Document:

ADDITIONAL PURCHASE OBLIGATION AGREEMENT

     ADDITIONAL PURCHASE OBLIGATION AGREEMENT, dated as of July 4, 2000, between
Tower Semiconductor Ltd., an Israeli corporation ("T"), and SanDisk Corporation,
a Delaware corporation ("S").

      WHEREAS,  T and S are parties to that  certain  Share  Purchase  Agreement
dated July 4, 2000,  relating  to the sale by T to S of 866,551 of T's  Ordinary
Shares (the "Share  Purchase  Agreement")  and parties to that  certain  Foundry
Agreement  dated July 4, 2000,  relating to the  production  of certain  silicon
wafers by T for delivery to S; and

      WHEREAS,  as a  condition  to the  closing  of the sale of  certain of T's
shares under the Share Purchase  Agreement and the  effectiveness of the Foundry
Agreement,  T and S have each agreed to enter into this Agreement  providing for
the issuance and delivery of conditional additional purchase obligations for the
purchase by S of Ordinary  Shares of T, subject to the terms and  conditions set
forth herein.

      NOW,  THEREFORE,  in consideration of the foregoing and for the purpose of
defining the terms and provisions of the Additional Purchase Obligations and the
respective rights and obligations thereunder of T and S, T and S hereby agree as
follows:

1.    DEFINITIONS

1.1.  CERTAIN DEFINITIONS.  As used in this Agreement, terms
      --------------------
            not  defined   herein  shall  have  the  meaning
            ascribed   to   them  in  the   Share   Purchase
            Agreement  and the  following  terms  shall have
            the following respective meanings:

            "A  ADDITIONAL  PURCHASE  OBLIGATION  CERTIFICATES"  shall  have the
            meaning ascribed to it in Section 2.2.

            "A ADDITIONAL PURCHASE  OBLIGATIONS" shall have the meaning ascribed
            to it in Section 2.1.

            "ADDITIONAL PURCHASE OBLIGATION CERTIFICATES" shall have the meaning
            ascribed to it in Section 2.2.

            "ADDITIONAL PURCHASE OBLIGATIONS" shall have the meaning ascribed to
            it in Section 2.1.

             "B     ADDITIONAL      PURCHASE      OBLIGATION
            CERTIFICATES"  shall have the  meaning  ascribed
            to it in Section 2.2.

            "B  ADDITIONAL  PURCHASE  OBLIGATIONS"  -  shall  have  the  meaning
            ascribed to it in Section 2.1.

            "EQUITY   SECURITIES"  means  (a)  Ordinary  Shares  and  securities
            convertible  into, or  exercisable  or  exchangeable  for,  Ordinary
            Shares or rights or options to acquire Ordinary Shares or such other
            securities,  and (b) shares of any other  class or series of capital
            shares  and   securities   convertible   into,  or   exercisable  or
            exchangeable for, shares of such other class or series and rights or
            options  to  acquire  shares of such  other  class or series or such
            other securities,  in each case,  excluding the Additional  Purchase
            Obligations.

            "EXCHANGE  ACT"  means  the  Securities  Exchange  Act of  1934,  as
            amended.

            "EXERCISE  PRICE" means the purchase  price per Ordinary Share to be
            paid upon the exercise of each  Additional  Purchase  Obligation  in
            accordance with the terms hereof, which price shall initially be $30
            per share,  as each may be  adjusted  from time to time  pursuant to
            Section 4 hereof.

            "EXPIRATION  DATE" means the fifth  anniversary  of the date of this
            Agreement  subject  to  earlier  termination  of one or  more of the
            Additional Purchase Obligations pursuant to Section 5.1.

            "EXERCISE  NOTICE" - shall have the  meaning  ascribed to in Section
            2.1.3.

            "GRACE  PERIOD" - shall have the  meaning  ascribed to it in Section
            5.1.

            "MANDATORY  EXERCISE EVENT" shall have the meaning ascribed to it in
            Section 5.1.

             "MISSED  EXERCISE"  - shall  have  the  meaning  ascribed  to it in
            Section 5.1.

            "NASDAQ" means the Nasdaq National Market.

            "B  ADDITIONAL  PURCHASE  OBLIGATION  CERTIFICATES"  shall  have the
            meaning ascribed to it in Section 2.2.

            "B  ADDITIONAL  PURCHASE  OBLIGATIONS"  -  shall  have  the  meaning
            ascribed to it in Section 2.1.

            "ORDINARY  SHARES" means the ordinary shares,  par value NIS1.00 per
            share  of T and  any  other  capital  shares  of T into  which  such
            ordinary  shares may be  converted  or  reclassified  or that may be
            issued in respect of, in exchange for, or in  substitution  of, such
            ordinary  shares by reason of any share  splits,  shares  dividends,
            distributions, mergers, consolidations or other like events.

             "SEC" means the Securities and Exchange Commission.

             "SECURITIES ACT" means the Securities Act of 1933, as amended.

            "SHARE  PURCHASE  AGREEMENT"  - as defined in the  recitals  to this
            Agreement.

            "T" means T, an Israeli corporation, and its successors and assigns.

            "UNDERLYING  ORDINARY  SHARES" means the Ordinary Shares issuable or
            issued upon the exercise of the Additional Purchase Obligations.

2.    ORIGINAL ISSUE OF ADDITIONAL PURCHASE OBLIGATIONS

2.1.  THE ADDITIONAL PURCHASE OBLIGATIONS.
      -----------------------------------

2.1.1.     A ADDITIONAL PURCHASE  OBLIGATIONS.  On the basis
           ----------------------------------
                   of the  representations,  warranties  and
                   agreements  contained in this  Agreement,
                   but  subject to the terms and  conditions
                   hereof,  concurrently  with the execution
                   of  this  Agreement,  T shall  issue  and
                   deliver   to   S   warrants   mandatorily
                   exercisable  under Section 5.1 hereof for
                   the  purchase  of up to an  aggregate  of
                   1,833,450  Ordinary  Shares  of  T  by  S
                   subject  to   adjustment   as  set  forth
                   herein   (the  "A   Additional   Purchase
                   Obligations").

2.1.2.     B ADDITIONAL PURCHASE  OBLIGATIONS.  On the basis
           ----------------------------------
                   of the  representations,  warranties  and
                   agreements  contained in this  Agreement,
                   but  subject to the terms and  conditions
                   hereof,  concurrently  with the execution
                   of  this  Agreement,  T shall  issue  and
                   deliver   to   S   Additional    Purchase
                   Obligations  for the purchase of up to an
                   aggregate  of 2,700,000  Ordinary  Shares
                   of T by S subject  to  adjustment  as set
                   forth  herein.  Pursuant to the  election
                   of  S  to  exercise   the  B   Additional
                   Purchase   Obligations   as  provided  in
                   Section  2.1.3  below,  the B  Additional
                   Purchase    Obligations    shall   become
                   mandatorily   exercisable  under  Section
                   5.1 hereof  (the "B  Additional  Purchase
                   Obligations"  and  together  with  the  A
                   Additional  Purchase   Obligations,   the
                   "Additional Purchase Obligations").

2.1.3.     B  ADDITIONAL  PURCHASE   OBLIGATIONS  EXERCISE
           -------------------------------------------------
                   NOTICE.  In the  event  that S elects  to
                   ---------
                   exercise   the  B   Additional   Purchase
                   Obligations,  S is required to deliver to
                   T, no  later  than  October  1,  2001(the
                   "Exercise  Date") , a written notice (the
                   "Exercise  Notice")  of its  election  to
                   exercise   the  B   Additional   Purchase
                   Obligations  under  Section  5.1  hereof.
                   The Exercise  Notice shall be accompanied
                   by  a  payment   for  such  number  of  B
                   Additional Purchase  Obligations as shall
                   have been  exercised  in the A Additional
                   Purchase  Obligation  series  through the
                   Exercise  Date.  For instance,  if by the
                   Exercise   Date  the  A-1,  A-2  and  A-3
                   Additional  Purchase   Obligations  shall
                   have  been  exercised,  on  the  Exercise
                   Date S shall make a payment  for the B-1,
                   B-2   and   B-3    Additional    Purchase
                   Obligations.  For  the  avoidance  of all
                   doubt,   the   B   Additional    Purchase
                   Obligations shall not become  exercisable
                   until  the   delivery  of  the   Election
                   Notice  and   failure   to  deliver   the
                   Election  Notice  to T within  the  above
                   date   shall   cause  the  B   Additional
                   Purchase  Obligations  to  terminate  and
                   become void.

2.2.        FORM  OF  ADDITIONAL   PURCHASE  OBLIGATION   CERTIFICATES.   The  A
            Additional  Purchase  Obligations shall be designated in five series
            (Series  A1  -  A5),  each  evidenced  by  an  Additional   Purchase
            Obligation  certificate  in the form of  EXHIBITS  A1 - A5  attached
            hereto (the "A Additional Purchase Obligation Certificates").  The B
            Additional  Purchase  Obligations shall be designated in five series
            (Series  B1  -  B5),  each  evidenced  by  an  Additional   Purchase
            Obligation  certificate  in the form of  EXHIBITS  B1 - B5  attached
            hereto (the "B  Additional  Purchase  Obligation  Certificates"  and
            together with the A Additional Purchase Obligation Certificates, the
            "Additional  Purchase Obligation  Certificates").  Each A Additional
            Purchase   Obligation  series  shall  contain  Additional   Purchase
            Obligations  to  purchase  up to an  aggregate  of 366,690  Ordinary
            Shares of T. Each B1- to B-5 Additional  Purchase  Obligation series
            shall contain  Additional  Purchase  Obligations to purchase 540,000
            Ordinary   Shares  of  T.  Each   Additional   Purchase   Obligation
            Certificate shall be dated the date hereof and shall bear the legend
            set forth in  Exhibit  C,  together  with  such  other  legends  and
            endorsements  thereon as may be  required  to comply with any law or
            with any rule or  regulation  pursuant  thereto  or with any rule or
            regulation of any securities  exchange on which the Ordinary  Shares
            may be listed, or to conform to customary usage.

3.    EXERCISE  PRICE;  EXERCISE  OF  ADDITIONAL  PURCHASE
      OBLIGATIONS GENERALLY

3.1.        PAYMENT OF  EXERCISE  PRICE.  Each  Additional  Purchase  Obligation
            Certificate  shall  entitle  the  holder  thereof,  subject  to  the
            provisions  thereof  and of this  Agreement,  to  receive  up to the
            number of Ordinary Shares stated  therein,  subject to adjustment as
            herein provided, upon payment of the Exercise Price for each of such
            shares.  The  Exercise  Price  shall be payable by wire  transfer of
            immediately  available  funds to T in accordance with written wiring
            instructions  provided  by T,  or by  such  other  means  as  may be
            mutually agreed by the parties.

