Document:

EXHIBIT 4.61

CONFIDENTIAL PORTIONS OF THIS AGREEMENT HAVE BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.

                          EQUIPMENT PURCHASE AGREEMENT

     This Equipment Purchase Agreement (this "AGREEMENT"), dated May 17, 2006,
is between Tower Semiconductor Ltd., a company organised under the laws of the
State of Israel ("TOWER") and Israel Corporation Ltd., a company organised under
the laws of the State of Israel ("TIC").

The above-mentioned parties are collectively known as the "PARTIES" and
individually known as a "PARTY".

                              W I T N E S S E T H:

     WHEREAS, Tower's Board of Directors recently approved an accelerated
ramp-up plan for Tower's Fab 2 manufacturing facility ("FAB 2");

     WHEREAS, TIC, a major shareholder of Tower, wishes to assist Tower in the
ramp-up of Fab 2 by purchasing certain equipment as set forth herein; and

     WHEREAS, TIC and Tower wish to detail the conditions which would result in
the transferring of the title to such equipment from TIC to Tower.

NOW, THEREFORE, in consideration of the mutual promises herein contained, it is
hereby agreed as follows:

1.   PURCHASE ORDERS AND/OR EQUIPMENT AGREEMENTS

     1.1. Immediately following the signature of this Agreement, and by no later
          than one (1) week from the date hereof, TIC shall order the equipment
          listed in ANNEX A1 (the "EQUIPMENT"), in their entirety, from the
          suppliers listed therein (the "SUPPLIERS") and at the total prices,
          including all related costs and VAT which in the aggregate shall not
          exceed $70 million, and delivery dates set forth therein (the
          "PURCHASE ORDERS"; together with any and all equipment purchase and/or
          installation agreements in connection therewith, the "EQUIPMENT
          AGREEMENTS"). By no later than one (1) week after this Agreement is
          effective pursuant to Section y5_hereof, TIC shall enter into
          Equipment Agreements relating to the Equipment listed in ANNEX A2 in
          their entirety, from the Suppliers at the total prices, including all
          related costs and VAT which in the aggregate shall not exceed $11
          million on the delivery dates set forth therein. For the avoidance of
          doubt, the terms "Equipment", "Suppliers", "Purchase Orders" and
          "Equipment Agreements" shall also relate to the Equipment listed on
          Annex A1, Annex A2 and the Replacement Equipment.

<PAGE>

          The Parties acknowledge (i) that changes in price and/or delivery
          dates may be required by the Suppliers and (ii) that the negotiation
          and execution of all or any of the equipment purchase and/or
          installation agreements to which the Purchase Orders relate may not be
          completed within one (1) week, but the Parties hereto undertake to use
          their commercially reasonable best efforts to finalize and execute
          such agreements as soon as practicable following the date hereof.
          However, Tower and TIC will agree in writing whether such new prices
          and/or delivery dates are acceptable, provided that such new prices
          including all related costs and VAT which, in the aggregate for the
          Equipment in Annex A1 and Annex A2, shall not exceed $84 million.

     1.2. The Equipment Agreements shall provide, INTER ALIA, that TIC shall be
          the owner of the Equipment. While the Equipment Agreements shall not
          provide details as to where the Equipment shall be delivered, the
          Equipment shall be delivered to such location as instructed by TIC
          prior to the delivery dates set forth in ANNEX A1 OR A2. In addition,
          TIC and Tower shall use their best efforts when negotiating the
          Equipment Agreements to ensure that the rights and obligations
          associated therewith, including any and all Equipment warranties and
          related service agreements, shall be assignable to Tower, without the
          need for Supplier or other third party consents. In addition, Tower
          shall use its best efforts when negotiating the Equipment Agreements
          to ensure that the Equipment Agreements are cancelable for a period of
          15 days after their signature with no cancellation fees.

     1.3. The terms and conditions of the Equipment Agreements and any
          amendments thereto shall be approved in writing b y Tower prior to
          their execution. TIC shall furnish Tower with signed copies of the
          Equipment Agreements and any amendments thereto as soon as practicable
          following their execution.

     1.4. The Parties acknowledge that on or about May 1, 2006, TIC transferred
          [***] to [***] and [***] to [***] with respect to the certain
          Equipment Agreements (each an "ADVANCE AGREEMENT") which were ordered
          by Tower (each an "ADVANCE"), pursuant to the letter from Tower to
          TIC, dated April 30, 2006 (the "ADVANCE LETTER").

          As soon as practicable following the signature of this Agreement,
          Tower shall use its best efforts to cause [***] and [***] to consent
          to the assignment of the Advance Agreements to TIC.

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[***] THE CONFIDENTIAL PORTION OF THIS AGREEMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIALITY.

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          If, within two weeks from the date hereof, either or both of such
          consents to the assignment of the Advance Agreements to TIC are
          obtained,

               (i)  Immediately after effectiveness of this Agreement pursuant
                    to Section 5 hereof, Tower shall assign and TIC shall assume
                    Tower's rights and obligations in connection with such
                    assigned Advance Agreement, including, without limitation,
                    Tower's rights to the equipment underlying such purchase
                    order and Tower's obligations to make future payments in
                    connection therewith.

               (ii) The provisions of this Agreement shall be applicable to each
                    of the assigned Advance Agreements and the total price of
                    the Equipment to be purchased by TIC under Section 1.1 of
                    this Agreement shall be increased by the amounts paid and
                    due to be paid under such assigned Advance Agreement such
                    that if both the consents of [***] and [***] are received,
                    the total price including all related costs and VAT of the
                    Equipment to be purchased under this Agreement shall be $100
                    million.

               (iii) For the avoidance of all doubt, with respect to the
                    Equipment purchased pursuant to such assigned Advance
                    Agreement, Tower shall be released from its repayment
                    obligations as set forth in the Advance Letter but shall be
                    subject to all of the terms and conditions of this
                    Agreement.

          If, within two weeks from the date hereof, one or more of such
          consents are not obtained, and this Agreement is effective pursuant to
          Section 5 hereof (i) Tower shall be entitled to request that TIC order
          additional Equipment up to the aggregate amount of the unpaid portions
          of the purchase prices under such unassigned Advance Agreement(s) (the
          "REPLACEMENT EQUIPMENT"); (ii) this Agreement shall apply to such
          Replacement Equipment MUTATIS MUTANDIS; and (iii) the Advance Letter
          shall remain in full force and effect with respect to the unassigned
          Advance Agreement and such Equipment shall not be subject to this
          Agreement. If neither consent is received within such two week time
          period, the total amount including all related costs and VAT to be
          ordered under this Agreement in aggregate, shall not exceed $94.3
          million.

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[***] THE CONFIDENTIAL PORTION OF THIS AGREEMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIALITY.

