Document:

EXHIBIT 4.15

                            [UNOFFICIAL TRANSLATION]

                                    AGREEMENT

                    Drawn up and signed in 5(th) day of July , 2006

BETWEEN:            MACPELL INDUSTRIES LTD.
                    Public company no. 52 - 003752 - 4
                    of 28 Hida Street, Bnei Brak
                    (hereinafter: the "LESSOR")

AND:                TEFRON LTD.
                    Public company no. 52 - 004340- 7
                    of 94 Em Hamoshavot Street, Petach Tikva
                    (hereinafter: the "LESSEE")
                    And HI-TEX, founded by Tefron Ltd.
                    Private company no. 51 - 248981 - 6
                    of 94 Em Hamoshavot Street, Petach Tikva
                    (hereinafter: "HI-TEX")

WHEREAS:            The Lessee is leasing from the Lessor an industrial
                    structure of approximately 7,710 sq.m. in the Teradion
                    Industrial Zone (hereinafter: the "HEADQUARTER BUILDING"),
                    pursuant to an agreement dated August 16, 1995, and pursuant
                    to the Appendix of Changes to this agreement of May 2001,
                    between the Lessee and New Net Assets (1994) Ltd.
                    (hereinafter: "NEW NET") which was merged into the Lessor,
                    as approved in the merger certificate of the Registrar of
                    Companies dated February 15, 2006 (hereinafter: the
                    "AGREEMENT OF 1995"), pursuant to which the lease term ends
                    in 2006;

<PAGE>

AND WHEREAS:        The Lessee is leasing from the Lessor an industrial
                    structure of approximately 6,040 sq.m., out of a structure
                    in an area of approximately 6,580 sq.m., which is situated
                    near to the Headquarter Building, in the Teradion Industrial
                    Zone (hereinafter: the "FINISHED PRODUCTS BUILDING"),
                    pursuant to an agreement dated December 10, 1999, and
                    pursuant to the Appendix of Changes to this agreement of May
                    2001, between the Lessee and New Net (hereinafter: the
                    "AGREEMENT OF 1999"), pursuant to which the lease term ends
                    on July 31, 2012;

AND WHEREAS:        HI-TEX, which is a wholly owned subsidiary of the Lessee, is
                    leasing from the Lessor two additional structures which are
                    situated near to the Headquarter Building, one (hereinafter:
                    "HI-TEX BUILDING 1") pursuant to an agreement dated August
                    12, 1997, as amended from time to time between the Lessee
                    and New Net, when the rights and obligations of the Lessee
                    pursuant thereto were assigned to HI-TEX (hereinafter: the
                    "AGREEMENT OF 1997") and the other, (hereinafter: "HI-TEX
                    BUILDING 2") pursuant to an agreement dated December 21,
                    1998, as amended from time to time between HI-TEX and New
                    Net (hereinafter: the "AGREEMENT OF 1998").

AND WHEREAS:        The parties have agreed to the amendment of the Agreement of
                    1995, the Agreement of 1997, the Agreement of 1998 and the
                    Agreement of 1999, in the manner set forth below;

THE FOLLOWING HAS THEREFORE BEEN DECLARED, STIPULATED AND AGREED BETWEEN THE
PARTIES:

1.   The Preamble to this Agreement forms an integral part hereof.

2.   On August 10, 2006 (hereinafter: the "Date of Vacation of the Finished
     Products Building") the lease term of the Finished Products Building shall
     end, and on the said date, the Lessee shall vacate the Finished Products
     Building and shall return it to the Lessor. Notwithstanding the foregoing
     in section 3 below, until the Date of Vacation of the Finished Products
     Building, all of the provisions of the Agreement of 1999 shall apply
     between the parties in connection with the rental of the Finished Products
     Building until the Date of Vacation of the Finished Products Building,
     including the provisions relating to the manner of the return of the
     Finished Products Building to the Lessor, all subject to a change in the
     Date of Vacation of the Finished Products Building, as stated above and
     subject to the following changes only:

<PAGE>

     a.   Notwithstanding that stated in the Agreement of 1999, in respect of
          the period from April 16, 2006 to the Date of Vacation of the Finished
          Products Building, the rent in respect of the Finished Products
          Building shall be in the amount, in New Israel Shekels, which is equal
          to 2.7 US dollars per sq.m., according to the representative rate of
          exchange of the dollar that is known on the date of payment. For the
          avoidance of doubt, and notwithstanding that stated in section 7.1 of
          the Agreement of 1999, the said rent is fixed and is not linked. In
          addition, the rent in respect of the period until the Date of Vacation
          of the Finished Products Building shall be paid in full by the Lessee
          to the Lessor not later than at the expiration of 30 days from the
          date of the taking of effect of this Agreement, as stated in section
          11 below.

     b.   Without derogating from the other undertakings of the Lessee pursuant
          to the Agreement of 1999, and pursuant to any law, and in light of the
          fact that HI-TEX is leasing the HI-TEX Building 2, which is near to
          the Finished Products Building and which is connected to the Finished
          Products Building, it is hereby stressed and clarified that the Lessee
          and HI-TEX shall take all the reasonable measures as required so that
          from the Date of Vacation of the Finished Products Building, there
          shall be no disturbance (by act or omission) on the part of the Lessee
          or HI-TEX, or any entity on their behalf, to the use by the Lessor or
          any entity on its behalf (including a new tenant) of the Finished
          Products Building (and of the parking spaces adjacent thereto) and in
          connection therewith, the Lessee and HI-TEX undertake, jointly and
          severally, without derogating from the generality of the foregoing,
          the following:

<PAGE>

          (1)  Until the connection in an independent manner of the Finished
               Products Building to the electricity grid of the Israel Electric
               Corporation (which, if and when it is implemented, shall be
               implemented by the Lessor or the entity to which the Lessor shall
               lease the Finished Products Building) - to continue to enable the
               full supply of electricity to the Finished Products Building
               through the infrastructure and electrical systems which are
               situated in the HI-TEX Building 2 (in the same manner in which
               the electricity is supplied to the Finished Products Building as
               at the date of the signing of this Agreement), provided that the
               Lessee and HI-TEX shall not be responsible for the quality of the
               electricity which is supplied, for failures in the supply
               thereof, for any reason which does not derive from gross
               negligence of any of them, for the infrastructure and electrical
               systems which are situated in the Finished Products Building, for
               the infrastructure and electrical systems which are situated in
               the HI-TEX Building 2, and for the infrastructure and electrical
               systems which conduct the electricity from the HI-TEX Building 2
               to the Finished Products Building (all provided that the level of
               the handling of the infrastructure and the systems which are in
               the HI-TEX Building 2 and which are being used for the purpose of
               the transfer of the electricity to the Finished Products
               Building, shall be similar to the level of the handling of the
               infrastructure and the systems which are in the HI-TEX Building 2
               and which are being used by the Lessee and HI-TEX). For the
               avoidance of doubt, it is hereby clarified that the payments in
               respect of the consumption of the electricity shall apply to the
               Lessor (or any entity on its behalf, such as a new tenant),
               commencing from the Date of Vacation of the Finished Products
               Building, and for this purpose, the Lessor shall procure the
               installation of a separate electricity meter for the Finished
               Products Building (the installation of the said meter shall be at
               the Lessor's expense; the Lessee and HI-TEX shall cooperate with
               the Lessor in connection with the installation of the said meter,
               including in all matters pertaining to the application to the
               Israel Electric Corporation, provided that the Lessee and HI-TEX
               shall not bear any payment in respect of the installation of the
               said meter). In the event that the Lessor or the entity which
               leased the Finished Products Building from the Lessor shall not
               pay the electricity bill in respect of the consumption in the
               Finished Products Building, the Lessee shall be entitled to
               offset the amount that was not paid from the rent due to the
               Lessor.