3.2.  EXERCISE  PERIODS  OF A AND  B  ADDITIONAL  PURCHASE
      ------------------------------------------------------
            OBLIGATIONS
            -----------

3.2.1.     EXERCISE   PERIOD  OF  A  ADDITIONAL   PURCHASE
           -------------------------------------------------
                   OBLIGATIONS.  Subject  to the  terms  and
                   -----------
                   conditions   set  forth  herein,   the  A
                   Additional Purchase  Obligations shall be
                   exercisable  at any time on or after  the
                   Closing  Date  under the  Share  Purchase
                   Agreement   and  on  or   prior   to  the
                   Expiration Date.

3.2.2.     EXERCISE   PERIOD  OF  B  ADDITIONAL   PURCHASE
           -------------------------------------------------
                   OBLIGATIONS.  Subject  to the  terms  and
                   -----------
                   conditions   set  forth  herein,   the  B
                   Additional Purchase  Obligations shall be
                   exercisable   at  any  time   after   the
                   delivery   of   the   Exercise    Notice,
                   pursuant  to  Section  2.1.3,  and  on or
                   prior to the Expiration Date.

3.3.  EXPIRATION OF  ADDITIONAL  PURCHASE  OBLIGATIONS.  The
      ------------------------------------------------
            Additional Purchase  Obligations shall terminate
            and become  void as of the close of  business on
            the Expiration Date.

3.4.        EXERCISE  GENERALLY.  Subject to Section 5, in order to  exercise an
            Additional  Purchase  Obligation,  S must  surrender the  Additional
            Purchase Obligation  Certificate evidencing such Additional Purchase
            Obligation to T, with one of the forms on the reverse of or attached
            to the Additional  Purchase  Obligation  Certificate  duly executed.
            Subject  to  the  terms  of  Section  5,  each  Additional  Purchase
            Obligation  may be exercised in whole or in part,  provided  that no
            Additional  Purchase Obligation may be exercised for the purchase of
            less than an aggregate of 100,000 Ordinary Shares. If fewer than all
            of the Additional Purchase Obligations  represented by an Additional
            Purchase  Obligation  Certificate are  surrendered,  such Additional
            Purchase  Obligation  Certificate  shall  be  surrendered  and a new
            Additional Purchase Obligation Certificate substantially in the form
            of the Additional  Purchase Obligation  Certificate  surrendered for
            partial exercise  thereof  providing for purchase by S of the number
            of Ordinary  Shares that were not  exercised  shall be executed by T
            and issued to S.

            Upon surrender of an Additional Purchase Obligation  Certificate and
            payment  of the  Exercise  Price in  conformity  with the  foregoing
            provisions,  T shall  promptly  issue to S  appropriate  evidence of
            ownership of the Ordinary Shares or other  securities or property to
            which S is entitled,  including share  certificates in the name of S
            and evidence of such Ordinary  Shares having been  registered in the
            share  register  of T in the name of S. Such  Shares  shall bear the
            same  legend as set  forth in  Section  4.3.2 of the Share  Purchase
            Agreement.

4.    ADJUSTMENTS

4.1.  ADJUSTMENT OF EXERCISE  PRICE AND NUMBER OF SHARES OF
      ------------------------------------------------------
            ORDINARY SHARES
            ---------------

            The (a) number and kind of shares  purchasable  upon the exercise of
            Additional Purchase Obligations and (b) Exercise Price shall both be
            subject to adjustment from time to time as follows:

4.1.1.     STOCK  DIVIDENDS,  SHARE-SPLITS,  COMBINATIONS,
           -------------------------------------------------
                   etc. In case T shall  hereafter (a) pay a
                   stock  dividend  or  make a  distribution
                   (whether  in  Ordinary  Shares or capital
                   shares   of  any   other   class  on  its
                   Ordinary   Shares),   (b)  subdivide  its
                   outstanding  Ordinary Shares, (c) combine
                   its  outstanding  Ordinary  Shares into a
                   smaller  number of  shares,  or (d) issue
                   by   reclassification   of  its  Ordinary
                   Shares  any  capital  shares  of  T,  the
                   Exercise  Price  in  effect   immediately
                   prior  to  such  action   (after   giving
                   effect  to all other  adjustements  under
                   this  Section  4)  shall be  adjusted  so
                   that,  in  relation  to  any   Additional
                   Purchase      Obligation       thereafter
                   exercised,   S  shall  be   entitled   to
                   receive the number of Ordinary  Shares or
                   of  other  capital  shares  which S would
                   have  owned  immediately  following  such
                   action  had  such   Additional   Purchase
                   Obligation  been  exercised   immediately
                   prior   thereto.   An   adjustment   made
                   pursuant to this  paragraph  shall become
                   effective  immediately  after the  record
                   date in the case of a dividend  and shall
                   become  effective  immediately  after the
                   effective   date   in  the   case   of  a
                   subdivision,        combination        or
                   reclassification.

4.1.2.     RECLASSIFICATION,  COMBINATION,  MERGERS, ETC. In
           ----------------------------------------------
                   case of any  reclassification  or  change
                   of outstanding  Ordinary  Shares issuable
                   upon exercise of the Additional  Purchase
                   Obligations  (other than (i) as set forth
                   in  paragraph  4.1.1  above,  and  (ii) a
                   change  in par  value,  or from par value
                   to no par value,  or from no par value to
                   par  value  or  (iii)  as a  result  of a
                   subdivision or  combination),  or in case
                   of any  consolidation or merger of T with
                   or into another  corporation  (other than
                   a  merger  in  which T is the  continuing
                   corporation  and which does not result in
                   any  reclassification  or  change  of the
                   then   outstanding   Ordinary  Shares  or
                   other   capital   shares   issuable  upon
                   exercise  of  the   Additional   Purchase
                   Obligations  (other  than a change in par
                   value,  or  from  par  value  to  no  par
                   value,  or from no par value to par value
                   or  as  a  result  of  a  subdivision  or
                   combination),  or in case of any  sale or
                   conveyance to another  corporation of the
                   property   of  T  as   an   entirety   or
                   substantially as an entirety,  then, as a
                   condition   of   such   reclassification,
                   change,  consolidation,  merger,  sale or
                   conveyance,  T or  such  a  successor  or
                   purchasing  corporation,  as the case may
                   be,  shall   forthwith  make  lawful  and
                   adequate  provision  whereby S shall have
                   the  right   thereafter   to  receive  on
                   exercise  of  such  Additional   Purchase
                   Obligation  the kind and amount of shares
                   and   other   securities   and   property
                   receivable  upon  such  reclassification,
                   change,  consolidation,  merger,  sale or
                   conveyance  by a holder of the  number of
                   Ordinary  Shares  issuable  upon exercise
                   of such  Additional  Purchase  Obligation
                   immediately       prior      to      such
                   reclassification,  change, consolidation,
                   merger,   sale   or   conveyance.    Such
                   provisions  shall  include  provision for
                   adjustments  which  shall  be  as  nearly
                   equivalent as may be  practicable  to the
                   adjustments  provided for in this Section
                   4.   The   above   provisions   of   this
                   paragraph  4.1.2 shall similarly apply to
                   successive  reclassification  and changes
                   of  Ordinary  Shares  and  to  successive
                   consolidations,    mergers,    sales   or
                   conveyances.

4.1.3.     DEFERRAL OF CERTAIN  ADJUSTMENTS.  No  adjustment
           --------------------------------
                   to  the  Exercise  Price  (including  the
                   related   adjustment  to  the  number  of
                   Ordinary  Shares   purchasable  upon  the
                   exercise  of  each  Additional   Purchase
                   Obligation)  shall be required  hereunder
                   unless  such  adjustment,  together  with
                   other  adjustments   carried  forward  as
                   provided   below,   would  result  in  an
                   increase  or  decrease  of at  least  one
                   percent of the Exercise Price,  PROVIDED,
                                                   --------
                   HOWEVER,  that any  adjustments  which by
                   -------
                   reason  of this  paragraph  4.1.3 are not
                   required  to be  made  shall  be  carried
                   forward  and taken  into  account  in any
                   subsequent   adjustment.   No  adjustment
                   need  be  made  for a  change  in the par
                   value of the Ordinary Shares.

4.1.4.     OTHER  ADJUSTMENTS.  In  the  event  that  at any
           -------------------
                   time, as a result of an  adjustment  made
                   pursuant  to  this  Section  4,  S  shall
                   become    entitled    to   receive    any
                   securities   of  T  other  than  Ordinary
                   Shares  thereafter  the  number  of  such
                   other   securities  so  receivable   upon
                   exercise  of  the   Additional   Purchase
                   Obligations   and  the   Exercise   Price
                   applicable  to  such  exercise  shall  be
                   subject to  adjustment  from time to time
                   in  a  manner  and  on  terms  as  nearly
                   equivalent   as    practicable   to   the
                   provisions  with  respect to the Ordinary
                   Shares contained in this Section 4.

4.2.        NOTICE OF  ADJUSTMENT.  Whenever  the number of  Ordinary  Shares or
            other Equity  Securities  or property  issuable upon the exercise of
            each  Additional  Purchase  Obligation  or  the  Exercise  Price  is
            adjusted,  as herein provided,  T shall promptly mail by first class
            mail, postage prepaid, to S notice of such adjustment or adjustments
            and shall deliver to S a certificate of T's chief financial  officer
            setting  forth  the  number  of  Ordinary  Shares  or  other  Equity
            Securities or property issuable upon the exercise of each Additional
            Purchase  Obligation  or the Exercise  Price after such  adjustment,
            setting  forth  a  brief  statement  of  the  facts  requiring  such
            adjustment   and  setting  forth  the   computation  by  which  such
            adjustment was made.

4.3.        STATEMENT ON ADDITIONAL  PURCHASE  OBLIGATIONS.  Irrespective of any
            adjustment  in the  number  or  kind of  shares  issuable  upon  the
            exercise of the  Additional  Purchase  Obligations  or the  Exercise
            Price,  Additional  Purchase  Obligations  theretofore or thereafter
            issued may continue to express the same number and kind of shares as
            are stated in the Additional Purchase Obligations initially issuable
            pursuant to this Agreement.

