<PAGE>
                                                                    EXHIBIT 10.2

                                                         Date: February 24, 2003

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-5 ADDITIONAL PURCHASE
  OBLIGATIONS, WAIVER OF SERIES A-5 CONDITIONS, CONVERSION OF SERIES A-4 WAFER
                 CREDITS AND OTHER PROVISIONS (THE "AMENDMENT")

Dear Sirs,

         With regard to the obligation of each party to this letter (a "Party")
to exercise the Series A-5 Additional Purchase Obligations, as provided for in
its Fab 2 Investment Agreements, as amended through the date hereof, including
the Amendment attached hereto as Exhibit A, all capitalized terms not defined
herein shall be as defined therein, each Party hereby agrees that with respect
to the parties to this letter agreement (the "Side Letter"), subject only to
Section 7 of the Amendment and the contents of this Side Letter, the Amendment
shall be effective upon the receipt by Tower Semiconductor Ltd. (the "Company"
or "Tower") of the signatures of each of SanDisk Corporation, Alliance
Semiconductor Corporation, Macronix International Co., Ltd. and Israel
Corporation Technologies (ICTech) Ltd.

         In addition, each of the Company, SanDisk Corporation, Alliance
Semiconductor Corporation, Macronix International Co., Ltd. and Israel
Corporation Technologies (ICTech) Ltd. hereby agree that notwithstanding
anything to the contrary set forth in the Amendment:

         1.       When the term Minimum Financing is used in the Amendment it
                  shall mean the Raising (as defined in the Amendment) by the
                  Company of the dollar amount equal to (a) $22,105,730,
                  provided that if the Company does not receive a portion of the
                  Series A-5 Additional Purchase Obligation, such $22,105,730
                  Minimum Financing amount shall not be increased in the event
                  each of Bank Hapoalim B.M. and Bank Leumi-Le-Israel Limited
                  shall have agreed to amend the terms of the Facility Agreement
                  to which Tower is a party (the "Facility Agreement") such that
                  the Company is not in breach of Section 16.27.1 or 16.27.2, as
                  applicable, of the Facility Agreement notwithstanding the fact
                  that the Company did not receive such portion of the Series
                  A-5 Additional Purchase Obligation, or (b) $22,105,730 plus
                  the dollar amount represented by the portion of the Series A-5
                  Additional

<PAGE>




                  Purchase Obligation which the Company did not receive and
                  which was not forgiven under (a) above.

         2.       The Amendment and the parties obligations thereunder is
                  subject to and shall only become effective upon the Company
                  receiving the consent of each of Bank Hapoalim B.M. and Bank
                  Leumi-Le-Israel Limited to amend the terms of the Facility
                  Agreement to (a) postpone the date for Tower to next raise an
                  aggregate of $26 million pursuant to section 16.27.2 of the
                  Facility Agreement, and (b) recognize any of the payment of
                  the First Installment in satisfaction of Tower's obligation to
                  raise funds under section 16.27.2 of the Facility Agreement.

         3.       This Side Letter supersedes all prior agreements,
                  understandings and arrangements, oral or written, between the
                  parties hereto with respect to the subject matter hereof.
                  Notwithstanding the preceding sentence, the provisions of the
                  Parties' Fab 2 Investment Agreements, including the Amendment,
                  shall remain unchanged to the extent they are not amended by
                  the terms of this Side Letter.


                     [end of page intentionally left blank]



<PAGE>




         IN WITNESS WHEREOF, the parties have executed this Side Letter as of
the date first above written.



 /s/ Rafi Levin                              /s/ Yossi Rosen
--------------------------------            ------------------------------------
     TOWER SEMICONDUCTOR LTD.                    ISRAEL CORPORATION TECHNOLOGIES
                                                           (ICTECH) LTD.



By:  Rafi Levin
     ---------------------------            By: Yossi Rosen
Title: Co-CEO                                   --------------------------------

                                            Title: CEO
                                                   -----------------------------


 /s/ Michael Gray                            /s/ N.D. Reddy
--------------------------------            ------------------------------------
     SANDISK CORPORATION                    ALLIANCE SEMICONDUCTOR CORPORATION

By: Michael Gray                             By: N.D. Reddy
    ----------------------------                 -------------------------------
Title: CFO                                   Title: President & CEO
       -------------------------                    ----------------------------


 /s/ Miin C. Wu
---------------------------------
     MACRONIX (BVI) CO., LTD.