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2.   PURCHASE AND SALE OF EQUIPMENT

     2.1. PUT OPTION. Tower hereby grants TIC the right (the "PUT OPTION"),
          during the period commencing on the Effective Date (as defined below)
          to sell all or part of the Equipment and the rights purchased pursuant
          to the Equipment Agreements to which such Equipment relate (together
          the "PURCHASED ASSETS") to Tower, in consideration for the aggregate
          consideration paid by TIC, in connection with such Purchased Assets
          (hereinafter, the "PURCHASE PRICE" as more fully defined in Section 3
          hereof). TIC may exercise the Put Option on all or part of the
          Purchased Assets by delivering a written notice to Tower (the "PUT
          NOTICE"), and upon receipt, Tower shall be obligated to purchase such
          Purchased Assets and pay the Purchase Price within fifteen (15) days
          of receipt of the Put Notice, or such later date as directed by TIC,
          provided, that such payment shall be made no later than the date of
          the consummation of the Investment. Notwithstanding anything to the
          contrary herein the Put Option may only be exercised in the event and
          to the extent that the Purchased Assets have not been uncrated, used
          or installed for the benefit or in the facilities of a party other
          than Tower and if TIC elects under the Put Option to sell to Tower any
          of the Purchased Assets labeled as belonging to a Set of Equipment in
          Annex A1 or A2, at the discretion of Tower, TIC shall also sell all or
          part of the other Purchased Assets belonging to such Set of Equipment
          to Tower, provided that if the relevant Supplier does not supply any
          portion of a Set of Equipment to Tower, TIC shall not be required to
          sell to Tower such portion(s) of the Set of Equipment.

     2.2. CALL OPTION. TIC hereby grants Tower the right (the "CALL OPTION"),
          during the period commencing on the later of: (i) the consummation of
          an Investment (as defined below); and (ii) the Effective Date and
          ending on the date on which the Reserve Period ends, to purchase all
          and not part of the Purchased Assets, in consideration for the
          Purchase Price. Tower may exercise the Call Option by delivering a
          written notice to TIC (the "CALL NOTICE"), and upon receipt, TIC shall
          be obligated to sell to Tower the Purchased Assets and Tower shall pay
          the Purchase Price within fifteen (15) days of receipt of the Call
          Notice, or such later date as directed by TIC, provided, that such
          payment shall be made no later than the date of the consummation of
          the Investment. In the event suc h payment of the Purchase Price has
          not been made within [***] after the Call Notice was delivered to TIC
          for any reason, the exercise of the Call Option shall be voided and
          for the avoidance of doubt, Tower shall not have any further right to
          exercise any Call Option hereunder. For the avoidance of doubt, TIC is
          not required to sell or transfer the Purchased Assets or transfer
          title thereto to Tower, unless it has received the Purchase Price in
          full. For purposes of this Agreement, an "INVESTMENT" shall mean an
          investment or investments in Tower by one or more investors after the
          date hereof in exchange for securities of Tower and/or proceeds which
          were paid to Tower on account of the future issuance of securities,
          including debt securities and/or including payments on account of
          wafer prepayments, which result in gross proceeds to Tower in an
          aggregate amount equal to or greater than one hundred million US
          dollars ($100,000,000), subject to such Investment obtaining such
          approvals as may be required by law. For the avoidance of doubt, the
          Parties hereto may jointly agree, that any or all amounts paid by TIC
          under this Agreement shall constitute an Investment, provided that
          nothing herein shall require TIC to so agree.

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[***] THE CONFIDENTIAL PORTION OF THIS AGREEMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIALITY.

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     2.3. RESERVE PERIOD. During the period ending on the earliest of: (i) the
          exercise by Tower of the Call Option; (ii) the exercise by TIC of the
          Put Option; (iii) the termination of this Agreement pursuant to
          Section y7 or the existence of an Event of Default; and (iv) [***]
          from the date of signature of this Agreement (the "RESERVE PERIOD"),
          in the absence of the prior written consent of Tower, TIC shall not:
          (x) sell, assign or otherwise transfer title or interest in the
          Purchased Assets to a party other than Tower; (y) uncrate the
          Purchased Assets; or (z) install or cause the installation of the
          Purchased Assets in the facilities of a party other than Tower (the
          "EQUIPMENT INTEGRITY RESTRICTIONS"). After the Reserve Period, TIC may
          sell or assign all or part of the Purchased Assets, in its sole
          discretion, without any consent required from Tower to any third party
          with no limitation on the identity or business of such third party.
          Nothing herein creates any obligation for TIC to deliver the Purchased
          Assets to Tower, or to allow Tower to uncrate, use or install the
          Purchased Assets until both (i) the exercise of the Put Option or the
          Call Option and (ii) the payment of the Purchase Price in full (or
          such applicable percentage of the Purchase Price in the event of a
          partial exercise of the Put Option).

     2.4. CONSENTS. To the extent that the purchase by Tower of the Purchased
          Assets, or a portion thereof, is subject to the receipt of Supplier or
          any other third party consent, TIC and Tower shall apply fo r or
          otherwise seek, and use their commercially reasonable efforts to
          obtain, the necessary consents to consummate the purchase.

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[***] THE CONFIDENTIAL PORTION OF THIS AGREEMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIALITY.

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     2.5. For the avoidance of doubt, upon the exercise of the Put Option or the
          Call Option and to the extent that: (i) an Equipment Agreement that is
          the subject of such exercise is assignable to Tower; and (ii) there
          are payments outstanding under such Equipment Agreement, such
          Equipment Agreement shall be assigned to Tower and upon assignment,
          (a) Tower shall assume all of the obligations associated with such
          outstanding payments (provided that TIC shall reimburse Tower for
          penalties incurred due to any non-payment to a Supplier by TIC unless
          TIC has been advised by Tower not to pay such Supplier) (b) TIC shall
          be released by such supplier in writing and (c) the Purchase Price
          shall not include amounts due and payable at a later time in
          connection therewith ("FUTURE PAYMENTS"). To the extent that any
          Equipment Agreement is not assignable or is not completely assignable
          in a manner that TIC is fully released from any obligation under such
          Equipment Agreement ("NON-ASSIGNABLE OBLIGATIONS"), the Purchase Price
          shall include the entire purchase price of such Purchased Asset
          including Future Payments and Tower shall simultaneously pay TIC for
          all Future Payments together with all other portions of the Purchase
          Price. TIC shall hold all amounts paid by Tower on account of Future
          Payments in trust and shall continue to make payments to Suppliers in
          accordance with the Non-Assignable Obligations. If an Equipment
          Agreement is not assignable to Tower but the Purchase Price related to
          such Equipment (including all Future Payments included therein) has
          been paid to TIC, TIC shall be obligated to transfer to Tower the
          Equipment including title and possession thereto, immediately upon its
          receipt of same.

