Date: ________, 2002

To:      Tower Semiconductor Ltd.
         P.O. Box 619
         Migdal Haemek 23105
         Israel
         Fax: +972-4-654-7788
         Attention: Co-Chief Executive Officer

cc:      Yigal Arnon & Co.
         One Azrieli Center
         Tel-Aviv 67021
         Israel
         Fax: +972-3-608-7714
         Attention: David H. Schapiro, Adv.

     Re:  AMENDMENT TO PAYMENT SCHEDULE OF SERIES A-3 AND SERIES A-4 ADDITIONAL
          PURCHASE OBLIGATIONS

Dear Sirs,

     With regard to the undersigned's obligation to exercise the Series A-3 and
Series A-4 Additional Purchase Obligations, as provided for in its Fab 2
Investment Agreements, all capitalized terms as defined therein, the undersigned
hereby agrees that its agreements shall be amended as follows:

     1.   WAFER PARTNER AND EQUITY PARTNER UNDERTAKING. The undersigned hereby
          confirms that in accordance with the terms set forth hereunder, it
          will advance the payment of the entire Series A-3 Additional Purchase
          Obligation by no later than April 5, 2002 or 2 business days following
          shareholder approval of this Amendment, without regard to whether the
          Series A-3 Mandatory Exercise Events occurs, and it will advance the
          payment of the entire Series A-4 Additional Purchase Obligation by no
          later than October 1, 2002, without regard to whether the Series A-4
          Mandatory Exercise Events occurs.

     2.   WAFER PARTNER.

          In consideration of its undertaking to advance the Series A-3
          Additional Purchase Obligation, by no later than April 5, 2002 or 2
          business days following shareholder approval of this Amendment without
          regard to whether the Series A-3 Mandatory Exercise Events occurs, and
          to advance the Series A-4 Additional Purchase Obligation, by no later
          than October 1, 2002, without regard to whether the Series A-4
          Mandatory Exercise Events occurs, following each payment advance, (i)
          the undersigned will be issued fully-paid and non-assessable ordinary
          shares of Tower equivalent to sixty percent of the amount of the
          payment made in connection with the Series A-3 Additional Purchase
          Obligation and the Series A-4 Additional Purchase Obligation, divided
          by the average trading price for the ordinary shares during the 30
          consecutive trading days preceding the date of actual payment,
          provided that such average trading price will not exceed $12.50, and
          (ii) the undersigned's Pre-Paid Credit Accounts will be increased by
          the amount equivalent to forty percent of the amount of the payment
          made in connection with the Series A-3 Additional Purchase Obligation
          and the Series A-4 Additional Purchase Obligation, which will be
          applicable against Fab 2 production purchases as soon as such
          production commences at Fab 2, provided that until July 1, 2005 such
          amounts that are added to the Pre-Paid Credit Account may be applied
          towards only 7.5% of Fab 2 wafer purchases made by the undersigned.


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     3.   EQUITY PARTNER.

          In consideration of its undertaking to advance the Series A-3
          Additional Purchase Obligation, by no later than April 5, 2002 or 2
          business days following shareholder approval of this Amendment without
          regard to whether the Series A-3 Mandatory Exercise Events occurs, and
          to advance the Series A-4 Additional Purchase Obligation, by no later
          than October 1, 2002, without regard to whether the Series A-4
          Mandatory Exercise Events occurs, following each payment advance, the
          undersigned will be issued fully-paid and non-assessable ordinary
          shares of Tower equivalent to the amount of the payment made in
          connection with the Series A-3 Additional Purchase Obligation and the
          Series A-4 Additional Purchase Obligation, divided by the average
          trading price for the ordinary shares during the 30 consecutive
          trading days preceding the date of actual payment, provided that such
          average trading price will not exceed $12.50.


     4.   APPROVALS. This Amendment is subject to shareholder and third party
          approvals, as may be applicable.

     5.   ENTIRE AGREEMENT. All other provisions of the undersigned's Fab 2
          Investment Agreements shall remain unchanged.


                  ____________________________________________
                             WAFER OR EQUITY PARTNER

                            COMPANY: _________________
                            BY: ______________________
                            TITLE: ___________________
                            DATE: ____________________


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