<PAGE>

          (2)  To prevent any disturbance (on behalf of the Lessee, HI-TEX, or
               any entity on their behalf, including service providers,
               suppliers, contractors and other third parties which come into
               contact with the Lessee or with HI-TEX) to the access of the
               Lessor (or any entity on its behalf) or of any third party
               (including a new tenant or any entity on its behalf) to the
               loading and unloading area of the Finished Products Building and
               to any other area of the Finished Products Building, and to take
               all the reasonable measures as required (at the expense of the
               Lessee and HI-TEX) in order to remove any such disturbance.

     c.   Without derogating from the other undertakings of the Lessor pursuant
          to the Agreement of 1999 and pursuant to any law, it is hereby
          emphasized and clarified that the Lessor (whether itself or through
          corporations in its control) shall take all the reasonable measures as
          required so as not to impair the use by the Lessee, HI-TEX or any
          entity on their behalf of the Headquarter Building and of the nearby
          structures which the Lessee and HI-TEX are leasing from the Lessor
          (including the loading and unloading area and any other area of the
          said structures and the parking spaces adjacent thereto), without any
          disturbance (by act or omission) on the part of the Lessor or
          corporations in its control. The Lessor undertakes that in any lease
          agreement or grant of right of use with regard to the Finished
          Products Building, it shall include a section in which the lessee or
          recipient of the right undertakes not to disturb (by act or omission)
          the use by the Lessee, HI-TEX or any entity on their behalf, of the
          nearby building, of the Headquarter Building and of any other nearby
          building which is being leased or shall be leased to the Lessee or to
          HI-TEX by the Lessor (including the loading and unloading area and any
          other area of the said structures and the parking spaces adjacent
          thereto).

<PAGE>

     d.   The parties declare that they are aware that pursuant to approval
          received by the Lessor from the Investment Center, the Lessor is
          required to continue to lease the Finished Products Building to the
          Lessee until August 31, 2007 (in this sub-section - hereinafter: the
          "Date of the Expiration of the Undertaking"). The parties shall apply,
          jointly, to the Investment Center and they shall use their best
          endeavors to receive the approval of the Investment Center for the
          termination of the lease of the Finished Products Building on the Date
          of the Vacation of the Finished Products Building, in consideration of
          the Lessor's undertaking to lease the Headquarter Building to the
          Lessee until the Date of the Expiration of the Undertaking.

     e.   The Lessor shall bear the cost of the Lessee's relocation from the
          Finished Products Building to another structure, against invoices
          which shall be presented by the Lessee to the Lessor in respect of the
          costs of the said relocation, which is estimated in a total amount of
          approximately 85,000 dollars.

3.   The Lessee shall continue to lease the Headquarter Building, in such manner
     that until April 15, 2006, all of the provisions of the Agreement of 1995
     in respect of the rental of the Headquarter Building shall continue to
     apply, and in the period commencing from April 16, 2006 (hereinafter: the
     "Effective Date for Changes") until July 31, 2012 (hereinafter: the
     "Updated Date for the Termination of the Lease of the Headquarter
     Building"), the Agreement of 1999 shall apply, including all the provisions
     thereof, to the rental of the Headquarter Building, subject to that stated
     in this Agreement (all of the changes which are set forth below are solely
     in respect of the period after the Effective Date for Changes):

     a.   The "Leased Premises" or the "Structure" - insofar as mentioned in the
          Agreement of 1999 shall be the "Leased Premises" as construed in the
          Agreement of 1995.

     b.   The base rent (as defined in section 7.1 of the Agreement of 1999)
          with regard to the 6,040 sq.m. of the Headquarter Building, in respect
          of the period commencing on the Effective Date for Changes and ending
          on the Updated Date for the Termination of the Lease of the
          Headquarter Building, shall be as set forth in the Agreement of 1999.
          As of April 16, 2006, taking into consideration the amendment stated
          in section 6 below, the rent pursuant to the Agreement of 1999 is 4.62
          dollars per sq.m.

<PAGE>

     c.   The base rent (as defined in section 7.1 of the Agreement of 1999)
          with regard to the additional 1,670 sq.m. of the Headquarter Building
          (which constitute the difference in area between the Headquarter
          Building and the area of the Finished Products Building) in respect of
          the period commencing on the Effective Date for Changes and ending on
          the Updated Date for the Termination of the Lease of the Headquarter
          Building, shall be in the monthly amount of 2.7 US dollars per sq.m.
          This rent shall be paid every three months in advance, by bank
          transfer, as the Lessor shall instruct the Lessee. With regard to this
          rent only (but not with regard to the rent specified in sub-section
          (b) above), the rent adjustment, in real terms, which is specified in
          the last sentence of section 7.1 of the Agreement of 1999 shall not
          apply, in respect of the period commencing on the Effective Date for
          Changes and ending on the Updated Date for the Termination of the
          Lease of the Headquarter Building.

     d.   For the avoidance of doubt, it is hereby clarified that the Agreement
          of 1995 shall not apply to the Headquarter Building, commencing on the
          Effective Date for Changes.

     e.   All of the securities that were provided pursuant to the Agreement of
          1999 shall also be used to secure the undertakings of the Lessee with
          regard to the Headquarter Building as stated in this section, pursuant
          to the original terms according to which they were given in the
          Agreement of 1999 (in addition to the fact that they shall continue to
          be used to secure the undertakings of the Lessee with regard to the
          Finished Products Building, including pursuant to section 2 above).

4.   Notwithstanding that stated in the first paragraph of section 7.1 in the
     Agreement of 1998, in effect commencing from April 16, 2006, the base rent
     pursuant to the said agreement, taking into consideration the amendment
     stated in section 6 below, shall be in the amount of 5.51 US dollars per
     sq.m. per month (instead of 4.65 dollars as set forth in the
     above-mentioned paragraph in the Agreement of 1998), which reflects a
     discount of 4%, after the addition of all the linkages and adjustments that
     were made by this date.

<PAGE>

5.   In the sixth paragraph of section 7.1 in the Agreement of 1997, in the
     Agreement of 1998 and in the Agreement of 1999 (rent adjustment
     mechanisms), the figure of 5% shall be replaced by 3% (three percent). It
     is clarified that this amendment shall apply to the adjustments which shall
     be made commencing from April 16, 2006, and shall not affect previous
     adjustments to the rent which have already been made or which were due to
     be made (pursuant to the terms of the relevant agreements) by April 16,
     2006. For the avoidance of doubt, it is hereby clarified that all of the
     provisions of the Agreement of 1997 and all of the provisions of the
     Agreement of 1998 shall continue to apply between the parties, subject to
     the changes in this Agreement only.