4.4.        FRACTIONAL  INTEREST.  T shall not be required  to issue  fractional
            Ordinary   Shares   upon  the   exercise  of   Additional   Purchase
            Obligations.  If more than one Additional  Purchase Obligation shall
            be presented  for  exercise in full at the same time,  the number of
            full  Ordinary  Shares  which shall be issuable  upon such  exercise
            shall be computed on the basis of the  aggregate  number of Ordinary
            Shares acquirable on exercise of the Additional Purchase Obligations
            so presented. If any fraction of an Ordinary Share would, except for
            the  provisions of this section,  be issuable on the exercise of any
            Additional  Purchase  Obligation (or specified portion  thereof),  T
            shall pay an amount  in cash  calculated  by it to equal to the then
            current market value per share multiplied by such fraction  computed
            to  nearest  whole  cent.  S, by its  acceptance  of the  Additional
            Purchase Obligation Certificates, expressly waive any and all rights
            to receive any fraction of an Ordinary Share or a share  certificate
            representing a fraction of an Ordinary Share.

5.    MANDATORY EXERCISE

5.1.        MANDATORY EXERCISE EVENTS; TERMINATION OF Obligation. Subject to the
            terms and  conditions  contained  herein,  S shall be  obligated  to
            exercise each Additional  Purchase  Obligation within thirty days of
            the following events (each a "Mandatory Exercise Event"):

5.1.1.     In respect of the Series A-1 Additional  Purchase
                   Obligation   (and   the  B-1   Additional
                   Purchase   Obligation   if  an   Exercise
                   Notice  was  delivered  prior to the date
                   the   Series  A-1   Additional   Purchase
                   Obligation is  mandatorily  exercisable),
                   upon  receipt  of written  notice  from T
                   signed  by  the  two  Co-CEOs  (or by the
                   CEO,  in the event  that at the  relevant
                   time the  Company  shall  employ only one
                   CEO) and the  Chairman  of the Board of T
                   certifying  that the  Board of  Directors
                   of  T  has  authorized   commencement  of
                   construction  of  Fab 2 at the  site  set
                   forth  in  the   Business   Plan,   which
                   approval   shall  not   occur   prior  to
                   obtaining   all   regulatory    approvals
                   necessary for the  construction  start as
                   described in the Business Plan,  provided
                   that such  event must occur no later than
                   one  month  after the  Closing  under the
                   Share Purchase Agreement;

5.1.2.     In respect of the Series A-2 Additional  Purchase
                   Obligation  and the Series B-2 Additional
                   Purchase   Obligation   (if  an  Exercise
                   Notice  was  delivered  prior to the date
                   the   Series  A-2   Additional   Purchase
                   Obligation is  mandatorily  exercisable),
                   upon  receipt  of written  notice  from T
                   signed by the two  Co-CEOs or the CEO, as
                   the case may be, and the  Chairman of the
                   Board of T  certifying  the  commencement
                   of  construction  of the shell of the Fab
                   2  building   in   accordance   with  the
                   Business  Plan  provided  that such event
                   must  occur no later  than  three  months
                   after   the   Closing   under  the  Share
                   Purchase Agreement;

5.1.3.      In  respect   of  the   Series  A-3   Additional
                   Purchase  Obligation  and the  Series B-3
                   Additional  Purchase  Obligation  (if  an
                   Exercise  Notice was  delivered  prior to
                   the  date  the  Series   A-3   Additional
                   Purchase    Obligation   is   mandatorily
                   exercisable),  upon  receipt  of  written
                   notice  from T signed by the two  Co-CEOs
                   or the CEO,  as the case may be,  and the
                   Chairman  of the  Board  of T  certifying
                   the  completion  of the  construction  of
                   the  first  phase  of  the  cleanroom  of
                   Fab 2 in  accordance  with  the  Business
                   Plan  provided that such event must occur
                   no  later   than  12  months   after  the
                   Closing   under   the   Share    Purchase
                   Agreement;

5.1.4.     In respect of the Series A-4 Additional  Purchase
                   Obligation  and the Series B-4 Additional
                   Purchase   Obligation   (if  an  Exercise
                   Notice  was  delivered  prior to the date
                   the   Series  A-4   Additional   Purchase
                   Obligation is  mandatorily  exercisable),
                   upon  receipt  of written  notice  from T
                   signed by the two  Co-CEOs or the CEO, as
                   the case may be, and the  Chairman of the
                   Board of T certifying  the  completion of
                   successful  pilot  production in Fab 2 in
                   accordance   with   the   Business   Plan
                   provided  that such  event  must occur no
                   later  than 18 months  after the  Closing
                   under the Share Purchase Agreement; and

5.1.5.     In respect of the Series A-5 Additional  Purchase
                   Obligation  and the Series B-5 Additional
                   Purchase   Obligation   (if  an  Exercise
                   Notice  was  delivered  prior to the date
                   the   Series  A-5   Additional   Purchase
                   Obligation is  mandatorily  exercisable),
                   upon  receipt  of written  notice  from T
                   signed by the two  Co-CEOs or the CEO, as
                   the case may be, and the  Chairman of the
                   Board  of T  certifying  that  Fab  2 has
                   successfully  produced wafers at the rate
                   of   5,000   per   month   for  two  full
                   consecutive  months  in  accordance  with
                   the  Business  Plan  provided  that  such
                   event  must occur no later than 22 months
                   after   the   Closing   under  the  Share
                   Purchase Agreement.

            Each of the  Mandatory  Exercise  Events  shall  be  deemed  to have
            occurred if the  Mandatory  Exercise  Event occurs  within seven and
            one-half  months  from its  original  exercise  date set forth above
            (such seven and one-half  month period,  a "Grace  Period").  In the
            event that one of the  Mandatory  Exercise  Events does not occur by
            the last date set forth in the  relevant  clause of clauses  5.1.1 -
            5.1.5,  including during the  corresponding  Grace Period (a "Missed
            Exercise"),  then, if the subsequent  Mandatory  Exercise Event does
            not  occur  by no  later  than  the end of its  corresponding  Grace
            Period,  S shall not be obligated to effect the Missed  Exercise and
            any subsequent  series of Additional  Purchase  Obligations  and the
            Additional Purchase  Obligation relating to the Missed Exercise,  to
            the extent such Additional  Purchase  Obligations  are  unexercised,
            shall automatically  expire.  However, if such subsequent  Mandatory
            Exercise Event does occur within the applicable Grace Period, then S
            shall be obligated to exercise the  Additional  Purchase  Obligation
            related to that  subsequent  Mandatory  Exercise  Event and shall be
            required to either effect the Missed  Exercise within thirty days of
            the occurrence of the relevant  subsequent  Mandatory Exercise Event
            or  the  Additional  Purchase  Obligation  relating  to  the  Missed
            Exercise shall expire.

            In addition, and without limiting any other remedies available to T,
            in the  event  that S  fails  to  exercise  an  Additional  Purchase
            Obligation in connection with a Mandatory Exercise Event which it is
            obligated  to effect  pursuant  to this  Section  5, any  Additional
            Purchase  Obligations  unexercised at such time shall  automatically
            expire

5.2.  PERCENTAGE   OWNERSHIP  DELAY.   Notwithstanding   the
      -----------------------------
            provisions  of  Section  5.1,  S may  delay  the
            exercise of any Additional  Purchase  Obligation
            if any such  exercise  would  result in S owning
            more  than  19.9%  of  the   outstanding   share
            capital of T.

5.3.        OTHER  CONDITIONS  TO  MANDATORY   EXERCISE.   In  addition  to  the
            conditions  to  Mandatory  Exercise  contained  in Section  5.1, S's
            obligation  to  effect a  Mandatory  Exercise  shall be  subject  to
            satisfaction of the following conditions (any of which may be waived
            by S, in whole or in part,  in S's  discretion)  in relation to each
            Mandatory Exercise:

5.3.1.     ACCURACY   OF   REPRESENTATIONS.   All   of   T's
           --------------------------------
                   representations    and    warranties   in
                   Section  6.1(i)  of this  Agreement  must
                   have  been   accurate  in  all   material
                   respects      (except      that      such
                   representations       and      warranties
                   specifically   qualified  by  materiality
                   shall  be  read  for   purposes  of  this
                   Section   so  as   not  to   require   an
                   additional  degree of  materiality) as of
                   the date of this  Agreement,  and must be
                   accurate in all  material  respects as of
                   the  date  of  the   relevant   Mandatory
                   Exercise,   after  giving  effect,   with
                   respect  to the  representations  made in
                   Section   3.1  and   3.3  of  the   Share
                   Purchase  Agreement,  to the  issuance of
                   Ordinary   Shares   contemplated  by  the
                   Business  Plan and  Additional  Financing
                   Plan and  without  giving  effect  to any
                   supplement  to the  Schedules  other than
                   supplements  disclosing  events and facts
                   not  existing  at the time of the Closing
                   and  arising  in the  Ordinary  Course of
                   Business.

5.3.2.     ADDITIONAL  FINANCINGS.  T shall have  raised all
           -----------------------
                   the   funds    under    the    Additional
                   Financings  required  thereunder  to have
                   been raised or obtained  either  prior to
                   or  simultaneously  with  the date of the
                   relevant  Mandatory Exercise as described
                   in the  Additional  Financing Plan (each,
                   a "Target  Date"),  including those funds
                   required  to  have  been  raised  by  the
                   relevant  Target  Date under (i) the debt
                   or equity financing  described in Section
                   10 of the  Business  Plan and (ii)  under
                   the grant from the Investment  Center, in
                   each case on terms and  conditions  which
                   do not  significantly  deviate  from  the
                   terms  and  conditions   agreed  upon  in
                   accordance  with Section 5.6 of the Share
                   Purchase  Agreement,  PROVIDED,  HOWEVER,
                   that  this  condition  shall be deemed to
                   have  been  not  satisfied  only  if  the
                   failure  to  raise  such  funds  causes a
                   material  change in the timetable or cost
                   of the Fab 2 project in  relation  to the
                   Business   Plan  as   determined   by  S.
                   Notwithstanding   the   foregoing,    the
                   conditions  set  forth  in  this  Section
                   5.2.2  shall be  deemed  to have been met
                   if the funds  which were not raised as of
                   the  relevant   Target  Date  are  raised
                   within  90 days of  such  Target  Date on
                   terms   and   conditions    substantially
                   similar to the terms and conditions  upon
                   which such funds  were  supposed  to have
                   been raised in  accordance  with  Section
                   5.6  of  the   of  the   Share   Purchase
                   Agreement.

5.3.3.     TRANSACTION   DOCUMENTS;   ANCILLARY  AGREEMENTS.
           -------------------------------------------------
                   Each  of the  Transaction  Documents  and
                   the  Toshiba  Agreement  shall be in full
                   force and  effect and shall not have been
                   materially breached by any party thereto.

