect to any transfer of this Capital
     Note, in whole or in part, the Holder shall surrender the Capital Note,
     together with a written request to transfer all or a portion of the
     Principal Amount of this Capital Note to the transferee, as well as, if
     reasonably requested by the Company, a written opinion of such Holder's
     counsel, to the effect that such offer, sale or other distribution may be
     effected without registration under the Securities Act. Upon surrender of
     such Capital Note (and delivery of such opinion, if so requested) by the
     Holder, the Company shall immediately register such transferee as the
     Holder of this Capital Note, or the portion thereof, transferred to such
     transferee, such registration shall be deemed to have been made immediately
     prior to the close of business on the date of such surrender and delivery
     (if applicable), and such transferee or transferees shall be treated for
     all purposes as the record holder or holders as of such date of a Capital
     Note in that portion of the Principal Amount of this Capital Note so
     transferred. The Company shall, as promptly as practicable, deliver to the
     Holder one or more Capital Notes, of like tenor as this Capital Note,
     except that the Principal Amount thereof shall be the amount transferred to
     such transferee, for delivery to the transferee or transferees (or, if the
     Holder requests, deliver such Capital Note directly to such transferee or
     transferees) and shall, if only a portion of the Principal Amount of this
     Capital Note is being transferred, concurrently deliver to the Holder one
     or more replacement Capital Notes to represent the portion of the Principal
     Amount of this Capital Note not so transferred. For the avoidance of doubt,
     the Company confirms that no approval by the Board of Directors of the
     Company of any transfer of this Capital Note or the Conversion Shares is
     required.

10.  REPRESENTATIONS, WARRANTIES AND COVENANTS

     The Company represents, warrants and covenants to the Holder as follows:

     10.1. this Capital Note has been duly authorized and executed by the
          Company and is a valid and binding obligation of the Company
          enforceable in accordance with its terms;


                                     - 10 -



     10.2. the Conversion Shares are duly authorized and are, and will be,
          reserved (for the avoidance of doubt, without the need for further
          corporate action by the Company) for issuance by the Company and, when
          issued in accordance with the terms hereof, will be validly issued,
          fully paid and non-assessable and not subject to any pre-emptive
          rights;

     10.3. the execution and delivery of this Capital Note are not, and the
          issuance of the Conversion Shares upon conversion of this Capital Note
          in accordance with the terms hereof will not be, inconsistent with the
          Company's Certificate of Incorporation, Memorandum of Association or
          Articles of Association, do not and will not contravene any law,
          governmental or regulatory rule or regulation, including NASDAQ and
          TASE rules and regulations, judgment or order applicable to the
          Company, do not and will not conflict with or contravene any provision
          of, or constitute a default under, any indenture, mortgage, contract
          or other instrument of which the Company is a party or by which it is
          bound or, except for consents that have already been obtained and
          filings already made, require the consent or approval of, the giving
          of notice to, the registration with or the taking of any action in
          respect of or by, any Israeli or foreign governmental authority or
          agency or other person; and

     10.4. the Conversion Shares have been approved for listing and trading on
          TASE.

11.  LOSS, THEFT, DESTRUCTION OR MUTILATION OF CAPITAL NOTE

     Upon receipt by the Company of evidence reasonably satisfactory to it of
     the loss, theft, destruction or mutilation of any Capital Note or
     Conversion Shares certificate, and in case of loss, theft or destruction,
     of indemnity, or security reasonably satisfactory to it, and upon
     reimbursement to the Company of all reasonable expenses incidental thereto,
     and upon surrender and cancellation of such Capital Note or Conversion
     Shares certificate, if mutilated, the Company will make and deliver a new
     Capital Note or Conversion Shares certificate of like tenor and dated as of
     such cancellation, in lieu of such Capital Note or Conversion Shares
     certificate.