6.

     a.   The fifth paragraph of section 7.1 in the Agreement of 1997, in the
          Agreement of 1998 and in the Agreement of 1999 (the paragraph
          regarding the linkage mechanisms of the rent, which commences with the
          words "The base rent shall be linked" and ends with the words "as
          compared with the base index") shall be replaced with the text set
          forth below, in effect in respect of the period commencing on April 1,
          2006, only:

          "The base rent shall be linked so that each of the payments of the
          rent which is due from the Lessee to the Lessor shall be linked to the
          American index, in such a manner that if the last index published
          prior to the date of the actual remittance of any payment
          (hereinafter: the "New Index") shall be higher than the index known on
          April 16, 2006 (the index in respect of the month of March 2006, i.e.
          199.8) (hereinafter: the "Base Index"), then the Lessee shall be
          required to make the payment which shall be increased by the rate at
          which the New Index has increased as compared with the Base Index."

     b.   In the third paragraph of section 7.1 in the Agreement of 1997, in the
          Agreement of 1998 and in the Agreement of 1999, the definition of the
          term "the Israeli index" shall be omitted, and the definition of the
          term "dollar" shall be replaced with the following definition: "US
          Dollar. And it is clarified that the rent pursuant to this section
          shall be paid in Dollars and not in New Israel Shekels."

<PAGE>

     c.   It is clarified that the Base Rent pursuant to the Agreement of 1997,
          as of April 16, 2006, taking into consideration that stated above, is
          5.52 dollars per sq.m.

7.   This Agreement amends the provisions of the Agreement of 1995, the
     Agreement of 1997, the Agreement of 1998 and the Agreement of 1999, and in
     any event of an inconsistency between any of the above-mentioned previous
     agreements and this Agreement, the provisions of this Agreement shall
     prevail.

8.   Upon their signing of this Agreement, the Lessee and HI-TEX give notice
     that they have no claim and/or demand and/or lawsuit and/or right of any
     kind or nature (hereinafter: "Claim") against the Lessor and/or New Net
     and/or the officers thereof and/or the directors thereof and/or the
     employees thereof and/or the shareholders thereof and/or the
     representatives thereof and/or the insurers thereof and/or anything in
     connection therewith, in all matters pertaining to the making, manners of
     approval and validity of the lease agreements which are the subject of this
     Agreement, or any one of them, and insofar as they have or had (or any of
     them has or had) a Claim, then they hereby retract and waive the Claim in a
     final and absolute manner.

     Upon its signing of this Agreement, the Lessor gives notice that it has no
     claim and/or demand and/or lawsuit and/or right of any kind or nature
     (hereinafter: "Claim") against the Lessee and/or HI-TEX and/or the officers
     thereof and/or the directors thereof and/or the employees thereof and/or
     the shareholders thereof and/or the representatives thereof and/or the
     insurers thereof and/or anything in connection therewith, in all matters
     pertaining to the making, manners of approval and validity of the lease
     agreements which are the subject of this Agreement, or any one of them, and
     insofar as it has or had (or New Net, which is stepping into the shoes
     thereof, has or had) a Claim, then it hereby retracts and waives the Claim
     in a final and absolute manner.

     In addition to the foregoing, the Lessee and HI-TEX declare that as of the
     date of the signing of this Agreement, they are not aware of any Claim or
     demand against the Lessor and/or New Net in connection with the contents
     and the manner of implementation of the lease agreements which are the
     subject of this Agreement, or any one of them.

<PAGE>

9.   The Lessee hereby declares that this Agreement is subject to the approval
     of the Audit Committee, the Board of Directors and the General Meeting of
     the Lessee. The Lessee hereby declares to the Lessor that its engagement in
     this Agreement has been approved by the Audit Committee and the Board of
     Directors of the Lessee, and that pursuant to any law and pursuant to the
     documents of incorporation and the resolutions of the Lessee, its
     engagement in this Agreement does not require the approval of other organs
     of the Lessee, with the exception of the General Meeting, and that there is
     no legal or other impediment to its engagement in this Agreement and to the
     implementation of all of its undertakings pursuant hereto, subject to the
     receipt of the approval of the General Meeting of the Lessee. HI-TEX hereby
     declares that its engagement in this Agreement has been approved by its
     Board of Directors and General Meeting, and that pursuant to any law and
     pursuant to the documents of incorporation and the resolutions of HI-TEX,
     its engagement in this Agreement does not require the approval of other
     organs of HI-TEX, and that there is no legal or other impediment to its
     engagement in this Agreement and to the implementation of all of its
     undertakings pursuant hereto, subject to the receipt of the approval of the
     General Meeting of the Lessee.

10.  The Lessor hereby declares to the Lessee that its engagement in this
     Agreement has been approved by its Audit Committee and Board of Directors,
     and that pursuant to any law and pursuant to the documents of incorporation
     and the resolutions of the Lessor, its engagement in this Agreement does
     not require the approval of other organs of the Lessor, and that there is
     no legal or other impediment to its engagement in this Agreement and to the
     implementation of all of its undertakings pursuant hereto, subject to the
     receipt of the approval of the General Meeting of the Lessor.

11.  This Agreement shall take effect upon receipt of the later of the
     following: (a) the approval of the General Meeting of the Lessee as stated
     in section 9 above; (b) the approval of the General Meeting of the Lessor
     as stated in section 10 above; and (c) the approval of the Investment
     Center as stated in section 2(d). Should any of the approvals stated in
     paragraphs (a) or (b) above not be received within 90 days from the date of
     the signing of this Agreement, this Agreement shall be VOID AB INITIO.
     Should the approval stated in paragraph (c) above not be received within 90
     days from the date of the signing of this Agreement, the parties shall
     conduct BONA FIDE negotiations in order to identify an alternative, agreed
     solution in connection with the terms of the said paragraph (c). Should
     such an agreed solution not be reached within 60 days, this Agreement shall
     be VOID AB INITIO.

<PAGE>

12.  The parties agree that the courts in the Tel Aviv District shall have the
     exclusive jurisdiction in all of the disputes between them arising from the
     implementation, breach or interpretation of this contract.