By: Miin C. Wu
    -----------------------------

Title: Director
       --------------------------









<PAGE>




                                    EXHIBIT A


                                                         Date: February 21, 2003

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-5 ADDITIONAL PURCHASE
  OBLIGATIONS, WAIVER OF SERIES A-5 CONDITIONS, CONVERSION OF SERIES A-4 WAFER
                 CREDITS AND OTHER PROVISIONS (THE "AMENDMENT")

Dear Sirs,

         With regard to the obligation of each party to this letter (a
"Party") to exercise the Series A-5 Additional Purchase Obligations, as provided
for in its Fab 2 Investment Agreements, as amended through the date hereof, all
capitalized terms not defined herein shall be as defined therein, each Party
hereby agrees that its agreements shall be amended as follows:

         1.       EXERCISE OF SERIES A-5 ADDITIONAL PURCHASE OBLIGATION.

         1.1.     FIRST INSTALLMENT. Each Party hereby notifies Tower
                  Semiconductor Ltd. (the "Company" or "Tower") that in
                  accordance with the terms set forth hereunder, and subject to
                  and effective upon Tower obtaining all required approvals as
                  specified in Section 7 hereof, it shall irrevocably exercise
                  sixty percent (60%) of the Series A-5 Additional Purchase
                  Obligation (the "First Installment"), which is the amount
                  identified as the First Installment with respect to such Party
                  as set forth in Exhibit A hereto, without regard to whether
                  the Series A-5 Mandatory Exercise Event occurs or whether any
                  of the conditions to a Mandatory Exercise are satisfied. The
                  First Installment shall be paid no later than five (5)
                  business days following satisfaction of the condition
                  specified in the first sentence above as evidenced by a
                  certificate delivered to each of the parties and executed by
                  Tower's CEO(s) certifying the satisfaction of such condition.

         1.2.     SECOND INSTALLMENT. Provided the conditions of Section 1.1 are
                  met, each Party hereby further notifies the Company that in
                  accordance with the terms set forth hereunder, and subject to
                  and conditioned upon the completion of the Minimum Financing
                  (as defined below), it shall irrevocably exercise forty
                  percent (40%) of the Series A-5 Additional

<PAGE>




                  Purchase Obligation (the "Second Installment"; the First
                  Installment and the Second Installment shall collectively be
                  referred to as the "Series A-5 APO Installments"), which is
                  the amount identified as the Second Installment with respect
                  to such Party as set forth in Exhibit A hereto, without regard
                  to whether the Series A-5 Mandatory Exercise Event occurs or
                  whether any of the conditions to a Mandatory Exercise are
                  satisfied. The term Minimum Financing shall mean the Raising
                  (as defined below) by the Company of the dollar amount equal
                  to $22,105,730. The term Raising shall mean the receipt of
                  proceeds from (i) the sale, in a public or private offering,
                  of ordinary shares of the Company or debt convertible into
                  ordinary shares of the Company; or (ii) any other form of fund
                  raising which satisfies the requirements for additional
                  financing pursuant to section 16.27.2 of the Facility
                  Agreement, as amended, to which the Company is a party. The
                  Second Installment shall be paid upon satisfaction of the
                  condition specified in the first sentence above as evidenced
                  by a certificate delivered to each of the parties and executed
                  by Tower's CEO(s) certifying the satisfaction of such
                  condition; provided, further, that the Second Installment
                  shall not be due before the later of (i) August 1, 2003, and
                  (ii) five (5) business days following the date upon which the
                  Company has completed the Minimum Financing. Notwithstanding
                  the preceding sentence, the obligation to advance the Second
                  Installment shall terminate, and there shall be no further
                  obligation or liability to pay the Second Installment, if the
                  Minimum Financing shall not have been completed by December
                  31, 2003.

                  For the avoidance of all doubt and notwithstanding the
                  provisions set forth in Sections 5 and 6 of the Additional
                  Purchase Obligation Agreement between SanDisk Corp. and Tower
                  dated July 4, 2000 or the Additional Purchase Obligation
                  Agreement between Israel Corporation Technologies (ICTech)
                  Ltd. and Tower dated December 12, 2000 or the Additional
                  Purchase Obligation Agreement between The Challenge Fund-Etgar
                  II, LP and Tower dated February 11, 2001 and as incorporated
                  by reference in all of the other Fab 2 Investment Agreements,
                  as applicable to each Party, each Party's undertaking to pay
                  the First Installment and the Second Installment is, upon
                  satisfaction of all of the conditions specified in this
                  Amendment and subject to the last sentence of the first
                  paragraph of this Section 1.2, completely irrevocable.