     2.6. TITLE. Title to a Purchased Asset shall be transferred or deemed
          transferred if title cannot be transferred to Tower only upon full
          payment by Tower of the entire amount of the Purchase Price relating
          to such Purchased Assets and shall continue to vest in TIC until such
          payment has been made. If, TIC, in its sole discretion and with no
          obligation to do so, decides to deliver a Purchased Asset to Tower or
          to allow Tower to uncrate, use and/or install such Purchased Asset
          prior to the exercise of the Put Option or the Call Option, in respect
          of such Purchased Asset, title shall not pass to Tower except in
          accordance with the foregoing. To the extent that: (i) Purchased
          Assets are uncrated, used and/or installed at Tower's facilities; and
          (ii) title to such Purchased Assets has not been transferred to Tower
          in accordance with the foregoing ("UTILIZED EQUIPMENT"), if necessary,
          Tower will (a) assist TIC in registering any pledge or other
          registration on such Purchased Assets promptly and (b) disassemble and
          repackage such Purchased Assets for Resale by TIC (as defined below)
          to a third party, if requested by TIC, in its sole discretion. TIC
          acknowledges that the grant and registration of a pledge as
          contemplated by this Section 2.6 may be subject to third party
          consents, which Tower undertakes to use its best commercial efforts to
          obtain.

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     2.7. NO WARRANTIES. Subject to TIC's compliance with the Equipment
          Integrity Restrictions prior to any Resale, any sale or assignment by
          TIC to Tower of any of the Purchased Assets or of the Equipment
          Agreements pursuant to the Put Option, Call Option or any other manner
          shall be on an "AS IS" manner and Tower shall not have any claim
          against TIC for defects in such Purchased Assets or any other product
          liability. Tower may make any such claims against the supplier
          directly without any involvement of TIC. Prior to their assignment or
          transfer of title to Tower, TIC shall use its commercially reasonable
          best efforts to enforce any and all warranties associated with all
          Utilized Equipment to the extent it is aware of such claims, including
          in accordance with Tower's instructions, provided, that Tower shall
          pay for all costs related to such enforcement directly and that in any
          event, TIC may enforce such warranties on its own and the costs of
          such effort shall be added to the Purchase Price if not paid for by
          Tower. TIC shall be entitled, in its sole discretion, to assign to
          Tower any or all rights to enforce such warranties, if such
          enforcement rights can be assigned.

3.   REIMBURSEMENT AND INDEMNIFICATION BY TOWER OF ALL PAYMENTS AND EXPENSES OF
     TIC UNDER THIS AGREEMENT

     3.1. Tower shall repay TIC for all amounts that TIC has paid or incurred or
          will be required to pay or incur under the terms of this Agreement
          and/or the Equipment Agreements. The full amount of the obligations of
          Tower contained in this Section 3.1 may be fulfilled through (i)
          payment of the Purchase Price pursuant to the Call Option or the Put
          Option; or (ii) payment of the Indemnification Amount (as defined
          below).

     3.2. The "PURCHASE PRICE" shall include but shall not be limited to the
          following (each amount in this Section 3.2 shall include any domestic
          or foreign VAT, sales tax or the equivalent thereof):

          3.2.1. any amount paid by TIC or, to the extent not fully assignable
               to Tower, obligated but not paid by to, any Supplier, including
               shipping, storage, VAT (whether foreign or Israeli), sales tax,
               or other taxes or duties, licensing fees, warranty/service
               agreements or insurance.

          3.2.2. legal fees.

          3.2.3. any amounts necessary to secure consent to assignment of any
               Equipment Agreements, sale of any Purchased Assets or transfer of
               any license, service agreement or warranty relating to any of the
               Purchased Assets.

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          3.2.4. any expenses in connection with the Equipment Agreements prior
               to their assignment to Tower hereunder.

          3.2.5. wiring fees.

          3.2.6. registration of title.

          3.2.7. registration of any pledge, if requested by TIC pursuant to
               Section 2.6.

          3.2.8. customs fees and expenses, including warehousing fees. (If TIC
               shall direct that the Equipment be delivered to Tower prior to
               the sale thereof to Tower, Tower shall make available storage
               space for such purposes and TIC shall pay Tower applicable market
               storage fees therefor.)

          3.2.9. Other Financing Expenses (as defined below).

     For the removal of doubt, if only a portion of the Purchased Assets is
     purchased by Tower, then only the applicable portion of the Purchase Price
     shall be paid.

     3.3. "OTHER FINANCING EXPENSES" shall mean other cash-related costs
          incurred by TIC including its cost of capital at a rate of [***], to
          be accrued between the date that TIC makes any payment under this
          Agreement and the actual date that such amount gets repaid in full by
          Tower.

     3.4. In the event that following the Reserve Period TIC assigns all or part
          of the Equipment Agreements or sells all or part of the Purchased
          Assets or transfers any license, service agreement or warranty
          relating to any of the Purchased Assets to any party other than Tower
          to the extent permitted hereunder (each a "RESALE"), in TIC's sole
          discretion, Tower shall indemnify TIC for each of the following (and
          TIC shall have a right to demand that Tower pay any known costs below
          directly), no later than [***] after any such Resale, as they relate
          to each such Equipment Agreement, Purchased Asset, license, service
          agreement or warranty (the "INDEMNIFICATION AMOUNT"):

          3.4.1. the amount equal to (x) the Purchase Price minus (y) the amount
               received (net after reasonable brokers fees, shipping fees,
               insurance, taxes, VAT and storage fees) from such Resale.

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[***] THE CONFIDENTIAL PORTION OF THIS AGREEMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIALITY.

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          3.4.2. any necessary costs of reconfiguring or modifying the Purchased
               Assets for resale.

          3.4.3. Other Financing Expenses.

          3.4.4. any amounts necessary to secure consent to assignment of any of
               the Equipment Agreements, sale of any of the Purchased Assets or
               transfer of any license, service agreement or warranty relating
               to any of the Purchased Assets.

          3.4.5. storage and insurance fees.

          3.4.6. any costs to enforce any warranty on the Equipment not
               previously paid for by Tower as per Section 2.7.

     3.5. If a Resale is necessary, the parties to this Agreement agree that
          such Resale should take place at reasonable prices under the
          circumstances. Since Tower has the necessary industry expertise
          relating to the Equipment, Tower shall assist TIC in obtaining the
          best price possible for the Equipment as quickly as practicable.
          Notwithstanding the provisions in this Section, TIC will have the sole
          discretion to decide on the terms of such Resale.

4.   REPRESENTATIONS OF TOWER

          Tower represents and warrants to TIC as follows:

     4.1. Tower has full legal right, power and authority to execute and deliver
          this Agreement and to consummate the transactions contemplated hereby.
          This Agreement, has been approved by Tower's audit committee and Board
          of Directors and when executed and delivered by Tower and approved by
          its shareholders (if there will be a written request by any
          shareholder or shareholders of Tower who hold at least 1% of the
          issued shares or voting rights of Tower, provided that such request is
          made no later than fourteen (14) calendar days from the date on which
          Tower announces its decision to enter into this Agreement),
          constitutes and will constitute the legal, valid and binding
          obligation of Tower, enforceable against it in accordance with its
          terms, except to the extent that such enforceability may be limited by
          bankruptcy, insolvency, reorganization and other laws affecting
          creditors' rights generally. Tower has attached the legal opinion of
          its counsel, Yigal Arnon & Co., Advocates to this effect hereto as
          ANNEX B.