      IN WITNESS WHEREOF THE PARTIES HERETO HAVE HEREUNTO SET THEIR HANDS:

     /s/ Yos Shiran                             /s/ Shmuel Nir
     -------------------                        ---------------
     /s/ Asaf Alperovitz                        /s/ Eli Azrieli
     -------------------                        ---------------
           LESSEE                                    LESSOR

     /s/ Yos Shiran
     -------------------
     /s/ Asaf Alperovitz
     -------------------
          HI-TEXEXHIBIT 4.16

                         LANGSHA TEFRON SEAMLESS CO. LTD

                             JOINT VENTURE AGREEMENT

                              TEFRON Ltd. (Israel)
                       LANGSHA Knitting Co., Ltd. (China)
                ITOCHU TEXTILE MATERIALS (ASIA) Ltd. (Hong Kong)

<PAGE>

                             JOINT VENTURE AGREEMENT

     THIS JOINT VENTURE AGREEMENT (this "AGREEMENT") is entered as of May 8,
2006 in __________ by and between TEFRON LTD., a company duly established and
registered under the laws of the State of Israel with its principal place of
business at Industrial Center Teradyon, Misgav, 20179, Israel ("TEFRON");
LANGSHA KNITTING CO., LTD., a company duly incorporated established and
registered under the laws of the People's Republic of China with its principal
place of business at 308 Jinfa Road, Yiwu City, Zhejiang (economic development
zone), PRC ("LANGSHA") and ITOCHU TEXTILE MATERIALS (ASIA) LTD., a company duly
incorporated established and registered under the laws of Hong Kong with its
principal place of business at Suites 2304-6, The Gateway, Tower 2, 25-27,
Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong ("ITM");

(TEFRON, LANGSHA and ITM shall hereinafter be collectively referred to as the
"PARTIES" and individually as a "PARTY").

PREAMBLE

WHEREAS,  TEFRON is a leading manufacturer of seamless apparel; and

WHEREAS,  LANGSHA is one of the leading companies in the Chinese Textile Cut &
          Sew industry, having outstanding experience and strong brand name
          recognition in the PRC; and

WHEREAS,  ITM is a company with strong financial capabilities, which operates in
          the textile industry; and

WHEREAS,  The Parties wish to form together a joint venture company for the
          purpose of designing, developing, manufacturing, marketing and selling
          seamless apparel in the PRC and in Asia;

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth
herein the Parties hereto agree and undertake as follows:

1.   INTERPRETATIONS AND DEFINITIONS

     1.1  In this Agreement, a reference to an Article, unless the context
          otherwise requires, is a reference to an article of this Agreement.

                                       2
<PAGE>

     1.2  The preamble to this Agreement and the Schedules attached hereto form
          an integral part hereof.

     1.3  The captions of the Articles in this Agreement are intended solely for
          convenience, and will have no meaning or significance in the
          interpretation of this Agreement.

     1.4  The following terms as used in this Agreement shall have the meanings
          set forth below:

          1.4.1 "AFFILIATE" shall mean a corporation, partnership, joint
               venture, trust or other entity or person directly or indirectly
               controlling or controlled by a Party or individual or entity or
               under direct or indirect common control with a Party, individual
               or entity. For the purpose of this definition, "CONTROL" means
               direct or indirect ownership or control of more than fifty
               percent (50%) of the voting rights of a company or more than
               fifty percent (50%) of the ownership interest representing the
               right to make the decisions for a partnership, joint venture or
               unincorporated association, as the case may be.

          1.4.2 "ANNUAL PRODUCTION VOLUME" shall have the meaning set out in
               Article 3.2.2.

          1.4.3 "ANNUAL PROFITABILITY FORECAST" shall have the meaning set out
               in Article 3.2.2

          1.4.4 "BOARD" or "BOARD OF DIRECTORS" shall mean the board of
               directors of the Company.

          1.4.5. "BUSINESS SCOPE" shall have the meaning set out in Article
               3.1.2 of this Agreement.

          1.4.6 "CHAIRMAN" shall mean the chairman of the Board of Directors of
               the Company.

          1.4.7 "COMPANY" shall have the meaning set out in Article 2.2 of this
               Agreement.

          1.4.8 "COMPANY'S OBJECTIVES" shall have the meaning set out in Article
               3.1.1 of this Agreement.

                                       3
<PAGE>

          1.4.9 "CONFIDENTIAL INFORMATION" shall mean non-public or proprietary
               data or information (including business plans and financial data)
               whether disclosed orally or in writing, which pertains to
               non-public or proprietary data or information of TEFRON or any
               Affiliate thereof and its respective businesses and activities,
               including without limitation any commercial, financial, business,
               professional and technical information, including information
               regarding TEFRON's or its Affiliates' operations, plans,
               activities, policies and procedures, specifications, designs,
               know how, trade secrets and marketing, all whether or not marked
               confidential or relating to seamless apparel.

          1.4.10 "DIRECTOR" shall mean a member of the Board of Directors.

          1.4.11 "ESCROW AGENT" shall mean an escrow agent to be chosen from
               among the Chinese branch of one of the top four international
               accounting firms (KPMG, Delloite & Touche, PriceWaterhouseCoopers
               and Ernst & Young) subject to the mutual written consent of the
               Parties and prior to any investment pursuant to Article 4.2.

          1.4.12 "ESTABLISHMENT DATE" shall have the meaning set out in Article
               2.5 of this Agreement.

          1.4.13 "EVENT(S) OF DISSOLUTION" shall have the meaning set out in
               Article 16.1 of this Agreement.

          1.4.14 "EVENT(S) OF FORCE MAJEURE" shall mean any one or more events
               or circumstances beyond the control of a Party, which cannot be
               prevented by reasonable precautions taken by such Party, having a
               material adverse effect on a Party's ability to perform its
               obligation under this Agreement. An Event of Force Majeure shall
               include: earthquake, typhoon, war, or enactment or revision of
               laws and ordinances, or any other reason beyond the control of
               any of the Parties which affects that Party's ability to perform
               its obligations hereunder all provided that: (I) such a Party is
               acting in good faith and without fault in causing such events,
               (II) such Event of Force Majeure is the sole reason for the
               nonperformance of such Party's obligations hereunder and (III)
               that the non-performing Party(s) has notified the other Party(s)
               of such Event of Force Majeure within 7 days from its beginning
               or consummation.

          1.4.15 "EXAMINATION AND APPROVAL AUTHORITY" means the Ministry of
               Commerce of the PRC and/or its authorized department who shall
               examine and approve the establishment of the Company.

          1.4.16 "GAAP" means the Generally Accepted Accounting Principles
               adopted by the Financial Accounting Standards Board in the U.S.A.

                                       4
<PAGE>

          1.4.17 "INTERESTS" shall mean the entire interests of a Party in the
               total registered capital of the Company, representing such
               Party's percentage of ownership in the Company at any particular
               time.

          1.4.18 "MACHINES" shall have the meaning set out in Article 4.2.1 of
               this Agreement.

          1.4.19 "MANAGEMENT TEAM" shall have the meaning set out in Article
               9.1.1 of this Agreement.

          1.4.20 "OPERATING EXPENSES" shall mean all costs and expenses of
               maintaining the operations of the Company including, without
               limitation, bookkeeping, reporting, taxes, fees and other
               governmental charges levied against the Company, fees for outside
               services (including, without limitation, audit, outside counsels
               and accountants), insurance, litigation and travel expenses.

          1.4.21 "PERMITTED TRANSFER" shall mean any transfer of Interests in
               the Company from a Party to its Affiliates and any transfer among
               such Affiliates themselves.

          1.4.23 "PRC" means the People's Republic of China, excluding Hong Kong
               Special Administration Region, Taiwan and Macau Special
               Administration Region.

          1.4.24 "RAW MATERIALS" shall mean un-knitted and in a raw form
               materials such as yarns, accessories and packaging materials.