12.  NOTICES

     All notices and other communications required or permitted hereunder to be
     given to a party to this Agreement shall be in writing and shall be faxed
     or mailed by registered or certified mail, postage prepaid, or otherwise
     delivered by hand or by messenger, addressed to such party's address as set
     forth below:


                                     - 11 -



       If to the Holder:             Bank Leumi Le-Israel B.M.
                                     Corporate Division
                                     34 Yehuda Halevi Street
                                     Tel Aviv, Israel
                                     ATTENTION: MANAGER OF HI-TECH
                                                INDUSTRIES SECTION
                                     FACSIMILE: (03) 514 9278

       with a copy to
       (which shall not
       constitute notice):           Leumi and Co. Investment House Ltd.
                                     25 Kalisher Street
                                     Tel-Aviv 65165
                                     Israel
                                     ATTENTION: HEAD OF INVESTMENT SECTOR
                                     FACSIMILE: (03) 5141 215

       If to the Company:            Tower Semiconductor Ltd.
                                     P.O. Box 619
                                     Ramat Gabriel Industrial Zone
                                     Migdal Haemek 23105
                                     ATTENTION: OREN SHIRAZI, ACTING
                                                CHIEF FINANCIAL OFFICER
                                     FACSIMILE: (04) 604 7242

       WITH A COPY TO:               Yigal Arnon & Co.
                                     1 Azrieli Center
                                     Tel Aviv
                                     Israel
                                     ATTENTION: DAVID H. SCHAPIRO, ADV./
                                                ARI FRIED, ADV.
                                     FACSIMILE: (03) 608 7714

     or such other address with respect to a party as such party shall notify
     each other party in writing as above provided. Any notice sent in
     accordance with this clause 12 shall be effective: (a) if mailed, 5 (five)
     business days after mailing; (b) if sent by messenger, upon delivery; and
     (c) if sent via facsimile, 1 (one) business day following transmission and
     electronic confirmation of receipt.


                                     - 12 -



13.  APPLICABLE LAW; JURISDICTION

     This Capital Note shall be governed by and construed in accordance with the
     laws of the State of Israel as applicable to contracts between two
     residents of the State of Israel entered into and to be performed entirely
     within the State of Israel. Any dispute arising under or in relation to
     this Capital Note shall be resolved in the competent court for Tel
     Aviv-Jaffa district, and the Company and the Holder hereby submits
     irrevocably to the jurisdiction of such court.

Dated: September 28, 2006

for    TOWER SEMICONDUCTOR LTD.

By:    __________________________

Title: __________________________


                                     - 13 -

                                                                   EXHIBIT 99.14

                                 FIRST AMENDMENT
                                      TO A
                                WARRANT ISSUED ON
                                DECEMBER 11, 2003
                                -----------------

          THIS FIRST AMENDMENT is made on the 28th day of September, 2006,
          between:

          (1)  TOWER SEMICONDUCTOR LTD., a company incorporated in Israel
               (registered number 52-004199-7), having its registered office at
               P.O. Box 619, Migdal Haemek 23105, Israel ("THE COMPANY");

          AND

          (2)  TARSHISH HAHZAKOT VEHASHKAOT HAPOALIM LTD. ("THE HOLDER")

WHEREAS:

(A)  pursuant to a Warrant issued on December 11, 2003 ("THE WARRANT"), the
     Company granted the Holder the right to purchase 448,298 Warrant Shares at
     the Warrant Price, which is US $6.17 (six United States Dollars and
     seventeen cents) per share; and

(B)  at the request of the Company, the Company and the Banks entered into an
     Amending Agreement, dated August 24, 2006, to the Agreement, one of the
     conditions to the effectiveness thereof is the entering into of this First
     Amendment ("THIS AMENDMENT") to the Warrant,





NOW THEREFORE IT IS AGREED BETWEEN THE PARTIES HERETO AS FOLLOWS:

1.   Unless otherwise defined in this Amendment, terms defined and references
     contained in the Warrant, shall have the same meaning and construction in
     this Amendment.