5.3.4.     CERTIFICATES.  In addition to the  documents T is
           -------------
                   obligated  to  deliver  to S  under  this
                   Section  5, T shall  furnish  S with such
                   other   documents  as  T  may  reasonably
                   request   for   the   purpose   of   (i)
                   evidencing  the  performance  by T of, or
                   the  compliance  by T with,  any covenant
                   or  obligation  required to be  performed
                   or complied  with by T in relation to the
                   relevant     Mandatory    Exercise    and
                   (ii) evidencing  the  satisfaction of any
                   condition referred to in this Section 5.

5.3.5.     NO   PROCEEDINGS.   Since   the   date   of  this
           -----------------
                   Agreement,   there  must  not  have  been
                   commenced  by a third party  against S or
                   T, or against any Person  affiliated with
                   S or T, any  Proceeding (a) involving any
                   challenge  to,  or  seeking   damages  or
                   other relief in connection  with,  any of
                   the  Contemplated  Transactions,  or  (b)
                   that may have the  effect of  preventing,
                   delaying,  making  illegal,  or otherwise
                   interfering  with any of the Contemplated
                   Transactions.

5.3.6.     BANKRUPTCY-RELATED    EVENTS.    None    of   the
           -----------------------------
                   following  events shall have occurred for
                   any reason  whatsoever  (and whether such
                   occurrence    shall   be   voluntary   or
                   involuntary,   or   come   about   or  be
                   effected   by   operation   of  law,   or
                   pursuant  to or in  compliance  with  any
                   judgement,  decree  or order of any court
                   or any order,  rule or  regulation of any
                   administrative or governmental body):

5.3.6.1.   T shall be unable to pay its debts  generally  as
                          they become  due;  file a petition
                          to   take    advantage    of   any
                          insolvency   statute;    make   an
                          assignment  for the benefit of its
                          creditors;  commence a  proceeding
                          for   the    appointment    of   a
                          receiver,  trustee,  liquidator or
                          conservator  of  itself  or of the
                          whole or any  substantial  part of
                          its  property;  file a petition or
                          answer seeking  reorganization  or
                          arrangement   or  similar   relief
                          under applicable  bankruptcy laws;
                          or

5.3.6.2.   A court  of  competent  jurisdiction  shall  have
                          entered  an  order,  judgement  or
                          decree   appointing  a  custodian,
                          receiver,  trustee,  liquidator or
                          conservator  of T or of the  whole
                          or  any  substantial  part  of its
                          properties,  or approve a petition
                          filed     against     T    seeking
                          reorganization  or  arrangement or
                          similar  relief  under  applicable
                          bankruptcy,   or  if,   under  the
                          provisions  of  any  law  for  the
                          relief or aid of debtors,  a court
                          of  competent  jurisdiction  shall
                          assume  custody or control of T or
                          of the  whole  or any  substantial
                          part  of  its  properties,  or  if
                          there was commenced  against T any
                          proceeding  or  petition   seeking
                          reorganization  or  arrangement or
                          similar  relief  under  applicable
                          bankruptcy  laws,  or  if T  shall
                          have taken any action to  indicate
                          its  consent  to  or  approval  of
                          any such  proceeding  or petition,
                          and any one of  which  proceedings
                          shall  not have  been  vacated  or
                          abandoned within 30 days.

5.3.6.3.   A default  shall have  occurred in any  agreement
                          or  instrument  under or  pursuant
                          to     which     any      material
                          indebtedness  of T shall have been
                          issued,     created,      assumed,
                          guaranteed  or  secured,  and such
                          default  shall  continure for more
                          than the period of grace,  if any,
                          therein  specified,   or  if  such
                          default  shall  permit  the holder
                          of    such     indebtedness     to
                          accelerate  the maturity  thereof,
                          provided,    however,   that   the
                          condition    contained   in   this
                          Section   5.3.6.3   shall  not  be
                          deemed to have been  satisfied  in
                          the event  that a  default  in any
                          agreement  or   instrument   under
                          which  any  indebtedness  of T has
                          been  issued  could give rise to a
                          cross default  provision in in any
                          agreement or  instrument  under or
                          pursuant  to  which  any  material
                          indebtedness  of T shall have been
                          issued,     created,      assumed,
                          guaranteed  or secured,  or if the
                          cumulative  effect  of  any or all
                          such  defaults  could be  material
                          to the Company.

6.    REPRESENTATIONS AND WARRANTIES

6.1.        REPRESENTATIONS  AND WARRANTIES OF T. (i) T hereby makes in favor of
            S, as of the date hereof and as of the date of each exercise of each
            Additional  Purchase  Obligation,  each of the  representations  and
            warranties made by the Company in Sections 3.1, 3.2, 3.3, 3.14.1(i),
            the  first two  sentences  of 3.14.2  and  clause  (ii) of the first
            paragraph of 3.15 of the Share  Purchase  Agreement,  provided  that
            references to "this  Agreement"  shall refer both to this  Agreement
            and  the  Share   Purchase   Agreement;   references,   directly  or
            indirectly, to the Escrow Agreement shall be ignored;  references to
            "Shares" and the  "Closing"  shall be deemed to be references to the
            Ordinary  Shares  to be  issued  pursuant  to  the  exercise  of the
            Additional Purchase Obligation; and references to the "Closing Date"
            shall refer to the date that Ordinary Shares are actually issued and
            delivered  to S pursuant to the relevant  exercise of an  Additional
            Purchase    Obligation.    Notwithstanding   the   foregoing,    the
            representation  contained  in the first  two  sentences  of  Section
            3.14.2  shall be read to relate  to Fab 2. In the  event  that it is
            uncertain  if a  situation,  event or fact that would  otherwise  be
            included in the scope of such  representation  relates to Fab 2, the
            matter shall be conclusively decided by the Project Committee.

6.2.        REPRESENTATIONS  AND  WARRANTIES OF S. S hereby makes in favor of T,
            as of the  date  hereof  and as of the date of each  exercise  of an
            Additional Purchase  Obligation,  the representations and warranties
            made by S under Sections 4.1 - 4.5 of the Share Purchase  Agreement,
            provided  that  references to "this  Agreement"  shall refer both to
            this  Agreement  and the Share  Purchase  Agreement,  references  to
            Shares shall refer to the Additional  Purchase  Obligations  and the
            Ordinary Shares  issuable upon the exercise  thereof and references,
            directly or indirectly, to the Escrow Agreement shall be ignored.

7.    COVENANTS

7.1.        RESERVATION  OF SHARES.  T will reserve for issuance  such number of
            Ordinary  Shares as shall be  sufficient  for  issuance and delivery
            thereof  upon  exercise  of  all  outstanding   Additional  Purchase
            Obligations and will take any and all corporate  action necessary to
            validly and  legally  issue  fully paid and  nonassessable  Ordinary
            Shares.

7.2.        CONSENTS;  REQUIRED  APPROVALS.  T and S will each,  as  promptly as
            practicable  after  the  date of this  Agreement,  take  all  action
            required  of each of them,  respectively,  to obtain as  promptly as
            practicable  all necessary  Consents and  agreements of, and to give
            all  notices and make all other  filings  with,  any third  parties,
            including  Governmental Bodies,  necessary to authorize,  approve or
            permit the consummation of the transactions contemplated hereby, the
            Contemplated  Transactions and the transactions  contemplated by the
            Ancillary  Agreements.  Between the date of this  Agreement  and the
            date of the last issuance of Ordinary Shares pursuant to an exercise
            of a Additional  Purchase  Obligation,  T will cooperate with S with
            respect to all filings that S elects to make or is required by Legal
            Requirements  to make in  connection  with the  performance  of this
            Agreement  and  the  Additional  Purchase  Obligations  and  S  will
            likewise cooperate with T.

7.3.        OPERATION OF T'S  BUSINESS.  Between the date of this  Agreement and
            the date of the last  issuance  of  Ordinary  Shares  pursuant  to a
            Mandatory  Exercise,  T will not (i) take or agree or commit to take
            any action  that  would make any  representation  or  warranty  of T
            hereunder  inaccurate in any respect at, or as of any time prior to,
            the date of the last  issuance  of  Ordinary  Shares  pursuant  to a
            Mandatory  Exercise  or (ii) omit or agree or commit to omit to take
            any action necessary to prevent any such  representation or warranty
            from being inaccurate in any respect at any such time.

8.     MISCELLANEOUS

8.1.        PAYMENT  OF  TAXES.  T will pay all  taxes  and  other  governmental
            charges  (other  than on the net income of S) that may be imposed or
            deliverable  upon exercise of Additional  Purchase  Obligations  and
            issuance of  Ordinary  Shares with  respect  thereto.  T will not be
            required,  however,  to pay any tax or other  charges  which  may be
            payable  in  respect of any  transfer  involved  in the issue of any
            certificate for Ordinary Shares or other  securities  underlying the
            Additional Purchase Obligations or payment of cash or other property
            to any  person  other  than the  holder  of an  Additional  Purchase
            Obligation Certificate surrendered upon the exercise thereof.

8.2.        MUTILATED, DESTROYED, LOST AND STOLEN ADDITIONAL PURCHASE OBLIGATION
            CERTIFICATES.  If (a) any mutilated  Additional  Purchase Obligation
            Certificate is  surrendered  to T or (b) T receives  evidence to its
            satisfaction  of the  destruction,  loss or theft of any  Additional
            Purchase Obligation Certificate,  then, T shall execute and deliver,
            in exchange for any such mutilated  Additional  Purchase  Obligation
            Certificate  or in  lieu  of any  such  destroyed,  lost  or  stolen
            Additional  Purchase  Obligation   Certificate,   a  new  Additional
            Purchase  Obligation  Certificate  of  like  tenor  and  for a  like
            aggregate number of Additional Purchase Obligations.

            Upon  the  issuance  of  any  new  Additional   Purchase  Obligation
            Certificate  under this  Section 8.2, T may require the payment of a
            sum  sufficient to cover any tax or other  governmental  charge that
            may be imposed in relation  thereto and other expenses in connection
            therewith  and an  appropriate  indemnity  with  respect  to  losses
            related thereto.

            Every new Additional  Purchase Obligation  Certificate  executed and
            delivered  pursuant to this  Section  8.2 in lieu of any  destroyed,
            lost or stolen  Additional  Purchase  Obligation  Certificate  shall
            constitute an original  contractual  obligation of T, whether or not
            the  destroyed,   lost  or  stolen  Additional  Purchase  Obligation
            Certificate shall be at any time enforceable by anyone, and shall be
            entitled   to  the   benefits   of  this   Agreement   equally   and
            proportionately   with  any  and  all  other   Additional   Purchase
            Obligation Certificates duly executed and delivered hereunder.