         2.       SHARE ISSUANCES. Immediately following the advancement of the
                  First Installment, each Party will be issued fully-paid and
                  non-assessable ordinary shares of Tower equivalent to the
                  aggregate of the First Installment divided by the average
                  trading price for the ordinary shares of the Company during
                  the thirty (30) consecutive trading days preceding the date
                  that this Amendment is approved by the Board of Directors of
                  the Company. Immediately following the advancement of the
                  Second Installment, each Party will be issued fully-paid and
                  non-assessable ordinary shares of Tower equivalent to the
                  Second Installment divided by the price per ordinary share of
                  the Company paid in connection with the Minimum Financing (the
                  "Minimum Financing Price"); provided, however, that if the
                  Minimum Financing

<PAGE>




                  Price cannot reasonably be calculated from the documents
                  evidencing the Minimum Financing, then the Minimum Financing
                  Price shall be the average trading price for the ordinary
                  shares of the Company during the thirty (30) consecutive
                  trading days preceding the date the Second Installment is
                  paid.


         3.       CONVERSION OF PORTION OF PRE-PAID CREDIT ACCOUNT. Tower hereby
                  grants to each Party who is either SanDisk Corp. ("SNDK"),
                  Alliance Semiconductor Corp. ("ALSC"), Macronix International
                  Co., Ltd. ("MXIC") or QuickLogic Corp. ("QUIK") (SNDK, ALSC,
                  MXIC and QUIK shall each be referred to as a "Wafer Partner"
                  and collectively shall be referred as the "Wafer Partners") an
                  option to convert a number of credits equal to the number of
                  credits in each of its respective Pre-Paid Wafer Accounts that
                  were issued in connection with its advancement of the Series
                  A-4 Additional Purchase Obligation payment in October 2002 and
                  that are held in its Pre-Paid Wafer Account on December 31,
                  2005 (the "Series A-4 Credits") into fully-paid and
                  non-assessable ordinary shares of Tower equivalent to the
                  amount of the Series A-4 Credits divided by the average
                  trading price for the ordinary shares of the Company during
                  the thirty (30) consecutive trading days preceding December
                  31, 2005 (the "Conversion Price"), provided that such Party
                  provides Tower advance written notice to convert all or a
                  portion of the Series A-4 Credits no earlier than December 31,
                  2005 and by no later than January 31, 2006 (the "Conversion
                  Notice"). Tower hereby agrees to issue to each Wafer Partner
                  that provides it with a Conversion Notice the ordinary shares
                  to be issued in connection with its exercise of the Series A-4
                  Credits promptly after its receipt of such Conversion Notice.

         4.       RIGHTS OFFERING. To the extent that any of the Wafer Partners
                  shall convert their "Series A-4 Credits" into fully-paid and
                  non-assessable ordinary shares pursuant to paragraph 3, and
                  provided that such amount of converted Series A-4 Credits are
                  equivalent to or greater than an aggregate of 5% of Tower's
                  then outstanding share capital, Tower hereby undertakes to
                  prepare and file a registration statement, within a reasonable
                  time following the issuance of the ordinary shares to the
                  Wafer Partners in connection with their conversion of the
                  Series A-4 Credits, for the distribution of rights to all of
                  Tower's shareholders other than Wafer Partners but including
                  each of the Parties who are either Israel Corporation
                  Technologies (ICTech) Ltd. ("ICTech") or The Challenge
                  Fund-Etgar II, LP ("CF") (ICTech and CF shall each be
                  referred to as an "Equity Partner"), to purchase additional
                  shares in Tower at the Conversion Price to maintain their
                  percentage of ordinary shares held in Tower immediately prior
                  to the conversion of the Series A-4 Credits. Tower shall use
                  its reasonable best efforts to cause the registration
                  statement to be declared effective by the Securities and
                  Exchange Commission and the Israel Securities Authority as
                  soon as reasonably practicable after filing thereof with the
                  Securities and Exchange Commission and the Israel Securities
                  Authority.