     4.2. Neither the execution and delivery of this Agreement by Tower, nor the
          compliance with the terms and provisions of this Agreement on the part
          of Tower, will: (i) violate any statute or regulation of any
          governmental authority, domestic or foreign, affecting Tower; (ii)
          require the issuance of any authorization, license, consent or
          approval of any governmental agency, or any other person; or (iii)
          conflict with or result in a breach of any of the terms, conditions or
          provisions of any judgment, order, injunction, decree, loan agreement
          or other material agreement or instrument to which Tower is a party,
          or by which Tower is bound, or constitute a default thereunder, the
          effect of which will have a material adverse effect on Tower.

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     4.3. All necessary consents of (i) any parties to any material contracts
          which are material to Tower's business, and (ii) any governmental
          authorities or agencies, to the extent required, in connection with
          the transactions contemplated by this Agreement, for which the failure
          to obtain such consents would have a material adverse effect on Tower,
          shall have been obtained and true and complete copies thereof
          delivered to TIC.

     4.4. There are no actions, suits, proceedings, or injunctive order, pending
          or threatened against or affecting Tower which could prevent the
          consummation of the transactions contemplated by this Agreement.

     4.5. Tower has not engaged any broker or finder in connection with the
          transactions contemplated by this Agreement, and no broker or other
          person is entitled to any commission or finder's fee in connection
          with such transactions.

5.   EFFECTIVENESS. In accordance with Tower's representations in Section 4.1
     hereof, the effectiveness of Sections 2 and 3 of this Agreement shall be on
     (the "EFFECTIVE DATE") the earlier of (i) approval of Tower's shareholders
     (if there will be a written request by any shareholder or shareholders of
     Tower who hold at least 1% of the issued shares or voting rights of Tower
     no later than fourteen (14) calendar days from the date on which Tower
     announces its decision to enter into this Agreement) or (ii) fifteen (15)
     calendar days from the date on which Tower announces its decision to enter
     into this Agreement if such shareholder vote has not been so requested. By
     signature hereof, Tower acknowledges and agrees that it will make such
     announcement within one (1) business day after the date of the signing of
     this Agreement. Notwithstanding the foregoing, upon the occurrence of any
     Event of Default, TIC shall not be obligated to enter into any additional
     Equipment Agreements and shall be permitted but not obligated to revoke any
     Equipment Agreements already entered into to the extent possible.

6.   COVENANTS

     6.1. Within five (5) days of becoming aware of the existence of any
          condition or event which constitutes an Event of Default (as defined
          below), or any condition or event which would upon notice or lapse of
          time, or both, constitute an Event of Default, Tower shall give TIC
          written notice thereof specifying the nature and duration thereof and
          the action being or proposed to be taken with respect thereto.

     6.2. Until the exercise of the Put Option or Call Option, Tower will
          operate in the ordinary course of business and neither TIC nor Tower
          will take any action inconsistent with this Agreement. For the
          avoidance of any doubt, nothing herein shall require TIC to take or
          refrain from taking any action as a shareholder or investor of Tower.

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     6.3. To the extent that TIC assigns any of the Equipment Agreements, sells
          the Equipment or transfers any license, maintenance agreement or
          warranty relating to the Equipment, to any party other than Tower as
          permitted hereunder, Tower hereby acknowledges that TIC may make such
          transfer assignment or sale to any third party without limitation on
          the identity or business of such third party and hereby waives any
          claim it might have against TIC with respect thereto.

7.   TERMINATION

     7.1. TIC may terminate this Agreement upon [***] notice, except for (i) the
          rights and obligations of the Parties in connection with the Put
          Option; (ii) Tower's obligation to repay the Purchase Price and/or to
          indemnify TIC; and (iii) Sections 2.7, 8, 9 and 10 hereof, which shall
          survive indefinitely if any of the following events occur, each an
          "EVENT OF DEFAULT":

          a.   If no Investment is consummated on or prior to such date which is
               [***] from the date of signature of this Agreement.

          b.   If Tower shall default in connection with any agreement for
               greater than [***] with any creditor, which entitles said
               creditor to accelerate the maturity thereof.

          c.   If Tower shall file a voluntary petition in bankruptcy or a
               voluntary petition or answer seeking liquidation, reorganization,
               arrangement, readjustment of its debts, or for any other relief
               under the Companies Law or Companies Ordinance, or under any
               other act or law pertaining to insolvency or debtor relief,
               whether Israeli or foreign, now or hereafter existing; Tower
               shall enter into any agreement indicating its consent to,
               approval of, or acquiescence in, any such petition or proceeding;
               Tower shall apply for or permit the appointment by consent or
               acquiescence of a receiver, custodian or trustee of Tower for all
               or a substantial part of its property; Tower shall make an
               assignment for the benefit of creditors; Tower shall be unable or
               shall fail to pay its debts generally as such debts become due;
               or Tower shall admit, in writing, its inability or failure to pay
               its debts generally as such debts become due.

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[***] THE CONFIDENTIAL PORTION OF THIS AGREEMENT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIALITY.

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          d.   If, (i) there shall have been filed against Tower an involuntary
               petitio n in bankruptcy or seeking liquidation, reorganization,
               arrangement, readjustment of its debts or for any other relief
               under the Companies Law or Companies Ordinance, or under any
               other act or law pertaining to insolvency or debtor relief; (ii)
               Tower shall suffer or permit the involuntary appointment of a
               receiver, custodian or trustee of Tower or for all or a
               substantial part of its property; (iii) Tower shall suffer or
               permit the issuance of a warrant of attachment, execution or
               similar process against all or any substantial part of the
               property of Tower; (iv) any motion, complaint or other pleading
               is filed in any bankruptcy case of any person or entity other
               than Tower and such motion, complaint or pleading seeks the
               consolidation of Tower's assets and liabilities with the assets
               and liabilities of such person or entity.

          e.   If the Board of Directors or Audit Committee of Tower shall
               rescind their approval of this Agreement, whether legally allowed
               to do so or not.

          f.   If the shareholders of Tower are requested to approve the terms
               of this Agreement and the transactions contemplated hereby and
               fail to approve the same at the meeting called to approve it.

     7.2. In the event any of the proceedings in Section 7.1.d shall be
          dismissed or removed within 60 days, this Agreement shall be
          reinstated or enforceable to the extent no other Event of Default has
          occurred and to the extent the Call Option would not have otherwise
          expired, as if such Event of Default had not occurred, including the
          reinstatement of the Call Option.