          1.4.25 "REGISTERED CAPITAL" shall have the meaning as defined in
               Article 18 of the IMPLEMENTATION RULE OF THE SINO-FOREIGN EQUITY
               JOINT VENTURE LAW OF THE PEOPLE'S REPUBLIC OF CHINA.

          1.4.26 "REGISTRATION AUTHORITY" shall mean the State Administration
               for Industry and Commerce or its authorized department with which
               the Company shall be registered.

          1.4.27 "RMB" shall mean the lawful currency of the PRC.

          1.4.28 "TERM" shall have the meaning set out in Article 15 of this
               Agreement.

          1.4.29 "TOTAL INVESTMENT AMOUNT" shall have the meaning as defined in
               Article 17 of the IMPLEMENTATION RULE OF THE SINO-FOREIGN EQUITY
               JOINT VENTURE LAW OF THE PEOPLE'S REPUBLIC OF CHINA.

                                       5
<PAGE>

          1.4.30 "TRANSFER" shall mean to sell, assign, transfer, pledge,
               encumber or otherwise dispose of the Interests in the registered
               capital of the Company or any portion thereof or right therein.

          1.4.31 "VICE CHAIRMAN" shall mean the vice chairman of the Board of
               Directors of the Company.

2.   ESTABLISHMENT OF A JOINT VENTURE COMPANY

     2.1  PARTIES TO THE COMPANY

          The Parties to this Agreement shall be as follows:

          TEFRON LTD., a company duly established and registered under the laws
          of the State of Israel with its principal place of business at
          Industrial Center Teradyon, Misgav, 20179, Israel.

          Legal Representative: Name: Yos Shiran
                                Position: Chief Executive Officer
                                Nationality: Israeli

          LANGSHA KNITTING CO., LTD, a company duly incorporated established and
          registered under the laws of the People's Republic of China with its
          principal place of business at 308 Jinfa Road, Yiwu City, Zhejiang
          (economic development zone), PRC.

          Legal Representative: Name: _________
                                Position: _________
                                Nationality: _________

          ITOCHU TEXTILE MATERIALS (ASIA) LTD. a company duly incorporated
          established and registered under the laws of Hong Kong with its
          principal place of business at Suites 2304-6, The Gateway, Tower 2,
          25-27, Canton Road, Tsim Sha Tsui, Kowloon, Hong Kong.

          Legal Representative: Name: _________
                                Position: _________
                                Nationality: _________

                                       6
<PAGE>

     2.2  ESTABLISHMENT OF THE COMPANY

          The Parties agree to establish a joint venture company in Yiwu City,
          Zhejiang Province, People's Republic of China, in accordance with the
          Chinese-Foreign Equity Joint Venture Enterprise Laws of the People's
          Republic of China (the: "COMPANY").

     2.3  NAME AND LEGAL ADDRESS OF THE COMPANY

          2.2.1 The name of the Company shall be "LANGSHA TEFRON SEAMLESS CO.
               LTD" in English and ____________ in Chinese.

          2.2.2 The registered address of the Company shall be 308 Economic
               Development Zone, Yiwu City, Zhejiang Province, People's Republic
               of China.

     2.4  LIMITED LIABILITY COMPANY

          2.4.1 The Company is a limited liability company. The liability of
               each of the Parties for the debts and losses of the Company shall
               be limited to such Party's obligation to make its respective
               contribution to the registered capital of the Company, as
               provided in Article 4.1., and therefore, it is hereby expressly
               acknowledged and agreed by the Parties that no Party is
               responsible or liable for any additional funding with respect to
               the Company. Any creditors of the Company shall have recourse
               only to the assets of the Company and may not seek repayment from
               either Party.

          2.4.2 No Party is an agent of the other Parties and no Party has any
               power to bind the other Parties or to assume or to create any
               obligation of responsibility, express or implied, on behalf of
               the other Parties or in the other Parties names. This Agreement
               shall not be construed as creating any form of legal relationship
               between the Parties with the effect that an act or failure to act
               by one Party would impose liability upon the other Party(s).

     2.5  THE ESTABLISHMENT DATE

          The Establishment of the Company shall mean the date on which the
          Company's business license is issued by the Registration Authority
          (the: "ESTABLISHMENT DATE").

                                       7
<PAGE>

3.   PURPOSES, SCOPE AND SCALE OF PRODUCTION AND BUSINESS

     3.1  THE OBJECTIVES OF THE COMPANY AND ITS PURPOSES

          3.1.1 The purpose of the Company shall be to design, develop,
               manufacture, market and sell seamless apparel for the purpose of
               becoming a leading company in the Asian seamless apparel market
               (the: "COMPANY'S OBJECTIVES"). The Company shall use its
               financial means, technological know-how, extensive production
               capacity, the extensive experience of LANGSHA and ITM in the
               Asian markets and their leading brand name in order to achieve
               the Company's Objectives, as provided hereinabove.

          3.1.2 The business scope of the Company ("BUSINESS SCOPE") shall be
               designing, developing, manufacturing, marketing and selling
               seamless apparel.

          3.1.3 The Company shall be entitled to expand or modify the
               aforementioned Company's Business Scope provided however that
               such expansion or modification was confirmed by the Board in a
               unanimous vote and subject to receiving all necessary permits.

     3.2  SCOPE AND SCALE OF PRODUCTION

          3.2.1 LANGSHA has submitted a three-year detailed business plan to
               TEFRON and ITM. Once such business plan is agreed upon and
               approved by TEFRON and ITM and executed by TEERON, ITM and
               LANGHSA, it will be legally binding upon all the Parties and the
               Company (the: "BUSINESS PLAN"). Such Business Plan shall be
               attached to this Agreement as SCHEDULE 3.2.1.

          3.2.2 The Business Plan shall establish an annual target in production
               volume, as provided in SCHEDULE 3.2.2(A) hereto (the: "ANNUAL
               PRODUCTION VOLUME") and an annual profitability forecast as
               provided in SCHEDULE 3.2.2(B) (the: "ANNUAL PROFITABILITY
               FORECAST"). Unless the Parties mutually agree otherwise in
               writing, the Parties shall make their best efforts so that the
               Company will meet the Annual Production Volume and the Annual
               Profitability Forecast, provided, however that if the Company did
               not meet the Annual Production Volume or the Annual Profitability
               Forecast in spite of the fact that all Parties made their genuine
               best efforts, then , no Party shall be held liable.

                                       8
<PAGE>

4.   THE REGISTERED CAPITAL OF THE COMPANY

     4.1  REGISTERED CAPITAL AND TOTAL INVESTMENT

          The Total Investment Amount of the Company shall be US$8,000,000
          (eight million US dollars), and the Registered Capital of the Company
          shall be US$4,008,016 (four million eight thousand and sixteen US
          dollars).