            The  provisions  of this Section 8.2 are exclusive and shall prelude
            (to the extent  lawful) all other rights or remedies with respect to
            the replacement of mutilated,  destroyed,  lost or stolen Additional
            Purchase Obligation Certificates.

8.3.        MISCELLANEOUS  RIGHTS.  The rights of S upon the  occurrence  of the
            events set forth in this Agreement are cumulative.  If more than one
            such event shall occur and the periods  following the  occurrence of
            such  events and prior to the closing of the  transactions  that are
            the  subject of such  events  overlap,  S may  exercise  such rights
            arising  therefrom as S may elect without any condition imposed upon
            such exercise not contained in this Agreement.

8.4.  NOTICES. Any notice,  demand or delivery authorized by
      --------
            this Agreement  shall be  sufficiently  given or
            made when  mailed if sent by  first-class  mail,
            postage  prepaid,  addressed  to the  parties as
            follows:

            T:
            Attention:         Co-Chief Executive Officer
                          P.O. Box 619
                          Migdal Haemek 23105 Israel
            Facsimile No.:     972-6-654-7788

            with a copy to:    Yigal Arnon & Co.
                          3 Daniel Frisch Street
                          Tel Aviv, Israel
            Attention:         David H. Schapiro, Adv.
            Facsimile No.:     972-3-608-7714

            S:
            Attention:         President and CEO
                          SanDisk Corporation
                          140 Caspian Court
                          Sunnyvale, California 94089
            Facsimile No.:(408) 542-0600

            with a copy to:    SanDisk Corporation
                          140 Caspian Court
                          Sunnyvale, California 94089
            Attention:         Vice  President  and  General
            Counsel

                   Facsimile No.:   (408)   548-0385or  such
                   other   address   as  shall   have   been
                   furnished  to the party  giving or making
                   such notice, demand or delivery.

8.5.        ASSIGNMENTS,  SUCCESSORS,  AND NO THIRD-PARTY RIGHTS.  Neither party
            may assign any of its rights under this Agreement  without the prior
            consent of the other  parties,  except  that S may assign any of its
            rights under this  Agreement to any wholly owned  Subsidiary of S or
            to any  Subsidiary  which  is  wholly  owned  other  than a  nominal
            interest, so long as such ownership shall be maintained.  Subject to
            the preceding sentence,  this Agreement will apply to, be binding in
            all respects  upon,  and inure to the benefit of the  successors and
            permitted  assigns of the parties.  Nothing expressed or referred to
            in this  Agreement  will be  construed to give any Person other than
            the parties to this Agreement any legal or equitable right,  remedy,
            or claim under or with respect to this Agreement or any provision of
            this  Agreement.  This  Agreement  and  all  of its  provisions  and
            conditions are for the sole and exclusive  benefit of the parties to
            this Agreement and their successors and assigns.

8.6.  COUNTERPARTS.  This  Agreement  may be executed in any
      -------------
            number of  counterparts,  each of which shall be
            deemed an  original,  but all of which  together
            constitute one and the same instrument.

8.7.        ENTIRE  AGREEMENT AND  MODIFICATION.  This Agreement  supersedes all
            prior  agreements  between the parties  with  respect to its subject
            matter  (including  the term sheet  between S and T dated  March 15,
            2000 and all drafts hereof and thereof) and constitutes  (along with
            the  documents  referred  to  in  this  Agreement)  a  complete  and
            exclusive  statement  of the  terms  of the  agreement  between  the
            parties with respect to its subject  matter.  This Agreement may not
            be amended except by a written agreement executed by the party to be
            charged with the amendment.

8.8.        TERMINATION. This Agreement (other than T's obligations with respect
            to Additional  Purchase  Obligations  previously  exercised) and the
            indemnification  provisions relating hereto appearing in Sections 10
            of  the  Share  Purchase  Agreement,  shall  terminate  and be of no
            further force and effect on the Expiration Date.

8.9.  APPLICABLE  LAW. This  Agreement  and each  Additional
      ----------------
            Purchase  Obligation  issued  hereunder  and all
            rights  arising  hereunder  shall be governed by
            the  law of the  State  of  California,  without
            giving   effect   to  the   conflict   of   laws
            provisions thereof.

8.10. HEADINGS.  The  descriptive  headings  of the  several
      ---------
            Sections  of this  Agreement  are  inserted  for
            convenience  and shall not control or affect the
            meaning   or   construction   of   any   of  the
            provisions hereof.

<PAGE>

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

                                Tower Semiconductor Ltd.

                                By:    /S/ YOAV NISSAN COHEN

                                     Name: Yoav Nissan Cohen
                                     Title: Co-Chief Executive Officer

                                SanDisk Corporation

                                By:  /S/ ELI HARARI
                                     Name: Eli Harari
                                     Title:  Chief Executive OfficerREGISTRATION RIGHTS AGREEMENT

     This  REGISTRATION  RIGHTS  AGREEMENT  (this  "Agreement"),  is  made as of
January  18,  2001,  by  and  between  Tower   Semiconductor  Ltd.,  an  Israeli
corporation (the "Company" or "T"), SanDisk Corporation,  a Delaware corporation
("S"),  Alliance  Semiconductor  Corp.  a  Delaware  corporation   ("Alliance"),
Macronix  International  Co., Ltd., a Taiwanese  corporation  (together with its
affiliates  referred  to as  "Macronix"),  QuickLogic  Corporation,  a  Delaware
corporation   ("QuickLogic")   and  The  Israel  Corporation  Ltd.,  an  Israeli
corporation ("TIC").

     WHEREAS, the Company and S entered into a Share Purchase Agreement dated as
of July 4, 2000 (the  "SPA") and an  Additional  Purchase  Obligation  Agreement
dated as of July 4, 2000 (the "Additional Purchase Obligation Agreement");

     WHEREAS,  the Company and Alliance entered into a Share Purchase  Agreement
dated as of August  29,  2000  (the  "Alliance  SPA"),  which  includes  certain
provisions  of the  Additional  Purchase  Obligation  Agreement  (the  "Alliance
Additional Purchase Obligation Agreement");

     WHEREAS,  the Company and Macronix entered into a Share Purchase  Agreement
dated as of December  12, 2000 (the  "Macronix  SPA"),  which  includes  certain
provisions  of the  Additional  Purchase  Obligation  Agreement  (the  "Macronix
Additional Purchase Obligation Agreement");

     WHEREAS, the Company and QuickLogic entered into a Share Purchase Agreement
dated as of December 12, 2000 (the  "QuickLogic  SPA"),  which includes  certain
provisions of the Additional  Purchase  Obligation  Agreement  (the  "QuickLogic
Additional Purchase Obligation Agreement");

     WHEREAS,  it is a condition  precedent  to the closing of the  transactions
contemplated  in the SPA, the Alliance SPA, the Macronix SPA and the  QuickLogic
SPA that the parties hereto execute and deliver this Agreement;

     NOW  THEREFORE,  in  consideration  of the  premises,  mutual  promises and
covenants  contained in this  Agreement and intending to be legally  bound,  the
parties hereto hereby agree as follows:

1.   DEFINITIONS
1.
2.   For purposes of this Agreement:
3.
4.   1.1   The term "Holder" shall mean a member of the
           Purchaser Group and/or TIC, as the case may be.
5.
6.         1.2 The term "Ordinary  Shares" means the ordinary shares,  par value
           NIS1.00  each of the Company (as may be adjusted for any stock split,
           stock  combination,  reclassification  or any other  recapitalization
           event).
7.
8.   1.3   The term "Closing" means Closing as such term is
           defined in the SPA.
9.
10.        1.4  The  term  "Purchaser   Group"  means  S,  Alliance,   Macronix,
           QuickLogic and any additional  parties that enter into share purchase
           agreements with T prior to the Closing and that close  simultaneously
           with  the  SPA or  any  successors  thereto  or  permitted  assignees
           thereof.
11.
12.        1.5 The term  "Registrable  Securities"  means  the  Purchaser  Group
           Registrable Securities and/or the TIC Registrable Securities,  as the
           case may be,  and any  securities  issued as a  dividend  on or other
           distribution  with respect to, or in exchange for or  replacement  of
           such secutities.
13.
14.  1.6   The term "Purchaser Group Registrable
           Securities" means the Ordinary Shares (a)
           purchased at the Closing under the SPA by S, (b)
           purchased at the closing under the Alliance SPA
           by Alliance, (c) purchased at the closing under
           the Macronix SPA by Macronix, (d) purchased at
           the closing under the QuickLogic SPA by
           QuickLogic, (e) purchased by any additional
           members of the Purchaser Group at the closing of
           any additional share purchase agreements with T
           that close simultaneously with the Closing of
           the SPA, (f) purchased by S pursuant to the
           Additional Purchase Obligation Agreement, (g)
           purchased by Alliance pursuant to the Alliance
           Additional Purchase Obligation Agreement, (h)
           purchased by Macronix pursuant to the Macronix
           Additional Purchase Obligation Agreement, (i)
           purchased by QuickLogic pursuant to the
           QuickLogic Additional Purchase Obligation
           Agreement, (j) purchased by any additional
           members of the Purchaser Group pursuant to an
           additional purchase obligation agreement entered
           into, prior to the Closing of the SPA, between T
           and such additional members of the Purchaser
           Group, (k) otherwise issued by the Company to S
           pursuant to the terms of the SPA or the
           Additional Purchase Obligation Agreement, (l)
           otherwise issued by the Company to Alliance
           pursuant to the terms of the Alliance SPA or the
           Alliance Additional Purchase Obligation
           Agreement, (m) otherwise issued by the Company
           to Macronix pursuant to the terms of the
           Macronix SPA or the Macronix Additional Purchase
           Obligation Agreement, (n) otherwise issued by
           the Company to QuickLogic pursuant to the terms
           of the QuickLogic SPA or the QuickLogic
           Additional Purchase Obligation Agreement, and
           (o) otherwise issued by the Company to any
           additional member of the Purchaser Group
           pursuant to the terms of any additional share
           purchase agreements with T that close
           simultaneously with the Closing or any
           additional purchase obligation agreement entered
           into, prior to the Closing of the SPA, between T
           and such additional members of the Purchaser
           Group. As to any particular Registrable
           Securities, such shares shall cease to be
           Registrable Securities for purposes of this
           Agreement when (i) a registration statement with
           respect to the sale of such shares shall have
           become effective under the Securities Act and
           such shares shall have been disposed of under
           such registration statement, (ii) such shares
           shall have been otherwise transferred or
           disposed of, and new certificates therefor not
           bearing a legend restricting further transfer
           shall have been delivered by the Company, and
           subsequent transfer or disposition of them shall
           not require their registration or qualification
           under the Securities Act or any similar state
           law then in force or (iii) such shares shall
           have ceased to be outstanding.
15.
16.  1.7   The terms "register," "registered" and
           "registration" refer to a registration effected
           by preparing and filing a registration statement
           or similar document in compliance with the
           Securities Act, and the declaration or ordering
           by the SEC of effectiveness of such registration
           statement or document, or the equivalent under
           the laws of another jurisdiction.
17.
18.  1.8   The term "Securities Act" means the United
           States Securities Act of 1933, as amended.
19.
20.  1.9   The term "SEC" means the United States
           Securities and Exchange Commission.
21.
22.  1.10  The term "TIC" means The Israel Corporation Ltd.
23.
24.        1.11 The term "TIC Registrable  Securities" means the Ordinary Shares
           held by TIC as of the date of the Closing.  As to any  particular TIC
           Registrable Securities, such shares shall cease to be TIC Registrable
           Securities  for purposes of this  Agreement  when (i) a  registration
           statement  with  respect to the sale of such shares shall have become
           effective  under the  Securities  Act and such shares shall have been
           disposed of under such registration statement, (ii) such shares shall
           have been otherwise  transferred or disposed of, and new certificates
           therefor not bearing a legend restricting further transfer shall have
           been delivered by the Company, and subsequent transfer or disposition
           of them shall not require their  registration or qualification  under
           the Securities Act or any similar state law then in force, (iii) such
           shares shall have ceased to be outstanding,  or (iv) such shares have
           been sold pursuant to Rule 144 or Rule 144A under the Securities Act.
           .
25.
26.        1.12 The term  "Additional  Purchase  Obligation"  means  each of the
           additional  obligations  to purchase  Ordinary  Shares of the Company
           issued to S pursuant to the Additional Purchase Obligation Agreement,
           the additional obligations to purchase Ordinary Shares of the Company
           issued to  Alliance  pursuant  to the  Alliance  Additional  Purchase
           Obligation Agreement, the additional obligations to purchase Ordinary
           Shares of the  Company  issued to Macronix  pursuant to the  Macronix
           Additional Purchase Obligation Agreement,  the additional obligations
           to  purchase  Ordinary  Shares of the  Company  issued to  QuickLogic
           pursuant to the QuickLogic  Additional Purchase Obligation  Agreement
           or any similar additional  obligations to purchase Ordinary Shares of
           the Company issued to any additional  members of the Purchaser  Group
           pursuant to an additional purchase obligation agreement entered into,
           prior to the Closing of the SPA, between T and such additional member
           of the Purchaser Group.