2.   The Warrant is hereby amended as follows:

     2.1. The legend at the top of the first page of the Warrant is hereby
          amended to read in its entirety as follows:

               THIS WARRANT HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE U.S.
               SECURITIES ACT OF 1933, AS AMENDED ("THE ACT"), OR ANY U.S. STATE
               OR OTHER JURISDICTION'S SECURITIES LAWS. THIS WARRANT, AND THE
               SECURITIES ISSUABLE PURSUANT THERETO, MAY NOT BE SOLD, OFFERED
               FOR SALE OR PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE
               ABSENCE OF A REGISTRATION STATEMENT IN EFFECT UNDER THE ACT WITH
               RESPECT TO THIS WARRANT OR THE SECURITIES ISSUABLE PURSUANT
               THERETO OR AN OPINION OF COUNSEL (REASONABLY SATISFACTORY TO THE
               COMPANY) THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD
               PURSUANT TO RULE 144 OF THE ACT OR ON THE TEL-AVIV STOCK EXCHANGE
               IN COMPLIANCE WITH REGULATION S UNDER THE ACT.

     2.2. Clause 2A ("TERM") is hereby amended to delete the words "the date
          which is 5 (five) years following the Effective Date" before the
          parenthetical phrase "("THE EXPIRATION DATE")" and substitute therefor
          the date "September 28, 2011".

     2.3. Clause 6 ("INVESTMENT REPRESENTATION") is hereby amended as follows:

          2.3.1. to amend the first sentence to read in its entirety as follows:
               "This Warrant has not been registered under the Securities Act,
               or any other securities laws.";

          2.3.2. to amend the third sentence thereof to read in its entirety as
               follows: "The Warrant Shares have been registered under the
               Securities Act on Form F-3 Registration Statement No.
               333-131315.".


                                     - 2 -



     2.4. Clause 8 ("TRANSFER OF THIS WARRANT OR SHARES ISSUABLE ON EXERCISE
          THEREOF") is hereby amended:

          2.4.1. to delete the words "or securities into which such Warrant may
               be exercised" from the first sentence of subclause a thereof
               thereof; and

          2.4.2. to add the words at the end of the second sentence of subclause
               a thereof, "or unless sold pursuant to Rule 144 of the Securities
               Act".

     2.5. Clause 9 (including, for the avoidance of doubt, Clause 9A, 9B and 9C)
          ("REGISTRATION RIGHTS") is hereby amended to read in its entirety as
          follows: "The Company covenants and agrees to provide the Holder the
          registration rights provided in the registration rights agreement,
          dated September 28, 2006 between the Company and Bank Hapoalim B.M., a
          copy of which is attached hereto as APPENDIX A, as such may be amended
          from time to time ("THE REGISTRATION RIGHTS AGREEMENT"). Such
          registration rights may be assigned by the Holder pursuant to and in
          accordance with the terms of the Registration Rights Agreement but
          only to a transferee or assignee of this Warrant pursuant to and in
          accordance with Section 8 of this Warrant.".

     2.6. Clause 12 ("LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT") is
          hereby amended by adding the following to the end thereof:

               ", provided that if this Warrant has been amended, at the request
               of the Holder, the Company shall issue an amended and restated
               Warrant certificate reflecting such amendment or amendments. In
               addition, but without derogating from the aforesaid, if this
               Warrant has been amended, the Holder shall have the right, at the
               option of the Holder, at any time and, if applicable, from time
               to time, to surrender this Warrant certificate and receive an
               amended and restated Warrant certificate reflecting any such
               amendment or amendments."

     2.7. Clause 11 ("NOTICES") is hereby renumbered as Clause 13 and is hereby
          further amended to delete the words "Zion Building, 45 Rothschild
          Boulevard" and substitute "Migdal Levenstein, 23 Menachem Begin Road"
          therefor, to delete the Facsimile No. "(03) 567-3728" and substitute
          "(03) 567-2995" therefor, to delete the name "Carmel Vernia" and
          substitute "Chief Financial Officer" therefor and to delete the
          Facsimile No. "(04) 654-7788" and substitute "(04) 604-7242" therefor.


                                     - 3 -



     2.8. Clause 12 ("APPLICABLE LAW; JURISDICTION") is hereby renumbered as
          Clause 14.

3.   Save as amended expressly pursuant to this Amendment, the provisions of the
     Warrant shall continue in full force and effect and the Warrant and this
     Amendment shall be read and construed as one instrument.

4.   This Amendment shall be governed by and construed in accordance with the
     laws of the State of Israel.

IN WITNESS WHEREOF, THE PARTIES HAVE SIGNED THIS FIRST AMENDMENT ON THE 28TH DAY
OF SEPTEMBER 2006.

for:   TOWER SEMICONDUCTOR LTD.