     7.3. Nothing herein shall terminate TIC's Put Option or Tower's obligation
          to indemnify TIC.

8.   NOTICES

     All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally or by commercial delivery service,
or mailed by registered or certified mail (return receipt requested) or sent via
facsimile (with confirmation of receipt) to the Parties at the following address
(or at such other address for a Party as shall be specified by like notice):

If to Tower:                          If to TIC:
Tower Semiconductor Ltd.              Israel Corporation Ltd.
Ramat Gavriel Industrial Area         Millennium Tower,
P.O. Box 619                          23 Aranha St. Tel Aviv Israel 61070
Migdal Haemek Israel 23105            Fax: 972-3-684-4574
Fax. 972-4-6047242                    Attn: Chief Financial Officer
Attn: Oren Shirazi, Acting CFO

                                     - 12 -
<PAGE>

with a copy to (which shall not       with a copy to (which shall not constitute
constitute notice):                   notice):
Yigal Arnon & Co.                     Gornitzky & Co.
One Azrieli Center,                   45 Rothschild Blvd.,
Tel Aviv 67021 Israel                 Tel-Aviv 65784 Israel
Fax: 972-3-608-7714                   Fax: 972-3-560-6555
Attn: Adv. David H. Schapiro          Attn:  Adv. Zvi Ephrat

9.   PUBLICITY

The Parties agree not to publish any press release or disclosure filing or
otherwise publicize the existence, or any of the terms, of this Agreement
without the prior consent of the other Party, except as may be required under
law.

10.  MISCELLANEOUS

     10.1. This Agreement, including the validity, interpretation, or
          performance of this Agreement and any of its terms or provisions, and
          the rights and obligations of the parties under this Agreement shall
          be governed by, and construed and interpreted in and only in
          accordance with, the domestic laws of the State of Israel without
          giving effect to any choice or conflict of law provision or rule that
          would cause the application of the laws of any jurisdiction other than
          the State of Israel. The competent court in Tel Aviv-Jaffa will have
          the sole and exclusive jurisdiction over any dispute arising under
          this Agreement.

     10.2. A Party's delay or failure to enforce at any time any of the
          provisions of this Agreement or any right with respect thereto shall
          in no way be construed to be a waiver of such provision, or rights or
          in any way to affect its right later to enforce them. A Party's
          exercise of any of its rights hereunder shall not preclude or
          prejudice that Party from thereafter exercising the same or any right
          which it may have under this Agreement, irrespective of any previous
          action or proceeding taken by it hereunder.

     10.3. This Agreement shall be binding upon and inure to the benefit of the
          successors and assigns of Tower and TIC.

     10.4. This Agreement and the Annexes hereto shall be modified only by an
          instrument in writing that is signed by duly-authorized
          representatives of the Parties.

     10.5. In the event that any provision of this Agreement, or the application
          thereof, becomes or is declared by a court of competent jurisdiction
          to be illegal, void or unenforceable, the remainder of this Agreement
          will continue in full force and effect and the application of such
          provision to other persons or circumstances will be interpreted so as
          reasonably to effect the intent of the Parties. The Parties further
          agree to replace such void or unenforceable provision of this
          Agreement with a valid and enforceable provision that will achieve, to
          the extent possible, the economic, business and other purposes of such
          void or unenforceable provision.

                                     - 13 -
<PAGE>

     10.6. At any time and from time to time, each Party agrees, without further
          consideration, to take such actions and to execute and deliver such
          documents as may be reasonably necessary to effectuate the purposes of
          this Agreement and shall refrain from taking any action that may
          frustrate the purpose of this Agreement.

     10.7. No Party shall be entitled to assign this Agreement or its rights
          under it without the prior written consent of the other Party.

     10.8. This Agreement may be executed in one or more counterparts, all of
          which shall be considered one and the same agreement and shall become
          effective when one or more counterparts have been signed by a Party
          hereto and delivered to the other Party hereto.

     10.9. This document constitutes the entire agreement between the Parties
          with respect to the subject matter hereof, and supersedes all previous
          communications, representations, understandings and agreements, either
          oral or written, between the Parties or any official or representative
          thereof.

     10.10. The Parties have participated jointly in the negotiation and
          drafting of this Agreement. In the event that an ambiguity or question
          of intent or interpretation arises, this Agreement shall be construed
          as if drafted jointly by the Parties and no presumption or burden of
          proof shall arise favoring or disfavoring any Party by virtue of the
          authorship of any provisions of this Agreement.

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly
executed as of the date first hereinabove set forth, such Parties acting by
their officers, being thereunto duly authorized.

______________________________                    ______________________________
TOWER SEMICONDUCTOR LTD.                          ISRAEL CORPORATION LTD.

Name: Russell Ellwanger                           Name:  ___________________
Title: Chief Executive Officer                    Title:   __________________F-3

Exhibit 10.1  

Functional General
Contractor (GC) 

performance description 

for Turn-Key
Construction 

New Building 

with 

Production- and Assembly hall, manufacturing lines’ equipment 

and offices building

Mühlenstraße
2 

Flst. Nr. 2288/1, 2288/2 

78073 Bad
Dürrheim – Biesingen 

	Owner of Building:  	InterCard
GmbH System electronics  

	 	
Mühlenstraße 2 

78073 Bad Dürrheim – Biesingen  

acting
as a representative for its parent corporation, 

On-Track Innovations Ltd. (“InterCard” and/or
the “Client”) 

	 	
On
Track Innovations Ltd., 

	 	
of Z.H.R. – Industrial Zone, Rosh-Pina 12000 Israel (“OTI” 

and/or the
“owner”) 

	Contractor: 	Queisser
GmbH (the “General Contractor”)  

	 	
Erligheimer Str.13 

74357 Bönnigheim  

Telefon: 07143 / 961810 

Fax: 07143 / 961819

	1  	GENERAL
DESCRIPTION  

	 	
InterCard,
acting as a representative for its parent corporation OTI (“client”) is
planning to establish a main office building and a production and assembly facility. The
building project will be designed und built by the general contractor Queisser GmbH (gc),
who has to provide a building ready for occupancy, complete, functional and operational,
according to this functional gc performance description.  

	 	
In
this Agreement:  

	 	1.1	the
term “DIN standards” means standards based on the rules of technology of
the “Deutsches Institut für Normung e.V.”

	 	1.2 	the
term "GC" means General Contractor 

	 	1.3	the
term “this Agreement” means this document together with all the
schedules and/or annexes attached hereto, as may be amended in writing from time to time
in terms hereof. 

	 	1.4 	The
term "Work Site" means any place in which work is conducted under this Agreement; 

	 	1.5	the
term “OTI Shares” shall mean, certain restricted shares of the Owner
which are not yet registered for trading, together with all existing and future rights
attached thereto , all which the Owner is entitled to issue to third parties under and
subject to applicable regulations of the Securities Act (as defined hereinafter). 

	 	1.5	this
Agreement shall have a counterpart In the German language. It is hereby clarified that
only the English version shall be binding. All definitions terms brought herein in the
German language are for convenience only and shall have no binding interpretation force. 