     4.2  INVESTMENTS IN THE REGISTERED CAPITAL

          The Parties shall invest in the registered capital of the Company a
          total amount of US$4,008,016 (four million eight thousand and sixteen
          US dollars) (the: "REGISTERED CAPITAL"), as follows:

          4.2.1 TEFRON shall contribute to the Company's registered capital 144
               (one hundred and forty four) machines (the: "MACHINES") as
               provided in SCHEDULE 4.2.1 hereto. The Parties, after a thorough
               examination and independent evaluation, have agreed that the
               Machines shall be invested in the Company at a value of
               US$2,008,016 (two million eight thousand and sixteen US dollars),
               all in consideration for 50.1% of the Company's registered
               capital. TEFRON shall be entitled to provide the Machines in
               separate shipments, provided however that all the Machines are
               delivered to the Company within 6 (six) months after the
               Establishment Date. Violation of the abovementioned obligations
               to provide the Machines shall be deemed material breach of this
               Agreement.

               Any benefits, awards bonuses or tax returns of any kind
               whatsoever, which will be granted or offered by any governmental
               authority of any entity whatsoever in connection with the
               Machines (including without limitation any VAT returns) shall be
               provided to the Company and shall be used for the benefit of the
               Company. For the avoidance of any doubt it is hereby clarified
               that such benefits, awards, bonuses or tax returns shall not be
               provided directly to the Parties themselves and that any benefit
               related directly or indirectly to the Machines shall be the
               property of the Company.

               Any failure or delay in the delivery of any of the shipments of
               the Machines arising from an Event of Force Majeare shall not be
               deemed as a breach of this Agreement by TEFRON and shall not
               expose TEFRON to any claims or demands whatsoever.

                                       9
<PAGE>

          4.2.2 No later than 2 months after the Establishment Date, LANGSHA
               shall contribute to the Company's registered capital the amount
               of US$1,600,000 (one million and six hundred thousand US dollars)
               in cash and eight (8) machines as provided in SCHEDULE 4.1.2, all
               in consideration for 39.9% of the Company's registered capital.
               Violation of the abovementioned obligations shall be deemed
               material breach of this Agreement.

          4.2.3 No later than 2 months after the Establishment Date, ITM shall
               contribute to the Company's registered capital the amount of
               US$400,801 (four-hundred thousand and eight hundred one US
               dollars) in cash in consideration for 10% of the Company's
               registered capital. Violation of the abovementioned obligations
               shall be deemed material breach of this Agreement.

          4.2.4 After each contribution is effected by the Parties in accordance
               with Article 4.2, an accounting firm certified and registered in
               the PRC and designated by the Board, shall be retained to verify
               such contributions respectively and then issue the capital
               verification report regarding such contribution.

               The Company shall issue the investment certificate to each Party
               setting forth the amount of the Party's contribution immediately
               after the receipt of capital verification report issued by the
               accounting firm as stated in Article 4.2. The investment
               certificates shall be in the form as required by relative Chinese
               laws and shall be signed by the Chairman and Vice Chairman and be
               affixed with the chop of the Company confirming that the
               contributions of the Parties are in accordance with this
               Agreement.

     4.3  TRANSFER OF INTERESTS IN THE REGISTERED CAPITAL OF THE COMPANY

          4.3.1 Except for a Permitted Transfer, if at any time during the Term,
               a Party (the "OFFEROR") wishes to Transfer any part or all of its
               Interests in the registered capital of the Company (the "OFFERED
               EQUITY INTERESTS") to another entity or group of entities (the:
               "OTHER ENTITY"), shall first submit a written offer (the "SALE
               NOTICE") to each Party (each an "OFFEREE") offering them to
               purchase the Offered Equity Interests on the terms and
               conditions, including without limitation the price at which the
               Offeror would be willing to Transfer the Offered Equity Interests
               to the Other Entity.

          4.3.2 Each Offeree shall have the right, exercisable upon written
               notice delivered to the Offeror and the Company (the "ACCEPTANCE
               NOTICE") within 45 days from the date of the Sale Notice (the
               "OFFER PERIOD"), to purchase the whole (and not less than the
               whole) of the Offered Equity Interests at the price and on the
               other terms and conditions stated in the Sale Notice.

                                       10
<PAGE>

          4.3.3 If an Offeree submits the Acceptance Notice within the Offer
               Period, then the Offeror shall, within 90 (ninety) days following
               its delivery of the Acceptance Notice (the: "CLOSING PERIOD"),
               shall sell such portion of Offered Equity Interests to such
               Offeree at a price and on other terms and conditions stated in
               the Sale Notice.

          4.3.4 If the acceptance by the accepting Offerees, in the aggregate,
               are in respect of all of, or more than, the Offered Equity
               Interests, then the accepting Offerees shall acquire the Offered
               Equity Interests, on the terms aforementioned, in proportion to
               their respective Interests in the Company at such time that the
               Sale Notice is given, provided however that the transfer is
               approved by the Registration Authority.

          4.3.5 If the Offeree(s) fail to deliver the Acceptance Notice within
               the Offer Period, the Offeror shall be deemed to have consented
               to the Transfer of the Offered Equity Interests by the Offeror to
               the Other Entity. If the Offeree(s) consent, or deemed to have
               consented to the Transfer, the Transferor shall be free during
               the period of 90 ninety days following the expiration of the
               Offer Period to Transfer such Offered Equity Interests not
               purchased by the Offeree(s) to the Other Entity on terms and
               conditions no more favorable to the Other Entity than those set
               forth in the Sale Notice without again complying with the
               procedures set forth in this Article 4.3 hereof. The Transfer
               will become effective and binding only after the Other Entity has
               acceded to all the agreements in force ruling the relationship
               between the Parties and provided that the purchase price shall be
               paid and the Transfer shall be consummated within such 90-day
               period. The Parties shall act in good faith, take all the
               necessary actions, submit all the necessary filings and fully
               cooperate in order to give force and effect to such Transfer.

               If the Transfer is not consummated within such 90-day period, the
               Offeror shall not be permitted to Transfer the Offered Equity
               Interests or any part thereof to any third party without again
               complying with the procedures set forth in this Article 4.3
               hereof.

                                       11
<PAGE>

          4.3.6 Notwithstanding the aforesaid, it is agreed that in the event
               the Offered Equity Interests represents the Offeror's entire
               Interests in the registered capital of the Company, so that after
               the sale of such Offered Equity Interest the Offeror will have no
               more Interests in the Company, then the Offeree(s) will be
               entitled to introduce an alternative purchaser for such Offered
               Equity Interests, provided that such an alternative purchaser is
               acceptable to the other Offeree and approved by simple majority
               of the Board of Directors. Such an alternative Offeree shall be
               deemed as an Offeree and therefore shall be subject to the
               provisions of this Article 4.3 hereof.

          4.3.7 PERMITTED TRANSFER

               Notwithstanding the forgoing provisions, the Parties hereby agree
               and commit to the following:

               Each Party is hereby allowed to transfer its Interests in the
               Company to its Affiliates ("PERMITTED TRANSFER"). The other
               Parties hereby consent to such Permitted Transfer and its
               directors of the Board of Directors shall be deemed to have
               consented unanimously to such Permitted Transfer. It shall be
               further deemed that all of the Parties and all directors of the
               Board have unanimously consented to such Permitted Transfer (or
               if a separate Board resolution of the Company is required by PRC
               law to approve the Permitted Transfer, each Party shall cause the
               directors it appointed to the Board to vote in favour of the
               Permitted Transfer). In case any other Party or the Company fails
               to produce necessary supporting documents for such transfer for
               purpose of change of registration at the Examination and Approval
               Authority, the Offeror shall be entitled to apply to the
               Examination and Approval Authority for change of shareholder by
               presentation of this provision.