By:    __________________________

Title: __________________________


for:   TARSHISH HAHZAKOT VEHASHKAOT HAPOALIM LTD.

By:    __________________________

Title: __________________________


                                     - 4 -

                                                                   EXHIBIT 99.15

                                 FIRST AMENDMENT
                                      TO A
                                WARRANT ISSUED ON
                                DECEMBER 11, 2003
                                -----------------

          THIS FIRST AMENDMENT is made on the 28th day of September, 2006,
          between:

          (1)  TOWER SEMICONDUCTOR LTD., a company incorporated in Israel
               (registered number 52-004199-7), having its registered office at
               P.O. Box 619, Migdal Haemek 23105, Israel ("THE COMPANY");

          AND

          (2)  BANK LEUMI LE-ISRAEL B.M. ("THE HOLDER")

WHEREAS:

(A)  pursuant to a Warrant issued on December 11, 2003 ("THE WARRANT"), the
     Company granted the Holder the right to purchase 448,298 Warrant Shares at
     the Warrant Price, which is US $6.17 (six United States Dollars and
     seventeen cents) per share; and

(B)  at the request of the Company, the Company and the Banks entered into an
     Amending Agreement, dated August 24, 2006, to the Agreement, one of the
     conditions to the effectiveness thereof is the entering into of this First
     Amendment ("THIS AMENDMENT") to the Warrant,

NOW THEREFORE IT IS AGREED BETWEEN THE PARTIES HERETO AS FOLLOWS:

1.   Unless otherwise defined in this Amendment, terms defined and references
     contained in the Warrant, shall have the same meaning and construction in
     this Amendment.





2.   The Warrant is hereby amended as follows:

     2.1. The legend at the top of the first page of the Warrant is hereby
          amended to read in its entirety as follows:

               THIS WARRANT HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE U.S.
               SECURITIES ACT OF 1933, AS AMENDED ("THE ACT"), OR ANY U.S. STATE
               OR OTHER JURISDICTION'S SECURITIES LAWS. THIS WARRANT, AND THE
               SECURITIES ISSUABLE PURSUANT THERETO, MAY NOT BE SOLD, OFFERED
               FOR SALE OR PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE
               ABSENCE OF A REGISTRATION STATEMENT IN EFFECT UNDER THE ACT WITH
               RESPECT TO THIS WARRANT OR THE SECURITIES ISSUABLE PURSUANT
               THERETO OR AN OPINION OF COUNSEL (REASONABLY SATISFACTORY TO THE
               COMPANY) THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD
               PURSUANT TO RULE 144 OF THE ACT OR ON THE TEL-AVIV STOCK EXCHANGE
               IN COMPLIANCE WITH REGULATION S UNDER THE ACT.

     2.2. Clause 2A ("TERM") is hereby amended to delete the words "the date
          which is 5 (five) years following the Effective Date" before the
          parenthetical phrase "("THE EXPIRATION DATE")" and substitute therefor
          the date "September 28, 2011".

     2.3. Clause 6 ("INVESTMENT REPRESENTATION") is hereby amended as follows:

          2.3.1. to amend the first sentence to read in its entirety as follows:
               "This Warrant has not been registered under the Securities Act,
               or any other securities laws.";

          2.3.2. to amend the third sentence thereof to read in its entirety as
               follows: "The Warrant Shares have been registered under the
               Securities Act on Form F-3 Registration Statement No.
               333-131315.".


                                     - 2 -



     2.4. Clause 8 ("TRANSFER OF THIS WARRANT OR SHARES ISSUABLE ON EXERCISE
          THEREOF") is hereby amended:

          2.4.1. to delete the words "or securities into which such Warrant may
               be exercised" from the first sentence of subclause a thereof
               thereof; and

          2.4.2. to add the words at the end of the second sentence of subclause
               a thereof, "or unless sold pursuant to Rule 144 of the Securities
               Act".