	 	1.6	nothing
in this Agreement shall derogate from any of the General Contractor’s undertakings
according to the MOU signed by the parties on September 29th 2005 

	2  	TERMS
AND CONDITIONS  

	2.1  	Subject
Matter of the Contract  

	 	
The
content of the contract is the turn-key design and construction of office building with
Assembly and production hall on the premises 2288/1 and 2288/2, in the township of Bad Dürrheim,
Industrial Area Biesingen, Mühlenstraße.  

	 	
The
completed turn-key design and construction includes planning, deliveries, performances
and supplementary performances. The general contractor shall immediately check, design
and attached documentation and all other data contained, including but not limited to
materials and quantities, and shall confirm that no error or contradiction is contained
in the constructing plans therein. The General Contractor shall confirm that all
necessary designs and specifications necessary to completely establish the building
project for the intended purpose on time and fully functional according to this
construction agreement.  

2

	 	
All
legal requirements, tasks and conditions of the responsible authorities of the building
project shall be executed by the General Contractor prior to final approval of InterCard.  

	2.2  	Scope
of Contract  

	 	
The
General Contractor shall have no claim, As far as performances for in-complete or not
obviously provided or described designs or specifications, and shall be required to
complete the construction of the building project, considering the recognized rules of
technology and the public determinations. The contractual performances shall be completed
by the general contractor in a quality, corresponding to the agreed complete building
project.  

	 	
Fees
for local authorities, are included in the total plan amount, including the examination
fees, shall be paid by the General Contractor, and written evidence of same shall be
provided to the Client upon demand.  

	 	
The
General Contractor represents that he visited the work site, checked its conditions,
soil, existing infrastructure, and has based his agreement to the terms of this Agreement
thereon.  

	2.3  	Contract
Components  

	 	
Contractual
components are listed below:  

	 	
this
functional gc performance description 

	 	
the
statement of costs dated 9.11.2005 (enclosure 1)  

	 	
the
Building permit dated ________ (enclosure 2) 

	 	
the
drawings being part of the request for approval (enclosure 3)  

	 	
the
schedule for payments (enclosure 4) 

	 	
the
construction schedule (enclosure 5) dated 22.12.06  

	 	
the
Furniture and Internal Design description (enclosure 6)  

	 	
the
manufacturing line equipment specifications (enclosure 7)  

	 	
VOB/B
in the currently valid version  

	 	
VOB/C
 in the currently valid version  

	 	
Appropriate
DIN standards,  regulations and guidelines  (DIN-EN,  VDI, VDE TUV and UVV),  in
its current versions.  

3

	 	
In
the event that a contradiction arises between two or more of the abovementioned
components, they will be interpreted in order to bring the building ready for occupancy,
complete, functional and operational on time. All necessary costs for foreseeable
adjustments shall be decided and pre approved by the parties.  

	2.4  	Side
offers, changes and additions  

	 	
The
GC is requested to identify suggestions for changes, additions or side offers clearly as
special attachments. These changes, additions and side offers have to be created, so that
the total performance shall remain as described herein, i.e. all performances, which are
part of the proper and functional fulfillment of the total performance, shall be listed,
furthermore the GC shall list all partial performances which have been incorporated in
the suggested offer, without changing of the scope of the performance specifications of
the Client.  

	2.5  	Site
Management / Special Site Management  

	 	
The
GC is appointing the responsible site manager or special site manager, according to legal
provisions and the state building regulations (Landesbauordnung).  

	 	
The
GC shall be responsible, at his sole expense, for all sub-contractors’ activities,
including without limitation the followings:  

	 	
– The
clean and secure transport of all materials from and to the Work Site; and  

	 	
– The
protection and security of the Work Site until the work is completed (24 hours a day);
and  

	 	
– The
drainage (including for rains and floods), water supply and electricity supply; and  

	 	
– Any
digging conducted at the Work Site, including but not limited to detecting and securing
underground pipes and cables; and  

	 	
– The
manpower and equipment at the Work Site and the continuity of the work until its
conclusion; and  

	 	
– The
quality of materials used at the Work Site.  

	 	
– Any
demolition and leveling works required including manpower and equipment.  

	 	
– Installation
and assembly of the Furniture all in accordance with the Internal Design description
attached as enclosure 6.  

	 	
The
GC shall be responsible for the work progress of all sub-contractors and shall take all
necessary measures to ensure that the work is completed on schedule and according to the
specifications, including but not limited to:  

	 	
– Bringing
additional equipment; and  

4

	 	
– Bringing
additional manpower; and  

	 	
– Increasing
the working hours and days.  

	 	
The
GC represents and warrants that he has taken into account delays. All necessary addition
and increasing shall be discussed and pre proved between parties.  

	2.6  	Safety
and Security  

	 	
The
GC shall be responsible for the safety and security of the Work Site, including but not
limited to the work safety and the safety of all sub-contractors, personnel, and the
general public at the site. For this proposes the GC shall:  

	 	
– Take
all measures to secure the Fencing of the building site. (Protection towards safety is
his responsibility as well, particularly with respect to public traffic); and  

	 	
– Take
all measures to enforce all work related rules and regulations if force; and  

	 	
– Take
all measures to place fences, lights and warning signs against all obstacles at the Work
Site.  

	 	
– Appoint
the responsible safety coordinator, according to German law.  

	2.7  	Building
Utilities and Cleanliness of Construction Site  

	 	
Energy/water:
Energy/water will be provided by the Client and shall be for the GC’s expenses.  

	 	
Cleanliness: The
GC, whether by the sub-contractors or not, shall take care of general cleaning in all
aspects. The building sites, including the public streets, floors, have to be kept in a
proper and clean condition. All holes in the ground will be filled; all paint markings
will be removed.  

	 	
Waste
management: Building rubble and waste have to be removed by the GC according to the
local waste management regulations contemporarily. It is expressly recorded that no waste
may be buried at the site.  

	 	
Existing
facilities: The GC represents that certain existing facilities at the Work Site shall
remain, and shall bear full responsibility for their integrity, including but not limited
to: phone lines, water piping, electricity lines and trees.  

	2.8  	General
Contractor’s All Risk Insurance/Owner’s and Client’s Legal Liability  

	 	
The
General Contractor is requested to take on, at his expense the following insurances:  

5

	 	
An
All Risk Insurance and business liability insurance for contractors, for the insured sum
of 3,000,000 € (in words: three million Euro) each event insured for the period of
the complete construction.  

	 	
– Employees
liability insurance, for the sum of 3,000,000 € (in words: three million Euro) for
the period of the complete construction  

	 	
– Third
party liability insurance, for the sum of 3,000,000 € (in words: three million Euro)
for the period of the complete construction.  

	 	
– An
Owner/Client Legal Liability Insurance for 1,5 -fold the amount of this Agreement.  

	 	
General
Contractor shall provide confirmation to OTI and to InterCard at the latest two weeks
after receipt of the order. Owner shall be entitled to take on the above insurances of
behalf of the GC and set of their cost form the Reimbursement defined in section 2.11
herein.  