2.    DEMAND REGISTRATION

      2.1  At any time  following  the third  anniversary  of the  Closing  (the
           "Demand  Period"),  TIC and each of S,  Alliance  and  Macronix,  may
           request in writing that all or part of their  Registrable  Securities
           be  registered  under the  Securities  Act and/or  listed so as to be
           eligible for public trading on any  securities  exchange on which the
           Ordinary Shares are otherwise traded (a "Demand"); provided, however,
           the  initiation  of such a Demand  may not be made by a  Holder  that
           holds under  1,500,000  Ordinary  Shares.  In  addition,  at any time
           during the Demand  Period,  members of the Purchaser  Group holding a
           majority of the Purchaser  Group  Registrable  Securities may jointly
           initiate an additional Demand.  Notwithstanding the foregoing, in the
           event  that,  pursuant  to  Section  5.3 of the  Additional  Purchase
           Obligation  Agreement,  a member of the Purchaser Group that holds at
           least 800,000 Ordinary Shares does not exercise any of its Additional
           Purchase Obligations, the right of such member of the Purchaser Group
           to initiate a Demand shall be  accelerated to the tenth day after the
           date upon which the event  giving rise to the right of such member of
           the  Purchaser   Group  not  to  exercise  the  Additional   Purchase
           Obligation occurs. Upon receipt of a Demand of a member or members of
           the Purchaser Group, the Company will promptly give written notice of
           such Demand to TIC and to all other  members of the  Purchaser  Group
           and the Company  shall  effect the  registration  of all  Registrable
           Securities  for  which  registration  has  been  requested  including
           Registrable  Securities  which  the  Company  has been  requested  to
           register by TIC or members of the Purchaser  Group by written request
           given to the Company  within 30 days after the giving of such written
           notice by the Company. The Company shall use its best efforts to have
           a Demand  become  effective  by the 60th  day  after a member  of the
           Purchaser  Group  makes  such  Demand  and,  shall  keep such  Demand
           effective  until  the  distribution  of such  Registrable  Securities
           registered  pursuant  thereto  is  complete,  if  underwritten,   or,
           otherwise, for 180 days. Upon receipt of a Demand of TIC, the Company
           will  promptly  give written  notice of such Demand to all members of
           the Purchaser Group and the Company shall effect the  registration of
           all Registrable  Securities for which registration has been requested
           including Registrable Securities which the Company has been requested
           to  register  by members of the  Purchaser  Group by written  request
           given to the Company  within 30 days after the giving of such written
           notice by the Company. The Company shall use its best efforts to have
           a Demand become effective by the 60th day after TIC makes such Demand
           and, shall keep such Demand  effective until the distribution of such
           Registrable  Securities  registered pursuant thereto is complete,  if
           underwritten, or, otherwise, for 180 days.

      2.2  In the  event of a Demand  by a member or  members  of the  Purchaser
           Group  in  which  the  registration  of  Registrable   Securities  is
           underwritten and the managing underwriter of the offering advises the
           members  of the  Purchaser  Group and TIC in writing  that  marketing
           factors   require  a  limitation  of  the  number  of  shares  to  be
           underwritten, then there shall be excluded from such registration and
           underwriting  to the extent  necessary  to satisfy  such  limitation,
           first  shares  which the  Company  may wish to  register  for its own
           account or for the account of other shareholders of the Company,  and
           then shares  held by TIC,  and then shares held by the members of the
           Purchaser Group on a pro rata basis to the number of shares that each
           member of the Purchaser Group included in the Demand. In the event of
           a  Demand  by TIC  in  which  the  registration  of  the  Registrable
           Securities  is  underwritten  and  the  managing  underwriter  of the
           offering  advises  TIC and the  members  of the  Purchaser  Group  in
           writing that marketing  factors require a limitation of the number of
           shares to be  underwritten,  then there shall be  excluded  from such
           registration and underwriting to the extent necessary to satisfy such
           limitation,  first  shares which the Company may wish to register for
           its own  account  or for the  account  of other  shareholders  of the
           Company,  and then shares held by the members of the Purchaser  Group
           on a pro rata basis to the number of shares  that each  member of the
           Purchaser Group included in the Demand,  and then shares held by TIC.
           In the event that, following a receipt of a request by the members of
           the  Purchaser  Group  and/or  TIC,  as the case may be, as  detailed
           above,  the  managing  underwriter  advises the  Company  that due to
           marketing  factors the shares  requested to be registered for trading
           could not be sold,  and  accordingly  the  Company  does not effect a
           registration  statement,  then such  request  by the  members  of the
           Purchaser  Group  and/or  TIC,  as the  case  may  be,  shall  not be
           considered a Demand under this Section 2.

      2.3  Any  registration  proceeding  begun  pursuant to Section 2.1 that is
           subsequently withdrawn at the request of the members of the Purchaser
           Group that initiated such registration  proceeding and/or TIC, as the
           case may be, shall count toward the quota of registration  statements
           which the members of the Purchaser  Group and/or TIC, as the case may
           be,  have the right to Demand  pursuant  to  Section  2.1;  provided,
           however, that such withdrawn  registration shall not be so counted as
           a Demand  if such  withdrawal  is based  upon  (a)  material  adverse
           information  relating  to the Company or its  condition,  business or
           prospects  which  is  different  from  that  generally  known  to the
           member(s) of the  Purchaser  Group that were to  participate  in such
           registration  proceeding,  in the  event of a Demand  by a member  or
           members of the  Purchaser  Group and/or TIC, in the event of a Demand
           by TIC, as the case may be, at the time of its request or (b) general
           securities  market conditions which are different from that generally
           known  to  the  member(s)  of  the  Purchaser   Group  that  were  to
           participate in such registration proceeding, in the event of a Demand
           by a member or members of the  Purchaser  Group  and/or  TIC,  in the
           event of a  Demand  by TIC,  as the  case may be,  at the time of its
           request,  provided,  in  connection  with this clause  (b),  that the
           member(s) of the  Purchaser  Group that were to  participate  in such
           registration  proceeding,  in the  event of a Demand  by a member  or
           members of the  Purchaser  Group and/or TIC, in the event of a Demand
           by TIC, as the case may be,  reimburse  the Company for its  expenses
           incurred in connection with effecting such withdrawn registration.

      2.4  The Company may not cause any other  registration  of securities  for
           sale for its own account (other than a registration  of securities to
           be offered to  employees,  directors  or  consultants  pursuant  to a
           benefit  plan on Form  S-8 or a  registration  in  connection  with a
           merger, an exchange offer or any acquisition) to be initiated after a
           registration   requested  pursuant  to  Section  2.1  and  to  become
           effective  less  than  180  days  after  the  effective  date  of the
           registration requested pursuant to Section 2.1.

      2.5  Notwithstanding  the other provisions of this Section 2, in the event
           that at any time during the Demand  Period the Company  shall receive
           from a Holder,  or a group of  Holders,  a written  request  that the
           Company  effect  a  registration  on Form F-3 (or any  equivalent  or
           successor  form) with respect to Registrable  Securities  (the "F-3")
           where the aggregate  net proceeds  from the sale of such  Registrable
           Securities  equals  at least  three  million  United  States  Dollars
           (US$3,000,000),  the  Company  will  within  twenty  (20) days  after
           receipt  of any such  request,  file such  registration  and all such
           qualifications  and  compliance  as may be so requested  and as would
           permit or facilitate the sale and distribution of all or such portion
           of the Registrable  Securities as are specified in such request,  and
           use its best efforts to have such  registration on Form F-3 effective
           by the 60th day  after the  Holder,  or group of  Holders,  make such
           request and keep such  registration  on Form F-3 effective  until the
           distribution is complete,  if underwritten,  or,  otherwise,  for 270
           days; PROVIDED,  HOWEVER,  that the Company shall not be obligated to
           file any such registration,  qualification or compliance, pursuant to
           this  Section  2.5 if the  Company  has,  within  the 180 day  period
           preceding  the  date  of  such  request,  already  effected  one  (1)
           registration  for a requesting  Holder  pursuant to this Section 2.5.
           The Company  undertakes that it will use its best efforts to continue
           to comply with all necessary filings and other  requirements so as to
           maintain its qualification to use Form F-3.