     2.5. Clause 9 (including, for the avoidance of doubt, Clause 9A, 9B and 9C)
          ("REGISTRATION RIGHTS") is hereby amended to read in its entirety as
          follows: "The Company covenants and agrees to provide the Holder the
          registration rights provided in the registration rights agreement,
          dated September 28, 2006 between the Company and Bank Leumi Le-Israel
          B.M., a copy of which is attached hereto as APPENDIX A, as such may be
          amended from time to time ("THE REGISTRATION RIGHTS AGREEMENT"). Such
          registration rights may be assigned by the Holder pursuant to and in
          accordance with the terms of the Registration Rights Agreement but
          only to a transferee or assignee of this Warrant pursuant to and in
          accordance with Section 8 of this Warrant.".

     2.6. Clause 12 ("LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT") is
          hereby amended by adding the following to the end thereof:

               ", provided that if this Warrant has been amended, at the request
               of the Holder, the Company shall issue an amended and restated
               Warrant certificate reflecting such amendment or amendments. In
               addition, but without derogating from the aforesaid, if this
               Warrant has been amended, the Holder shall have the right, at the
               option of the Holder, at any time and, if applicable, from time
               to time, to surrender this Warrant certificate and receive an
               amended and restated Warrant certificate reflecting any such
               amendment or amendments."

     2.7. Clause 11 ("NOTICES") is hereby renumbered as Clause 13 and is hereby
          further amended to delete the number "32" and substitute the number
          "34" therefor, to delete the Facsimile No. "(03) 514-9017" and
          substitute "(03) 514-9278" therefor, to add immediately thereafter,
          "with a copy to (which shall not constitute notice):Leumi and Co.
          Investment House Ltd., 25 Kalisher Street, Tel-Aviv 65165, Israel,
          Fax: 972-3-5141215, Attn: Head of Investment Sector", to delete the
          name "Carmel Vernia" and substitute "Chief Financial Officer" therefor
          and to delete the Facsimile No. "(04) 654-7788" and substitute "(04)
          604-7242" therefor.

                                     - 3 -



     2.8. Clause 12 ("APPLICABLE LAW; JURISDICTION") is hereby renumbered as
          Clause 14.

3.   Save as amended expressly pursuant to this Amendment, the provisions of the
     Warrant shall continue in full force and effect and the Warrant and this
     Amendment shall be read and construed as one instrument.

4.   This Amendment shall be governed by and construed in accordance with the
     laws of the State of Israel.

IN WITNESS WHEREOF, THE PARTIES HAVE SIGNED THIS FIRST AMENDMENT ON THE 28TH DAY
OF SEPTEMBER 2006.

for:   TOWER SEMICONDUCTOR LTD.

By:    __________________________

Title: __________________________


for:   BANK LEUMI LE-ISRAEL B.M.

By:    __________________________

Title: __________________________



                                     - 4 -

                                                                   EXHIBIT 99.16

                                 FIRST AMENDMENT
                                      TO A
                                WARRANT ISSUED ON
                                 AUGUST 4, 2005
                                -----------------

          THIS FIRST AMENDMENT is made on the 28th day of September, 2006,
          between:

          (1)  TOWER SEMICONDUCTOR LTD., a company incorporated in Israel
               (registered number 52-004199-7), having its registered office at
               P.O. Box 619, Migdal Haemek 23105, Israel ("THE COMPANY");

          AND

          (2)  BANK HAPOALIM B.M. ("THE HOLDER")

WHEREAS:

(A)  pursuant to a Warrant issued on August 4, 2005 ("THE WARRANT"), the Company
     granted the Holder the right to purchase 4,132,232 Warrant Shares at the
     Warrant Price, which is US $1.21 (one United States Dollar and twenty-one
     cents) per share; and

(B)  at the request of the Company, the Company and the Banks entered into an
     Amending Agreement, dated August 24, 2006, to the Agreement, one of the
     conditions to the effectiveness thereof is the entering into of this First
     Amendment to the Warrant,





NOW THEREFORE IT IS AGREED BETWEEN THE PARTIES HERETO AS FOLLOWS:

1.   Unless otherwise defined in this Amendment, terms defined and references
     contained in the Warrant, shall have the same meaning and construction in
     this Amendment.