	2.9  	Non-Assignment
Clause  

	 	
The
assignment of work wage claims of the contractor against the owner is excluded by
contract. The GC shall be entitled to appoint and hire sub-contractors, provided that he
attains OTI’s written pre-approval (“Sub Contractors”). Such
approval shall not be unreasonably withheld.  

	 	
Sub-Contractor’s
agreement shall be terminated with this Agreement, for any reason.  

	 	
Neither
OTI, nor InterCard shall be deemed to have any direct relations with any of the Sub – Contractors,
and a Sub – Contractor shall not have any claim or demand or any other right towards
OTI and/or InterCard in any matter whatsoever.  

	 	
The
GC agrees that OTI and/or InterCard shall be entitled to terminate, for Reasonable Cause,
the engagement of any Sub – Contractor in the Work Site (for the purpose of this
section “Reasonable Cause” shall mean failure to abide by the engagement
requirements, qualifications and/or conditions, committing or authorizing an offense or
disregard of OTI and/or InterCard policies and guide lines, unwillingness or inability to
adequately perform the Sub- Contractor duties, or for insubordination, any falsification,
misrepresentation, or omission which if previously know would not result in the
engagement of Sub –Contractor).  

	 	
The
parties to this Agreement are acting hereunder as independent contractors and it is
hereby expressly declared and agreed that this Agreement in no way establishes any
principal – agent, employer –employee, or partnership relations between the
parties.  

6

	2.10  	Building
Journal  

	 	
The
GC is obliged to keep daily record and to provide copies to the Owner and the Client on a
weekly basis (the “Journal”). Such Journal shall not derogate from Owner’s/Client’s
right to inspect the Work Site at any time.  

	 	
Any
incompatibility between the Journal and the inspection conducted by the Owner/Client
shall be a material breech of this Agreement.  

	2.11  	Reimbursement  

	 	
The
parties agree one a lump sum agreement. InterCard may issue an advance payment to the GC
on security by bank guarantee accordingly to Section 2.2. The advance payment shall be
set of from the remaining lump sum.  

	2.11.1  	Consideration;  

	 	
2.11.1.1
Subject to the provisions of this Agreement, in consideration for the design and the
construction of the building based on this functional gc performance description and all
other covenants made under this Agreement, Owner shall pay the GC an aggregate amount of
€ 1,500,000, (one and a half million Euro) plus VAT (“Consideration”).  

	 	
2.11.1.2
In case of cost cutting, based on optimization of design and construction, bidding
conditions and optimization of investment, the cost cutting will be shared out between
Owner and GC in a ratio 40% to the Owner and %60 to the gc. Notwithstanding the
aforesaid, OTI shall be entitled to decrease the Furniture detailed in the Internal
Design description, attached as enclosure 6, with no benefit to the GC, provided however
that OTI shall not decrease the Furniture by more the 10%.  

	 	
2.11.1.3
Payment of the Consideration and any part thereof shall be made only upon the progress of
the GC’s work and upon Client satisfactory (and as the case may be relevant invoice
provided to the Client).  

	 	
2.11.1.4
Subject to the provisions stipulated in this Agreement, the Parties agree that the
Consideration shall be paid by way of Owner transferring to the GC an accumulated amount
of _________ (In words: _____________) OTI Shares.  

7

	2.11.2  	Guarantee
of work progress  

	 	
2.11.2.1
As a guarantee for the work progress of the GC and all related Sub-Contractors hired by
the GC, the Parties shall enter, within 90 days from the date hereof, into an escrow
arrangement with (“Escrow Agent”), pursuant to which the OTI Shares
shall be deposited and held in trust with the Escrow Agent until the need to make a
payment to the GC in accordance with the work progress at the Work Site performed by the
GC, all according to the terms of this Agreement (“Escrow Shares”).  

	 	
2.11.2.2
Following a written notification from OTI that the Escrow Shares have been registered
with the United States Securities and Exchange Commission (the “SEC”) and are
eligible for trading in the NASDAQ National Market,and after receiving confirmation from
OTI and/or InterCard’s in writing that certain work that reflects a certain amount
of Escrow Shares has been performed by the GC in accordance with the terms of this
Agreement and , the Escrow Agent shall as soon as practically possible thereafter sell
such amount of Escrow Shares as instructed by OTI and/or InterCard pursuant to the Escrow
Agreement and shall remit the proceeds of such sale to the GC .  

	2.11.3  	Restrictions
on the GC;  

	 	
2.11.3.1
It is hereby clarified and agreed that at the date hereof, none of the OTI Shares have
been registered with the SEC under the United States Securities Act of 1933 as amended
(the “Securities Act”) and such OTI Shares may not be sold, transferred or
otherwise disposed of unless registered under the Securities Act (and, where
required, under the laws of one or more other jurisdictions), except in accordance with
Regulation S (“Regulation S”) under the Securities Act , or unless another
exemption from registration is then available.  

	 	
2.11.3.2
The GC acknowledges and agrees that, until such time as a registration statement with
respect to the OTI Shares has been declared effective by the SEC all certificates
representing the OTI Shares deposited with the Escrow Agent shall bear, and shall be
subject to, a restrictive legend.  

	 	
2.11.3.3
The GC undertakes not to engage in hedging transactions in the United States of America
with regard to OTI Shares unless such transactions are conducted in compliance with the
Securities Act and the United States Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and the rules and regulations promulgated thereunder.  

	 	
2.11.3.4
The Owner hereby undertakes to complete, by no later than 31 May 2006, the necessary
actions required to register the OTI Shares with the SEC and make the OTI Shares eligible
for trading in the NASDAQ National Market  

8

	 	
2.11.3.5
As soon as is practically possible, the Owner hereby undertakes to deliver to the GC a
notice confirming that a registration statement with respect to the OTI has been declared
effective by the SEC and the OTI Shares are eligible for trading in theNASDAQ National
Market (the “Notice of Tradability”). The Notice of Tradability shall be issued
by a professional broker admitted to practice in a jurisdiction in which the Notice of
Tradability is issued. Alternatively, the Owner may deliver to the GC a Notice of
Tradability issued by its Company Secretary together with an opinion of a counsel with
respect to such matters.  

	 	
2.11.3.6
The GC hereby confirms that it shall be solely responsible and liable for any taxes
arising out of or in connection with the sale of the OTI Shares. The GC hereby declares
that it will make sure that the sale of the OTI Shares is performed strictly in
accordance with and under the terms and conditions of OTI’s Insider Trading Policy,
as available from time to time.  

	 	
2.11.3.7
The GC hereby irrevocably waives, relinquishes and releases OTI and InterCard from any
and all claims, rights, demands or causes of action asserted or non-asserted which the GC
may have had, now has or hereafter may have against OTI and/or InterCard, and their
directors, officers, employees, agents and/or consultants, in connection with the
issuance and sale of the OTI Shares, including without limitation, any fluctuations in
the OTI Share price.  