          4.3.8 When one Party assigns all or part of its equity interest in the
               Company, such Party shall return to the Company its investment
               certificate issued by the Company. If part of the equity interest
               is assigned, after such Party returns its investment certificate
               to the Company, a new investment certificate shall be issued by
               the Company to such Party identifying its capital contribution
               after the equity transfer.

          4.3.9 Notwithstanding the assignment of the equity interest in the
               Company pursuant to this Article 4, the Parties agree that
               assignment of the equity interest in the Company will not relieve
               them of their confidentiality obligations under Article 7.

                                       12
<PAGE>

          4.3.10 COMPULSORY TRANSFER

               In the following circumstances, the other Parties shall be
               entitled to force such Party falling in below situations to sell
               its Interests in the Company to them or other purchasers they
               respectively selected and approved by the Board of Directors of
               the Company in proportion to their share equity at that time:

               4.3.10.1 A material breach of this Agreement has occurred and
                    such breach is not cured by the breaching Party within 30
                    (thirty) days after receipt of written notice of the breach
                    from the non-breaching Party, provided however that the
                    non-breaching Party does not wish to dissolve and liquidate
                    the Company.

               4.3.10.2 Any Party becomes bankrupt, or is the subject of
                    proceedings for liquidation or dissolution, or ceases to
                    carry on business or becomes unable to pay its debts as they
                    come due, provided however that the other Parties do not
                    wish to dissolve and liquidate the Company.

5.   RESPONSIBILITIES OF THE PARTIES

     TEFRON, LANGSHA and ITM shall be respectively responsible for the following
     matters:

     5.1  RESPONSIBILITIES OF TEFRON

          Among its responsibilities under this Agreement, TEFRON shall:

          5.1.1 make its respective contribution to the registered capital of
               the Company according to the terms and conditions of Article 4.2
               above.

          5.1.2 participate and cooperate in the design and development of new
               products.

          5.1.3 provide the Company with managerial consultation.

          5.1.4 assist the Company in installation, testing and operation of the
               equipment, which was provided to the Company by TEFRON pursuant
               to Article 4.2 above.

     5.2  RESPONSIBILITIES OF LANGSHA

          Among its responsibilities under this Agreement, LANGSHA shall:

                                       13
<PAGE>

          5.2.1 make its respective contribution to the registered capital of
               the Company according to the terms and conditions of Article 4.2
               above.

          5.2.2 to the extent requested by TEFRON and/or ITM and for as long as
               such request remains in full force and effect, properly handle
               the matters relating to the establishment of the Company, in
               accordance with the relevant laws and regulations of the PRC,
               such as the applications for approvals, registration and business
               license and other formalities relating to the relevant Chinese
               governmental authorities.

          5.2.3 assist the Company in selling and marketing its products in
               domestic markets, i.e. in the PRC and in Asia for the purpose of
               achieving its Annual Production Volume and Annual Profitability
               Forecast and enhance the overall image and position of the
               Company in local markets.

          5.2.4 make its best efforts in assisting the Company to obtain
               favorable local regulatory and financial support along with
               incentives and tax preferential treatment.

          5.2.5 assist the foreign personnel or representatives of TEFRON and
               ITM in obtaining all necessary PRC entry visas, travel documents
               and work permits; and

          5.2.6 upon the occurrence of an Event of Dissolution, assist in
               assuring the prompt dissolution and liquidation of the Company
               pursuant to the terms hereof and the repatriation of any funds
               and/or other contributions (including the Machines) invested in
               the Company and any and all profits accrued thereon out of the
               PRC.

          5.2.7 handle customs clearance for importing equipment, raw materials
               and machinery imported by the Company and arranging the
               transportation to the Company's factory premises.

          5.2.8 assist the Company in obtaining preferred rights of land use for
               its operations from the Land Resources Administrative Bureau (all
               in good terms for the Company), as well as assisting the Company
               in negotiating the design and construction of buildings and
               facilities required by the Company.

                                       14
<PAGE>

          5.2.9 arrange necessary provision of water, electricity,
               telecommunications and all other required installations.

          5.2.10 assist the Company in locating suitable local workers and other
               staff needed by the Company, all in reasonable and profitable
               terms to the Company.

          5.2.11 perform professional maintenance activities and adjustment of
               equipment, at a reasonable low costs to the Company.

     5.3  RESPONSIBILITIES OF ITM

          Among its responsibilities under this Agreement, ITM shall:

          5.3.1 make the payment of its contribution to the registered capital
               of the Company according to the terms and conditions of Article
               4.2 above.

          5.3.2 assist the Company in selling and marketing its products in Asia
               for the purpose of achieving its Annual Production Volume and
               Annual Profitability Forecast, as further provided in SCHEDULES
               3.2.2 A AND 3.2.2 (B) and enhance the overall image and position
               of the Company in Asia.

          5.3.3 provide information on market trends in raw materials and
               products, and consulting on technology.

          5.3.4 assist the Company in Import-export procedures, and cooperate in
               product distribution.

          5.3.5 continuously use its contacts and acquaintance with the Chinese
               and Asian market in order to enhance the Company's business and
               protect the Company's rights in the PRC and in Asia.

     5.4  Notwithstanding the above agreements on the allocation of
          responsibilities, all fees and costs in relation to the establishment
          of the JV (other than the professional fee each Party pay to their
          respective advisor for the negotiation of the JV Contract and Articles
          of Association of the Company) shall be borne by the Company. The
          Company shall reimburse each Party for such expenses upon receipt of
          the supporting documents, which is in compliance with accounting rules
          of the PRC.

                                       15
<PAGE>

     5.5  FINANCING

          Notwithstanding the terms and conditions hereof, the Parties agree
          that the Company shall, in principle, be responsible for obtaining its
          own financing from third party lenders to operate its business, fund
          capital expenditures and maintain working capital. If the Company
          cannot obtain such funds, then, upon the adoption of the resolution of
          the Board in simple majority, LANGSHA shall assist the Company to
          obtain such financing, and/or shall make loans to the Company, on a
          non-recourse basis to TEFRON and ITM.

          Further agreement between the Company and LANGSHA shall be reached
          with regard to the above issue after the establishment of the Company.

6.   PRODUCT EXPORT AND MARKETING, TRADEMARKS AND NON- COMPETITION

     6.1  PRODUCT EXPORT AND MARKETING

          The Company shall market its own products under its own responsibility
          and judgment within the People's Republic of China and Asia.

     6.2  SALE OF PRODUCTS

          Notwithstanding anything to the contrary, the Parties agree that the
          products manufactured or produced by the Company shall, if exported to
          the Japanese market, be sold and/or exported through ITM to the
          Japanese market where ITM has the exclusive right to purchase from the
          Company and to sell the products during the Term in Japan. In
          obtaining the exclusive distribution right mentioned above in the
          Japanese market, ITM shall submit business target for the sell of
          products of the Company in Japan to the Company which is subject to
          the simple majority approval of the BOD of the Company. Failure to
          meet the approved business target by ITM will enable the Company to
          appoint another distributor for the distribution of products of the
          Company in the Japanese market.

