---

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Exhibit 4.97

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
REGULATIONS UNDER THE ACT.

# EQUITY EQUIVALENT
CONVERTIBLE CAPITAL NOTE

# (Principal Amount of
US $30,000,000)

THIS EQUITY EQUIVALENT CONVERTIBLE
CAPITAL NOTE(this Capital Note) in the principal amount of
US $30,000,000(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 Israel Corporation Ltd. (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 (including certain accrued and unpaid interest) equal to 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.
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------

---

|1 | Following
the effective date of any Registration Statement covering the           Conversion Shares
or any of them, bracketed language to be removed from Capital           Notes relating to
such Conversion Shares and, at the request of the Holder, a           substitute Capital
Note omitting the bracketed language will promptly be           delivered to the Holder.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

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| | 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 passuand 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 $1.42, as adjusted at
any time and from time to time in accordance with clause 7 below.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | 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.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|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 any Registration Statement covering the           Conversion Shares
or any of them, bracketed language to be removed from all           future Capital Notes
to be issued with respect to such Conversion Shares 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 any Registration Statement covering the           Conversion Shares
or any of them,, 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 with respect to such Conversion Shares,
and, at the request           of the Holder, a substitute Capital Note having such
replacement language will           promptly be delivered to the Holder.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|7. | ADJUSTMENT
OF CONVERSION PRICEAND
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.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | 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.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | 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.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 7.8. | Adjustment
for Cash Dividends and Distributions
| | ---- | -----------------------------------------------

| | In
the event the Company, at any time or from time to time until September 28, 2023, 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.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | 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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | 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. | 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.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|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;
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.2. | 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.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|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:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |                    |                                        
| | ------------------ | ---------------------------------------
|
|
|
|
| | If to the Holder:  | Israel Coropration Ltd.                
| |                    | Milennium Tower                        
| |                    | 23 Aranha St.                          
| |                    | Tel-Aviv, Israel 61070                 
| |                    | Attention:      Chief Financial Officer
| |                    | Facsimile:     972-3-684-4574          
| |                    |                                        
| | with a copy to:    | Gornitzky & Co.                        
| |                    | 45 Rothschild Blvd.                    
| |                    | Tel Aviv, Israel 65784                 
| |                    | Attention:      Zvi Ephrat, Adv.       
| |                    | Facsimile:     (03) 560 6555           
| |                    |                                        
| | If to the Company: | Tower Semiconductor Ltd.               
| |                    | P.O. Box 619                           
| |                    | Ramat Gabriel Industrial Zone          
| |                    | Migdal Haemek 23105                    
| |                    | Israel                                 
| |                    | 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.
| |                    | 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.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|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 25,
2008

|forBy:Title: | TOWER SEMICONDUCTOR LTD. |  | 
|------------ | ---------------------------------------------------- |  | 



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