2.   The Warrant is hereby amended as follows:

     2.1. The legend at the top of the first page of the Warrant is hereby
          amended to read in its entirety as follows:

               THIS WARRANT HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE U.S.
               SECURITIES ACT OF 1933, AS AMENDED ("THE ACT"), OR ANY U.S. STATE
               OR OTHER JURISDICTION'S SECURITIES LAWS. THIS WARRANT, AND THE
               SECURITIES ISSUABLE PURSUANT THERETO, MAY NOT BE SOLD, OFFERED
               FOR SALE OR PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE
               ABSENCE OF A REGISTRATION STATEMENT IN EFFECT UNDER THE ACT WITH
               RESPECT TO THIS WARRANT OR THE SECURITIES ISSUABLE PURSUANT
               THERETO OR AN OPINION OF COUNSEL (REASONABLY SATISFACTORY TO THE
               COMPANY) THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD
               PURSUANT TO RULE 144 OF THE ACT OR ON THE TEL-AVIV STOCK EXCHANGE
               IN COMPLIANCE WITH REGULATION S UNDER THE ACT.

     2.2. Clause 2A ("EXERCISABILITY; TERM") is hereby amended as follows:

          2.2.1. the words "the date which is 5 (five) years following the Ninth
               Amendment Closing Date" before the parenthetical phrase "("THE
               FIRST TRANCHE EXPIRATION DATE")" are hereby deleted and the date
               "September 28, 2011" substituted therefor;

          2.2.2. the words "the date of signature by the Company and the Banks
               of an agreement by the Banks to reschedule the repayment dates of
               the Interest Payment Loans (as defined in the Ninth Amendment)"
               before the parenthetical phrase "("THE SECOND TRANCHE
               EXERCISABILITY DATE")" are hereby deleted and the date "September
               28, 2006" substituted therefor; and

          2.2.3. the words "the date which is 5 (five) years following the
               Second Tranche Exercisability Date" before the parenthetical
               phrase "("THE SECOND TRANCHE EXPIRATION DATE")" are hereby
               deleted and the date "September 28, 2011" substituted therefor.


                                     - 2 -



     2.3. Clause 3 ("EXERCISE OF WARRANT") is hereby amended by deleting the
          words "and, provided further, that if the Second Tranche
          Exercisability Date does not occur, no more than 2,066,116 (two
          million and sixty-six thousand, one hundred and sixteen) Warrant
          Shares will be exercisable during the term of this Warrant".

     2.4. Clause 6 ("INVESTMENT REPRESENTATION") is hereby amended as follows:

          2.4.1. to amend the first sentence to read in its entirety as follows:
               "This Warrant has not been registered under the Securities Act,
               or any other securities laws.";

          2.4.2. to amend the third sentence thereof to read in its entirety as
               follows: "The Warrant Shares have been registered under the
               Securities Act on Form F-3 Registration Statement No.
               333-131315.".

     2.5. Clause 8 ("TRANSFER OF THIS WARRANT OR SHARES") is hereby amended:

          2.5.1. to delete the words "or securities purchaseable hereunder" from
               the first sentence thereof; and

          2.5.2. to add the words at the end of the second sentence thereof, "or
               unless sold pursuant to Rule 144 of the Securities Act".

     2.6. Clause 9 (including, for the avoidance of doubt, Clause 9A, 9B and 9C)
          ("REGISTRATION RIGHTS") is hereby amended to read in its entirety as
          follows: "The Company covenants and agrees to provide the Holder the
          registration rights provided in the registration rights agreement,
          dated September 28, 2006 between the Company and Bank Hapoalim B.M., a
          copy of which is attached hereto as APPENDIX A, as such may be amended
          from time to time ("THE REGISTRATION RIGHTS AGREEMENT"). Such
          registration rights may be assigned by the Holder pursuant to and in
          accordance with the terms of the Registration Rights Agreement but
          only to a transferee or assignee of this Warrant pursuant to and in
          accordance with Section 8 of this Warrant.".


                                     - 3 -



     2.7. Clause 12 is hereby amended by adding the following to the end
          thereof:

               ", provided that if this Warrant has been amended, at the request
               of the Holder, the Company shall issue an amended and restated
               Warrant certificate reflecting such amendment or amendments. In
               addition, but without derogating from the aforesaid, if this
               Warrant has been amended, the Holder shall have the right, at the
               option of the Holder, at any time and, if applicable, from time
               to time, to surrender this Warrant certificate and receive an
               amended and restated Warrant certificate reflecting any such
               amendment or amendments."