<PAGE>


         5.       TERMINATION OF WAFER PARTNER DIFFERENTIAL CONDITION. Upon
                  satisfaction of the condition set forth in the first sentence
                  of Section 1.1, the parties shall irrevocably agree to fully
                  and indefinitely waive Tower's obligation to raise an
                  additional $50 million from additional wafer partners in
                  connection with the provisions set forth in the Fab 2
                  Investment Agreements and related letters with respect to the
                  Wafer Partner Differential.

         6.       RESTRICTION ON TRANSFER OF EQUITY SECURITIES UNDER THE
                  CONSOLIDATED SHAREHOLDERS AGREEMENT; REGISTRATION RIGHTS. All
                  of the parties to the Consolidated Shareholders Agreement
                  dated January 18, 2001 by and between SanDisk, Alliance,
                  Macronix and Israel Corporation Ltd. (the "CSA"), hereby agree
                  that all of the ordinary shares in Tower to be issued to such
                  parties with respect to the Series A-5 Additional Purchase
                  Obligations will be subject to the restrictions on transfer of
                  Equity Securities during the Initial Restricted Period and the
                  Subsequent Restricted Period (all capitalized terms in this
                  section as defined in the CSA). All shares issued or
                  contemplated to be issued to the parties pursuant to Sections
                  2 and 3 of this Amendment shall be deemed to be Purchaser
                  Group Registrable Securities as defined in and as provided for
                  in the Registration Rights Agreement made as of January 18,
                  2001, by and among Tower Semiconductor Ltd., SanDisk
                  Corporation, Alliance Semiconductor Corp., Macronix
                  International Co., Ltd, QuickLogic Corporation and The Israel
                  Corporation Ltd.

         7.       APPROVALS. This Amendment and the parties obligations
                  hereunder are subject to and shall only become effective upon
                  the approval of the Company's audit committee, its board of
                  directors (which approval shall include the unanimous vote of
                  approval of its independent directors), its shareholders, the
                  Office of the Chief Scientist, the Investment Center and, to
                  the extent applicable, the Israel Land Administration.

         8.       FAB 2 INVESTMENT AGREEMENTS. Except as expressly set forth in
                  this Amendment and effective upon payment of the First
                  Installment in full, the Company hereby irrevocably waives,
                  forever excuses and releases the Wafer Partners and their
                  respective officers, directors and employees, from their
                  obligation to exercise the Series A-5 Additional Purchase
                  Obligation as provided for in the Fab 2 Investment Agreements,
                  including without limitation, the Additional Purchase
                  Obligation Agreement. All other provisions of the Parties' Fab
                  2 Investment Agreements shall remain unchanged.


                     [end of page intentionally left blank]



<PAGE>




         IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first above written.


----------------------------------          ------------------------------------
   TOWER SEMICONDUCTOR LTD.                    ISRAEL CORPORATION TECHNOLOGIES
                                                         (ICTECH) LTD.


                                            By:
By:                                             --------------------------------
   -------------------------------
                                            Title:
Title: Co-CEO                                      -----------------------------


----------------------------------          ------------------------------------
      SANDISK CORPORATION                     ALLIANCE SEMICONDUCTOR CORPORATION

By:                                         By:
    ------------------------------              --------------------------------

Title:                                      Title:
       ---------------------------                 -----------------------------

----------------------------------          ------------------------------------
MACRONIX INTERNATIONAL CO., LTD.                     QUICKLOGIC CORP.

By:                                         By:
    ------------------------------              --------------------------------

Title:                                      Title:
       ---------------------------                 -----------------------------



----------------------------------
THE CHALLENGE FUND-ETGAR II, LP

By:
    ------------------------------

Title:
       ---------------------------






<PAGE>




                                    EXHIBIT A

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
WAFER PARTNER OR EQUITY PARTNER                   FIRST               SECOND
                                                  INSTALLMENT         INSTALLMENT
-----------------------------------------------------------------------------------
<S>                                               <C>                 <C>
SanDisk Corp.                                     $6,600,420          $4,400,280
Alliance Semiconductor Corp.                      $6,600,420          $4,400,280
Macronix International Co., Ltd.                  $6,600,420          $4,400,280
QuickLogic Corp.                                  $2,200,140          $1,466,760
Israel Corporation Technologies (ICTech) Ltd.     $4,400,004          $2,933,336
The Challenge Fund-Etgar II, LP                   $440,000.40         $293,333.60
-----------------------------------------------------------------------------------
</TABLE>