      2.6  The  Company  shall not be  required  to effect  more than  three (3)
           registrations  initiated by TIC under  Section 2.1. The Company shall
           not be required to effect more than one (1) registration initiated by
           each  of S,  Alliance  and  Macronix  under  Section  2.1 and one (1)
           additional registration jointly initiated by members of the Purchaser
           Group  holding  a  majority  of  the  Purchaser   Group   Registrable
           Securities under Section 2.1. Concurrent  registrations in respect of
           multiple  exchanges shall be construed as a single  registration  for
           the purposes of this Section 2.6.

      2.7  The  Company  shall  have the  right to defer  filing a  registration
           statement  (a  "Registration  Deferral")  under  the  Securities  Act
           pursuant to this Section 2 not more than once in any 12-month  period
           if (i) the Board of Directors of the Company shall  determine that it
           would  be  seriously   detrimental   to  the  Company  to  file  such
           registration  statement  at the date the filing  would  otherwise  be
           required under this Agreement,  or (ii) the Board of Directors of the
           Company  determines  in  good  faith  that  (A)  the  Company  is  in
           possession  of  material,   non-public   information   concerning  an
           acquisition, merger, recapitalization,  consolidation, reorganization
           or other  material  transaction  by or of the  Company or  concerning
           pending  or  threatened   litigation   and  (B)  disclosure  of  such
           information  would  jeopardize any such  transaction or litigation or
           otherwise materially harm the Company.

      2.8  A  Registration  Deferral  shall end by the date that is 90 days from
           the date of such  determination  by the Company (the "90th Day"), or,
           in the case described in Section  2.7(ii)  above,  the earlier of the
           90th Day and the date such material  information  is disclosed to the
           public or ceases to be  material,  such  transaction  is completed or
           abandoned or such litigation is settled or finally determined. In the
           event a  Registration  Deferral  is  instituted,  the  members of the
           Purchaser  Group and/or TIC, as the case may be, shall be entitled to
           withdraw   such  request.   If  such  request  is   withdrawn,   such
           registration  shall not count as one of the  permitted  registrations
           under this Section 2. The Company shall  promptly  notify the members
           of the  Purchaser  Group  and/or  TIC of the  expiration  or  earlier
           termination of any Registration Deferral.

3.    INCIDENTAL REGISTRATION

      3.1  If the  Company  at any  time  proposes  to  register  (other  than a
           registration  of securities to be offered to employees,  directors or
           consultants  pursuant to a benefit plan on Form S-8 or a registration
           in connection  with a merger,  an exchange offer or any  acquisition)
           any of its  securities,  it shall give  notice to each Holder of such
           intention at least thirty (30) days prior to filing such registration
           statement.  Upon the written request of any Holder within twenty (20)
           days after  receipt of any such notice,  the Company shall include in
           such registration all of the Registrable Securities indicated in such
           request, so as to permit the disposition of the shares so registered.

      3.2  Notwithstanding  any other  provision of this Section 3, in the event
           that the Company is  undertaking  a  registration  of its  securities
           other than pursuant to a Demand under Section 2 of this Agreement and
           the  managing   underwriter  advises  the  Company  in  writing  that
           marketing  factors require a limitation of the number of shares to be
           underwritten, then there shall be excluded from such registration and
           underwriting,  to the extent  necessary to satisfy  such  limitation,
           first shares held by any  shareholders  other than the Holders,  then
           shares held by the Holders pro rata to their respective shareholdings
           in the  Company,  provided  that in the event that a Holder  does not
           wish to include the full pro rata  amount of shares it could  include
           in the relevant  registration,  then the remaining Holders shall have
           the right to include in such  registration  an amount of shares equal
           to their pro rata portion  plus the amount of the other  Holder's pro
           rata  portion  that such Holder has chosen not to  include;  and then
           shares which the Company may wish to register for its own account.

4.    OBLIGATIONS OF THE COMPANY
1.
2.    Whenever  required under this  Agreement to file a registration  statement
      with respect to the Registrable Securities, the Company shall:
3.
4.         4.1  Prepare  and  file  with  the SEC  (or  other  relevant  body) a
           registration  statement with respect to such  Registrable  Securities
           and use its best  efforts to cause  such  registration  statement  to
           become effective.
5.
6.   4.2   Promptly prepare and file with the SEC (or other
           relevant body) such amendments and supplements
           to such registration statement and the
           prospectus used in connection with such
           registration statement as may be necessary to
           comply with the provisions of the Securities Act
           (or other relevant legislation) with respect to
           the disposition of all securities covered by
           such registration statement.
7.
8.   4.3   Furnish to the Holders such number of copies of
           a prospectus, including a preliminary
           prospectus, in conformity with the requirements
           of the Securities Act (or other relevant
           legislation), and such other documents as it may
           reasonably request in order to facilitate the
           disposition of Registrable Securities owned by
           it.
9.
10.  4.4   Register and qualify the securities covered by
           such registration statement under such other
           securities or blue sky laws of such
           jurisdictions as shall be reasonably requested
           by the Holders, provided, however, that the
           Company shall not be required to qualify to do
           business as a foreign corporation or to file any
           general consent to service of process in any
           jurisdiction in which it has not already so
           qualified or filed.
11.
12.  4.5   In the event of any underwritten public
           offering, 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 offer. The
           Holders shall also enter into and perform their
           obligations under such an agreement (the terms
           of which must be satisfactory to each Holder if
           such Holder is to participate in such
           offering).
13.
14.  4.6   Notify the Holders at any time when a prospectus
           relating to a registration statement filed
           pursuant hereto is required to be delivered
           under the Securities Act or the happening of any
           event as a result of which the prospectus
           included in such registration statement, as then
           in effect, includes an untrue statement of a
           material fact or omits to state a material fact
           required to be stated therein or necessary to
           make the statements therein not misleading in
           the light of the circumstances then existing, in
           which event the Holders shall forthwith
           discontinue disposition of its Registrable
           Securities pursuant to such prospectus until it
           is advised in writing by the Company that the
           use of such prospectus may be resumed or until
           such holder receives copies of any supplement or
           amendment to such prospectus.
15.
16.  4.7   Cause all Registrable Securities registered
           pursuant thereunder to be listed on each
           securities exchange on which similar securities
           issued by the Company are then listed.
17.
18.        4.8  Provide a  transfer  agent  and  registrar  for all  Registrable
           Securities  registered  pursuant hereunder and a CUSIP number for all
           such Registrable Securities not later than the effective date of such
           registration.
19.
20.  4.9   Afford the Holders and their representatives the
           opportunity to make such examination of the
           business affairs of the Company and its
           subsidiaries as the Holders 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 Holders and their representatives).
21.
22.        4.10 Furnish,  at the request of the Holders in  connection  with the
           registration of Registrable Securities pursuant to this Agreement, on
           the date  that  such  Registrable  Securities  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,  (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 Holders,  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
           Holders.
23.
24.  5.    INFORMATION
25.
26.   It shall be a condition  precedent  to the  obligations  of the Company to
      take any action  pursuant to this Agreement that each Holder shall furnish
      to  the  Company  such  information   regarding  itself,  the  Registrable
      Securities  held by it, and the  intended  method of  disposition  of such
      securities  as shall be  required  to  effect  the  registration  of their
      Registrable Securities.
27.
28.  6.    EXPENSES OF REGISTRATION
29.
30.   All expenses  incurred by the Company in connection with any  registration
      pursuant to this Agreement (other than underwriter's commissions and fees)
      including without  limitation all  registration,  filing and qualification
      fees,  printers' and accounting fees and fees and disbursements of counsel
      for the Company and fees and disbursements of one counsel for the Holders,
      shall be borne by the Company.
31.
32.  7.    INDEMNIFICATION
33.
34.  In the event any Ordinary Shares are included in a
      registration statement in accordance herewith:
35.
36.  7.1   To the extent permitted by law, the Company will
           indemnify and hold harmless the Holders, the
           officers and directors of any Holder, any
           underwriter (as defined in the Securities Act)
           for any Holder and each person, if any, who
           controls any Holder or underwriter within the
           meaning of the Securities Act or the 1934 Act
           against any losses, claims, damages, or
           liabilities to which they may become subject
           under the Securities Act, the Securities
           Exchange Act or other United States federal or
           state law or the securities laws of the State of
           Israel, insofar as such losses, claims, damages,
           or liabilities (or actions in respect thereof)
           arise out of or are based upon any of the
           following statements, omissions or violations
           (collectively a "Violation"): (i) any untrue
           statement of a material fact contained in such
           registration statement, including any
           preliminary prospectus or final prospectus
           contained therein or any amendments or
           supplements thereto; (ii) the omission to state
           therein a material fact required to be stated
           therein, or necessary to make the statements
           therein not misleading in light of the
           circumstances under which they were made, or
           (iii) any violation by the Company of the
           Securities Act, the Securities Exchange Act, any
           state securities law or any rule or regulation
           promulgated under the Securities Act, the
           Securities Exchange Act or any state securities
           law, or any of the securities laws of the State
           of Israel or any rule or regulation thereunder;
           and the Company will reimburse each such Holder,
           officer or director, underwriter or controlling
           person for any legal or other expenses
           reasonably incurred by them in connection with
           investigating or defending any such loss, claim,
           damage, liability, or action; provided, however,
           that the indemnity agreement contained in this
           Section 7, shall not apply to amounts paid in
           settlement of any such loss, claim, damage,
           liability, or action if such settlement is
           effected without the consent of the Company
           (which consent shall not be unreasonably
           withheld), nor shall the Company be liable to a
           Holder, underwriter or controlling person in any
           such case for any such loss, claim, damage,
           liability, or action to the extent that it
           arises out of or is based upon a Violation which
           occurs in reliance upon and in conformity with
           written information furnished to the Company
           expressly for use in connection with such
           registration by a Holder, underwriter or
           controlling person. Such indemnity shall remain
           in full force and effect regardless of any
           investigation made by or on behalf of a Holder,
           the underwriter or any controlling person of a
           Holder or the underwriter, and regardless of any
           sale in connection with such offering by a
           Holder.
37.
38.  7.2   To the extent permitted by law, each Holder will
           indemnify and hold harmless the Company, each of
           its directors, each of its officers who have
           signed the registration statement, each person,
           if any, who controls the Company within the
           meaning of the Securities Act, any underwriter
           (within the meaning of the Securities Act) for
           the Company, any person who controls such
           underwriter, and any other parties selling
           securities in such registration statement or any
           directors or officers or any persons controlling
           such parties, against any losses, claims,
           damages, or liabilities to which the Company or
           any such director, officer, controlling person,
           or underwriter or controlling person may become
           subject under the Securities Act, the Securities
           Exchange Act or other United States federal or
           state law, or any of the securities laws of the
           State of Israel, insofar as such losses, claims,
           damages, liabilities (or actions in respect
           hereto) 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 use in connection with such
           registration statement; and such Holder will
           reimburse any legal or other expenses reasonably
           incurred by the Company or any such director,
           officer, controlling person, underwriter or
           controlling person, in connection with
           investigating or defending any such loss, claim,
           damage, liability or action attributable to such
           Violation or alleged Violation; provided,
           however, that the indemnity agreement contained
           in this Section 7 shall not apply to amounts
           paid in settlement of any such loss, claim,
           damage, liability or action if such settlement
           is effected without the consent of such Holder,
           which consent shall not be unreasonably
           withheld. In no event shall the liability of a
           Holder hereunder exceed the net proceeds from
           the offering received by such Holder.
39.
40.  7.3   Promptly after receipt by an indemnified party
           under this Section 7.3 of notice of the
           commencement of any action (including any
           governmental action), such indemnified party
           will, if a claim in respect thereof is to be
           made against any indemnifying party under this
           Section 7, notify the indemnifying party in
           writing 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 the defense thereof with counsel mutually
           satisfactory to the parties; provided, however,
           that an indemnified party shall have the right
           to retain its own counsel, with the fees and
           expenses to be paid by the indemnifying party,
           if representation of such indemnified party by
           the counsel retained by the indemnifying party
           would be inappropriate due to actual or
           potential differing interests between such
           indemnified party and any other party
           represented by such counsel in such proceeding.
           The failure to notify an indemnifying party
           within a reasonable time of the commencement of
           any such action, if prejudicial to its ability
           to defend such action, shall relieve such
           indemnifying party of any liability to the
           indemnifying party under this Section 7, 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
           party otherwise than under this Section 7.
41.
42.