     2.8. Clause 13 is hereby amended to delete the words "Zion Building, 45
          Rothschild Boulevard" and substitute "Migdal Levenstein, 23 Menachem
          Begin Road" therefor, to delete the Facsimile No. "(03) 567-3728" and
          substitute "(03) 567-2995" therefor, and to delete the Facsimile No.
          "(04) 654-6510" and substitute "(04) 604-7242" therefor.

3.   Save as amended expressly pursuant to this Amendment, the provisions of the
     Warrant shall continue in full force and effect and the Warrant and this
     Amendment shall be read and construed as one instrument.

4.   This Amendment shall be governed by and construed in accordance with the
     laws of the State of Israel.

IN WITNESS WHEREOF, THE PARTIES HAVE SIGNED THIS FIRST AMENDMENT ON THE 28TH DAY
OF SEPTEMBER 2006.


for:   TOWER SEMICONDUCTOR LTD.

By:    __________________________

Title: __________________________


[for   BANK HAPOALIM B.M.

By:    _________________________

Title: __________________________]


                                     - 4 -

                                                                   EXHIBIT 99.17

                                 FIRST AMENDMENT
                                      TO A
                                WARRANT ISSUED ON
                                 AUGUST 4, 2005
                                -----------------

          THIS FIRST AMENDMENT is made on the 28th day of September, 2006,
          between:

          (1)  TOWER SEMICONDUCTOR LTD., a company incorporated in Israel
               (registered number 52-004199-7), having its registered office at
               P.O. Box 619, Migdal Haemek 23105, Israel ("THE COMPANY");

          AND

          (2)  BANK LEUMI LE-ISRAEL B.M. ("THE HOLDER")

WHEREAS:

(A)  pursuant to a Warrant issued on August 4, 2005 ("THE WARRANT"), the Company
     granted the Holder the right to purchase 4,132,232 Warrant Shares at the
     Warrant Price, which is US $1.21 (one United States Dollar and twenty-one
     cents) per share; and

(B)  at the request of the Company, the Company and the Banks entered into an
     Amending Agreement, dated August 24, 2006, to the Agreement, one of the
     conditions to the effectiveness thereof is the entering into of this First
     Amendment to the Warrant,

NOW THEREFORE IT IS AGREED BETWEEN THE PARTIES HERETO AS FOLLOWS:

1.   Unless otherwise defined in this Amendment, terms defined and references
     contained in the Warrant, shall have the same meaning and construction in
     this Amendment.





2.   The Warrant is hereby amended as follows:

     2.1. The legend at the top of the first page of the Warrant is hereby
          amended to read in its entirety as follows:

               THIS WARRANT HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE U.S.
               SECURITIES ACT OF 1933, AS AMENDED ("THE ACT"), OR ANY U.S. STATE
               OR OTHER JURISDICTION'S SECURITIES LAWS. THIS WARRANT, AND THE
               SECURITIES ISSUABLE PURSUANT THERETO, MAY NOT BE SOLD, OFFERED
               FOR SALE OR PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE
               ABSENCE OF A REGISTRATION STATEMENT IN EFFECT UNDER THE ACT WITH
               RESPECT TO THIS WARRANT OR THE SECURITIES ISSUABLE PURSUANT
               THERETO OR AN OPINION OF COUNSEL (REASONABLY SATISFACTORY TO THE
               COMPANY) THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD
               PURSUANT TO RULE 144 OF THE ACT OR ON THE TEL-AVIV STOCK EXCHANGE
               IN COMPLIANCE WITH REGULATION S UNDER THE ACT.