	2.12  	Performance
Documentation  

	 	
For
performances the only documents allowed, are those which have been indicated and released
as “intended for performance” by the Owner.  

	 	
GC
shall have no exemption regarding liability towards the Owner and/or the Client, due to
identification and release of such documents and the data contained therein.  

	 	
The
GC cannot rely on not having, or not sufficiently being, supervised. GC liability will
not be excluded or restricted by the fact, that the presented documents for the execution
of performances have been reviewed and approved by the Owner.  

	 	
The
GC has – according to the building and work process – to submit the performance
planning and specifications to the Owner in advance so that possible re-registrations and
suggestions can be taken into consideration before use.  

	 	
The GC has to provide a list of guaranteed tasks
and performances for better coordination. 

All deviation from the performance planning and
the guaranteed tasks, shall be pre-approved by the Owner and/or InterCard.  

9

	 	
Layout
plans, revision plans, systems documentation as well as manuals have to be provided
through the contractor for final approval (3 copies) and free of charge, and in digital
format (DXF and PDF files).  

	2.13  	Material
Testing and Sampling  

	 	
GC
shall conduct planed quality and/or material testing of substances and/or components, at
its own costs.  

	 	
If
quality and or material testing which are exceeding the general technical regulations for
building performances and the “Allgemeinen Technischen Vertragsbedingungen (ATV)",
for reasons which could not be reasonably foreseen by the GC, the GC will receive special
reimbursement, for actual, pre-approved in writing, costs incurred by him and against a
timely submitted invoice to the Owner.  

	 	
The
design shall be coordinated on a timely basis with the InterCard and requires individual
written pre-approval.  

	 	
The
GC shall provide a sampling catalogue, outlining the extent of the sampling/materials
selection. 

Further more, InterCard may at any time, require additional sampling. An
alternative with regard to the used materials as well as the manner of the construction
requires in any case specific written pre-approval by the InterCard.  

	2.14  	Execution  

	 	
The
GC shall submit the building reports (the Journal) to the Owner and the Client on a
weekly basis. Such journal shall contain all details which can be deemed of importance
for the execution and invoicing of the agreed performances.  

	 	
The
GC has to protect the executed performances from outside influences in accordance with
the currently accepted regulations without separate reimbursement.  

	 	
The
GC supervises the performances of the engaged sub-contractors according to his task as a
GC, and shall bear full and sole liability for any action or omission by the
Sub-Contractors.  

10

	2.15  	Performance
Deadlines  

	 	
The
GC shall present a detailed time schedule within 14 days after receipt of order, that
contains according to § 5 Nr. 1 VOB/B a fixed date of completion of GC’s works.
Owner’s approval of the time schedule shall be a condition precedent for the
validation of this agreement.  

	2.16  	Penalty
for Breach of Contract  

	 	
The
GC shall pay the Owner an agreed compensation in sum of 0.3% of the total value of this
agreement for each day’s delay  

	2.17  	Acceptance
/ Approval  

	 	
According
to § 12 Nr. 4 VOB/B the performance will be only formally accepted; the GC has to
apply in writing to accept the completed works and the building as agreed performance. § 12
Nr. 5 VOB/B will be excluded.  

	 	
The
GC has to organize the approval event and to provide the required workers and gauges at
his expense.  

	 	
A
possible move before final acceptance doesn’t represent any silent approval.  

	 	
Prior
to the approval of the Owner and the Client a certified surveyor/geometrician shall
prepare and sign blueprint of the Work Site, at the expense of the GC.  

	2.18  	Warranty  

	 	
The
warranty period for design and construction is 5 years after formal acceptance of all
completed works.  

	 	
The
warranty period for design and construction of the roof sealing shall be 10 years.
Otherwise § 13 VOB/B is valid.  

	2.19  	Invoicing  

	 	
Invoices
have to be identified as installments and final invoices.  

	 	
Final
invoices must contain all contract demands of the contractor, including additional
orders. 

In every invoice the scope and value of all present performances and already
received partial payments have to be recorded separately and submitted with consecutive
numbering.  

11

	 	
All
invoices shall show the value add tax separately.  

	2.20  	Payments/
Overpayment  

	 	
Payments
are made by OTI according to agreed payment plans and building progress within 14 days
after invoicing, subject to Section 2.11, and provided however that OTI shares have
become tradable on NASDAQ as detailed above.  

	 	
The
payments have to be transferred on the project account of the contractor.  

	 	
Payments
from the GC project account of the contractor have to be signed by Mr. Kuchenbecker or
Mr. Shamir as representatives of the client.  

	 	
Overpayments
have to be refunded, although the final invoice has been approved and paid completely.  

	2.21  	Securities  

	 	
The
general contractor shall provide the owner, by himself, with a performance of contract
security equal to 5% of the total value of this agreement issued due to payment of 95% of
each approved and signed GC’s invoice.  

	 	
As
a security for the fulfillment of warranty claims the owner retains 5% of the total
contracted amount of each sub contractor starting with the duration of the warranty
period and the day of approval. 

The general contractor has the duty to organize the works
and correction of deficiencies during the period of warranty.  

	 	
The
security retention can be covered by a bank guarantee. Bank guarantees may only be placed
with a large German bank with a registered office in Germany. German Law shall apply. The
bank shall be liable as a principal without time limit, shall waive the defenses of §§ 770
– 776 BGB and shall not be discharged by depositing money.  

	 	
The
guarantee will be returned if desired after expiry of the warranty period, if no more
open claims exist.  

	 	
No
interest will be paid for security deposits.  

12

	2.22  	Cancellation  

	 	
Contract
cancellations have to be in writing and to contain a good cause, also cancellations for
legal termination rights have to be in writing.  

	 	
A
good cause for cancellation is seen in the event of delay and insolvency or insolvency
proceedings being opened against the GC.  

	 	
The
Owner is then authorized to have unfinished parts of the building project executed by a
third party at the expense of the GC.  

	 	
Damage
compensation entitlements because of delay or non-fulfillment and contract claims against
the GC will remain.  

	2.23  	Other
Conditions  

	 	
Annulments,
changes or additions to the contract are required in writing.  

	 	
Should
individual causes of the contract become ineffective, the effectiveness of the other
specifications remain binding.  

	 	
The
only place of jurisdiction for all disputes, relative to the building contract, will be
Frankfurt/ Main Germany. German law shall apply.  

	 	

	 	InterCard GmbH System
 electronics
/s/ Heinz Kuchenbecker
/s/ Shmuel Shamir

by: Heinz Kuchenbecker
——————————————

Shmuel Shamir
title: CEO  	On Track
 Innovations Ltd.
/s/ Oded Bashan 

by: Oded Bashan
——————————————

 
title: CEO 	Queisser GmbH

/s/ Martin Queisser

by: Martin Queisser
——————————————

 
title: CEO 

13

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