<PAGE>

8.   CONTRIBUTION
43.
44.   If  for  any  reason  the  foregoing  indemnity  is  unavailable,   or  is
      insufficient to hold harmless an indemnified  party, then the indemnifying
      party shall  contribute  to the amount paid or payable by the  indemnified
      party as a result of such losses, claims, damages, liabilities or expenses
      (i) in such proportion as is appropriate to reflect the relative  benefits
      received  by the  indemnifying  party on the one hand and the  indemnified
      party  on the  other  from  the  registration  or (ii)  if the  allocation
      provided  by clause  (i) above is not  permitted  by  applicable  law,  or
      provides a lesser sum to the indemnified party than the amount hereinafter
      calculated,  in such  proportion as is appropriate to reflect not only the
      relative benefits  received by the indemnifying  party on the one hand and
      the  indemnified  party on the  other but also the  relative  fault of the
      indemnifying party and the indemnified party as well as any other relevant
      equitable considerations;  provided that in no event shall any amount paid
      or due by a Holder  pursuant to Sections 7 and 8 hereunder  exceed the net
      proceeds  from the offering  received by such Holder.  No person guilty of
      fraudulent  misrepresentation  (within the meaning of Section 11(f) of the
      Securities Act) shall be entitled to contribution  from any person who was
      not guilty of such fraudulent misrepresentation.
45.
46.  9.    DESIGNATION OF UNDERWRITER
47.
48.  9.1   In the case of any registration effected
           pursuant to Section 2.1, should the offering be
           underwritten, the Company and the relevant
           member of the Purchaser Group and/or TIC, as the
           case may be, shall confer as to the selection of
           a managing underwriter. Should they fail to
           reach agreement, the selection shall be made by
           the relevant member of the Purchaser Group
           and/or TIC, as the case may be.
49.
50.  9.2   In the case of any registration initiated by the
           Company, the Company shall have the right to
           designate the managing underwriter in any
           underwritten offering.
51.
52.  10.   RULE 144 REPORTING
53.
54.   With a view  to  making  available  the  benefits  of  certain  rules  and
      regulations  of the SEC  that  may  permit  the  sale  of the  Registrable
      Securities to the public without  registration,  the Company agrees to use
      its best efforts to:
55.
56.  10.1  make and keep public information regarding the
           Company available as those terms are understood
           and defined in Rule 144 under the Securities
           Act, at all times;
57.
58.        10.2 file with the  Commission  in a timely  manner all  reports  and
           other documents  required of the Company under the Securities Act and
           the  Securities  Exchange Act at any time after it has become subject
           to such reporting requirements;
59.
60.        10.3 so long as a Holder owns any Registrable Securities,  furnish to
           such Holder forthwith upon written request a written statement by the
           Company as to its compliance with the reporting  requirements of Rule
           144, and of the  Securities  Act and the  Securities  Exchange Act, a
           copy of the most recent  annual or  quarterly  report of the Company,
           and such other  reports  and  documents  so filed as such  Holder may
           reasonably  request in availing  itself of any rule or  regulation of
           the SEC  allowing  such  Holder to sell any such  securities  without
           registration.
61.
62.

<PAGE>

11.  ASSIGNMENT OF REGISTRATION RIGHTS
63.
64.   A Holder may assign its rights and obligations under this Agreement to any
      person  or  entity  provided  that  such  assignment  may be made  only in
      connection with sale of at least 300,000  Ordinary Shares by a Holder to a
      person or an entity and that the  assignment  relates only to those shares
      transferred  to such  person or entity,  and  further  provided  that such
      assignee agrees to be bound by the terms of this Agreement.
65.
66.  12.   AMENDMENTS, WAIVERS, ETC.
67.
68.   This  Agreement  may not be  amended,  waived  or  otherwise  modified  or
      terminated  except by an instrument in writing signed by the Company and a
      Holder, if the amendment is to be effective against such Holder.
69.
70.  13.   MARKET STAND-OFF AGREEMENT.
71.
72.   Holders of  Registrable  Securities,  if  requested by the Company and the
      underwriters  of the Company's  securities,  shall enter into an agreement
      (the  "Market  Stand-off  Agreement")  not to sell,  sell any  option,  or
      otherwise  transfer or dispose of any Ordinary Shares or other  securities
      of the  Company  held by such  holders  during the 90-day  period (or such
      shorter period as is required by the underwriters) following the effective
      date of a registration statement of the Company filed under the Securities
      Act, provided that such restrictions shall not apply to Ordinary Shares or
      other  securities  of the Company that are  included in such  registration
      statement,   and  shall  apply  only  to  the  first  firmly  underwritten
      registered equity offering of the Company's securities occurring after the
      third  anniversary  of the date of the this  Agreement  and no such holder
      shall be  obligated  to enter  into a Market  Stand-off  Agreement  if any
      officer,  director  or  holder of 5% or more of the  outstanding  Ordinary
      Shares of the Company is not subject to a Market Stand-off  Agreement with
      substantially  similar terms.  The  underwriters  in connection  with such
      registration  statement  are intended  third party  beneficiaries  of this
      provision.
73.
74.   In order to  enforce  the  foregoing  covenant,  the  Company  may  impose
      stop-transfer  instructions  with respect to the  securities  held by each
      Holder (and the  securities of every other person subject to the foregoing
      restriction) until the end of such period.
75.
76.  14.   COUNTERPART
77.
78.  This Agreement may be executed in one or more
      counterparts, all of which shall be considered one
      and the same agreement. Each party need not sign the
      same counterpart.
79.
80.  15.   ENTIRE AGREEMENT
81.
82.   This Agreement  constitutes the entire  agreement and supersedes all prior
      agreements and  understandings,  both written and oral,  among the parties
      with respect to the subject  matter  hereof,  including  the  Registration
      Rights  Agreement,  dated  February  28,  1993,  by and among the Company,
      National  Semiconductor (IC) Ltd., and Tower Semiconductor Holdings (1993)
      Ltd.
83.
84.  16.   GOVERNING LAW AND JURISDICTION
85.
86.   This Agreement shall be governed by, and construed in accordance with, the
      laws  of the  State  of  California  regardless  of the  laws  that  might
      otherwise govern under applicable  principles of conflicts of law thereof.
      Any action or proceeding  seeking to enforce any provision of, or based on
      any right arising out of, this Agreement may be brought against any of the
      parties solely in the courts of the State of  California,  and each of the
      parties   consents  to  the  jurisdiction  of  such  courts  (and  of  the
      appropriate  appellate courts) in any such action or proceeding and waives
      any objection to venue laid  therein.  Process in any action or proceeding
      referred to in the preceding  sentence may be served on any party anywhere
      in the world.
87.
88.  17.   ADDITIONAL PARTIES
89.
90.   The  parties  hereto  agree  that by the  execution  of a joinder  to this
      Agreement,   any  additional   parties  that  enter  into  share  purchase
      agreements  with T  prior  to  the  Closing  of the  SPA  and  that  close
      simultaneously with the SPA may become parties to this Agreement and shall
      be members of the Purchaser Group.

      IN WITNESS  WHEREOF,  the parties  hereto have caused this Agreement to be
signed on its behalf by its officers  thereunto  duly  authorized as of the date
first written above.

                             Tower Semiconductor Ltd.

                             By:  /s/ Yoav Nissan-Cohen
                                  ----------------------
                             Name: Yoav Nissan-Cohen
                             Title: Co-CEO

                             SanDisk Corporation

                             By:  /s/ Eli Harari
                                  ----------------------
                             Name: Eli Harari
                             Title: CEO

                             The Israel Corporation Ltd.

                             By:  /s/ Yossi Rose
                                  ----------------------
                             Name: Yossi Rose
                             Title: President and CEO

                             Alliance Semiconductor Corp.

                             By:  /s/ N. Damodar Reddy
                                  ----------------------
                             Name: N. Damodar Reddy
                             Title: President and CEO

                             Macronix International Co.,
                             Ltd., on behalf of itself and
                             its affiliates

                             By:  /s/ Miin Wu
                                  ----------------------
                             Name: Miin Wu
                             Title: President

                             QuickLogic Corp.

                             By:  /s/ E. Thomas Hart
                                  ----------------------
                             Name: E. Thomas Hart
                             Title: President and CEO

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