     2.2. Clause 2A ("EXERCISABILITY; TERM") is hereby amended as follows:

          2.2.1. the words "the date which is 5 (five) years following the Ninth
               Amendment Closing Date" before the parenthetical phrase "("THE
               FIRST TRANCHE EXPIRATION DATE")" are hereby deleted and the date
               "September 28, 2011" substituted therefor;

          2.2.2. the words "the date of signature by the Company and the Banks
               of an agreement by the Banks to reschedule the repayment dates of
               the Interest Payment Loans (as defined in the Ninth Amendment)"
               before the parenthetical phrase "("THE SECOND TRANCHE
               EXERCISABILITY DATE")" are hereby deleted and the date "September
               28, 2006" substituted therefor; and

          2.2.3. the words "the date which is 5 (five) years following the
               Second Tranche Exercisability Date" before the parenthetical
               phrase "("THE SECOND TRANCHE EXPIRATION DATE")" are hereby
               deleted and the date "September 28, 2011" substituted therefor.


                                     - 2 -



     2.3. Clause 3 ("EXERCISE OF WARRANT") is hereby amended by deleting the
          words "and, provided further, that if the Second Tranche
          Exercisability Date does not occur, no more than 2,066,116 (two
          million and sixty-six thousand, one hundred and sixteen) Warrant
          Shares will be exercisable during the term of this Warrant".

     2.4. Clause 6 ("INVESTMENT REPRESENTATION") is hereby amended as follows:

          2.4.1. to amend the first sentence to read in its entirety as follows:
               "This Warrant has not been registered under the Securities Act,
               or any other securities laws.";

          2.4.2. to amend the third sentence thereof to read in its entirety as
               follows: "The Warrant Shares have been registered under the
               Securities Act on Form F-3 Registration Statement No.
               333-131315.".

     2.5. Clause 8 ("TRANSFER OF THIS WARRANT OR SHARES") is hereby amended:

          2.5.1. to delete the words "or securities purchaseable hereunder" from
               the first sentence thereof; and

          2.5.2. to add the words at the end of the second sentence thereof, "or
               unless sold pursuant to Rule 144 of the Securities Act".

     2.6. Clause 9 (including, for the avoidance of doubt, Clause 9A, 9B and 9C)
          ("REGISTRATION RIGHTS") is hereby amended to read in its entirety as
          follows: "The Company covenants and agrees to provide the Holder the
          registration rights provided in the registration rights agreement,
          dated September 28, 2006 between the Company and Bank Leumi Le-Israel
          B.M., a copy of which is attached hereto as APPENDIX A, as such may be
          amended from time to time ("THE REGISTRATION RIGHTS AGREEMENT"). Such
          registration rights may be assigned by the Holder pursuant to and in
          accordance with the terms of the Registration Rights Agreement but
          only to a transferee or assignee of this Warrant pursuant to and in
          accordance with Section 8 of this Warrant.".

     2.7. Clause 12 is hereby amended by adding the following to the end
          thereof:

               ", provided that if this Warrant has been amended, at the request
               of the Holder, the Company shall issue an amended and restated
               Warrant certificate reflecting such amendment or amendments. In
               addition, but without derogating from the aforesaid, if this
               Warrant has been amended, the Holder shall have the right, at the
               option of the Holder, at any time and, if applicable, from time
               to time, to surrender this Warrant certificate and receive an
               amended and restated Warrant certificate reflecting any such
               amendment or amendments."


                                     - 3 -



     2.8. Clause 13 is hereby amended to delete the Facsimile No. "(03)
          514-9017" and substitute "(03) 514-9278" therefor, to add, immediately
          thereafter, "with a copy to (which shall not constitute notice): Leumi
          and Co. Investment House Ltd., 25 Kalisher Street, Tel-Aviv 65165,
          Israel, Fax: 972-3-5141215, Attn: Head of Investment Sector" and to
          delete the Facsimile No. "(04) 654-6510" and substitute "(04)
          604-7242" therefor.

3.   Save as amended expressly pursuant to this Amendment, the provisions of the
     Warrant shall continue in full force and effect and the Warrant and this
     Amendment shall be read and construed as one instrument.

4.   This Amendment shall be governed by and construed in accordance with the
     laws of the State of Israel.

IN WITNESS WHEREOF, THE PARTIES HAVE SIGNED THIS FIRST AMENDMENT ON THE 28TH DAY
OF SEPTEMBER 2006.

for:   TOWER SEMICONDUCTOR LTD.

By:    __________________________

Title: __________________________


for    BANK LEUMI LE-ISRAEL B.M.

By:    _________________________

Title: __________________________


                                     - 4 -