          Further agreement between the Company and ITM shall be reached with
          regard to the above issue after the establishment of the Company.

     6.3  TRADEMARKS

          6.3.1 The Company's products will be marketed under the name "LANGSHA
               TEFRON SEAMLESS" in English and _________ in Chinese (the:
               "Company's Trademarks"). The Company's Trademarks shall be
               registered in the name of the Company in accordance with the
               Trademark Law of the PRC.

                                       16
<PAGE>

               After the termination of the Company for any reason, the
               trademark "LANGSHA TEFRON SEAMLESS" or any other trademarks owned
               by the Company shall be transferred to TEFRON free of charge.

          6.3.2 For the avoidance of any doubt it is hereby agreed that with the
               exception of the Company's Trademarks, as specifically provided
               above, the Company shall not be entitled to manufacture, market
               and/or sell products under the name "TEFRON" in any variation
               whatsoever which will remain the property of TEFRON and therefore
               will be registered in the name of TEFRON Ltd. in accordance with
               the Trademark Law of the PRC.

               LANGSHA, ITM or the Company shall not at any time during the Term
               of this Agreement nor at any time thereafter reserve or register
               or cause the registration or reservation of any business or
               company name similar to or incorporating the words TEFRON or any
               Chinese characters for these words or reserve or register or
               cause the registration or reservation of any trademarks similar
               to or incorporating the words TEFRON in the People's Republic of
               China or elsewhere.

               Violation of the above obligation shall be deemed material breach
               of this Agreement and the defaulting party shall pay damage at
               the amount of [USD Five Million] to TEFRON within forty-five days
               upon receipt of TEFRON's written notice for the breach.

               LANGSHA shall provide TEFRON with all the necessary assistance
               required for the successful registration of its trademarks.
               TEFRON can sign a separate agreement regarding on it with TEFRON
               when it deems necessary.

     6.4  NON-COMPETITION

          6.4.1 It is hereby agreed that during the Term LANGSHA's and ITM's
               direct and indirect seamless activities shall be carried out
               fully and exclusively by the Company, with the exception only of
               the following activities, provided however that such limitations
               will apply to ITM only and not its affiliates:

               6.4.1.1 ITM's existing sale activity of Raw Materials as further
                    provided in SCHEDULE 6.4.1.1

                                       17
<PAGE>

               6.4.1.2 Langsha's existing sale activity of the seamless intimate
                    apparel products listed in SCHEDULE 6.4.1.2 hereto to its
                    customers listed in SCHEDULE 6.4.2 hereto.

               Without derogating from the aforesaid, during the Term and for 7
               (seven) years thereafter (the RESTRICTED PERIOD FOR BUSINESS),
               LANGSHA and ITM shall not be involved, directly or indirectly in
               any activity, which is competitive with the Company's Business
               Scope and TEFRON shall act in accordance with its obligations in
               the Letter of Undertaking, a copy of which its attached hereto as
               SCHEDULE 6.4.1.

          6.4.2 Throughout the Term and for 5 years after the expiration of the
               Term or the termination of this Agreement (the RESTRICTED PERIOD
               FOR CONTACT) for any reason whatsoever: (I) LANGSHA shall not
               solicit approach, directly or indirectly, any of TEFRON's
               customers listed in SCHEDULE 6.4.2A, as updated from time to
               time, nor sell or offer to sale or manufacture, directly or
               indirectly, any goods or services for any of the abovementioned
               TEFRON's customers, without prior written approval of TEFRON,
               except for Raw Materials and seamed socks and hosiery that
               LANGSHA already sells to the customers listed in SCHEDULE 6.4.2.B
               AND as specifically indicated therein; and (II) ITM shall not
               solicit approach, directly or indirectly, any of TEFRON's
               customers listed in SCHEDULE 6.4.2A, as updated from time to
               time, nor sell or offer to sale or manufacture, directly or
               indirectly, any seamless products for any of the abovementioned
               TEFRON's customers, without prior written approval of TEFRON,
               provided however that such limitations will apply to ITM only and
               not to its Affiliates; and (III) TEFRON shall not approach,
               directly or indirectly, any of LANGSHA's customers listed in
               SCHEDULE 6.4.2B and ITM's customers listed in SCHEDULE 6.4.2C ,
               as updated from time to time, nor sell or offer to sale or
               manufacture, directly or indirectly, any goods or services
               (except for Raw Materials and apparel that TEFRON already sells
               to the customers listed in SCHEDULE 6.4.2A) for any of the
               abovementioned LANGSHA's customers and ITM's customers, without
               prior written approval of LANGSHA and/or ITM.

          6.4.3 Articles 6.4.1 and Article 6.4.2 above shall survive the
               termination of this Agreement as well as the dissolution and/or
               liquidation and/or termination of the Company.

          6.4.4 Violation of the above-mentioned obligation shall be deemed
               material breach of this Agreement.

                                       18
<PAGE>

7.   CONFIDENTIALITY

     7.1  LANGSHA and ITM hereby undertake towards TEFRON as follows:

          7.1.1 to strictly maintain the confidentiality of, and not to
               disclose, any and all Confidential Information received by them.

          7.1.2 to use the Confidential Information or any part thereof only for
               the purposes of this Agreement and for no other purpose
               whatsoever.

          7.1.3 to procure that the Company will permit access to the
               Confidential Information only to those employees, Directors,
               officers, advisers or agents to whom disclosure is necessary for
               the Company to fulfill its purposes and objectives hereunder and
               who shall sign a written undertaking in form satisfactory to
               TEFRON to keep the Confidential Information in strict confidence
               and to use the same only for the purposes of this Agreement. For
               the removal of any doubt, the execution by an officer or employee
               on such undertaking shall not derogate from LANGSHA and ITM
               obligations to maintain the Confidential Information in full
               confidence and procure that the Company or its employees do not
               reveal such Confidential Information to any third parties.

     7.2  Nothing herein contained shall be interpreted as: (I) requiring the
          disclosure of any Confidential Information; (II) granting of any
          express or implied license or other right under any patent, copyright,
          right to trade secretes or any other intellectual property right or
          other right of TEFRON relating to the Confidential Information; (III)
          restricting, limiting or preventing TEFRON from disclosing to third
          parties or otherwise dealing with the Confidential Information and its
          technology as it deems fit.

     7.3  Immediately upon the termination of this Agreement for any reason
          whatsoever, the Parties and the Company will immediately cease all use
          of the Confidential Information, and will promptly return to TEFRON
          all forms of Confidential Information and any and all copies or
          derivatives thereof (including notes or other write-ups thereof made
          by the Company). The obligations of the Parties and the Company
          regarding non-disclosure and confidentiality pursuant to this Article
          7 will remain in full force indefinitely.

     7.4  Violation of the above clause shall constitute material breach of this
          Article and the defaulting party shall pay damage at the amount of
          [USD Six Million] to the non-defaulting party.

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8.   BOARD OF DIRECTORS

     8.1  FORMATION AND ESTABLISHMENT OF THE BOARD

          The Board shall be established on the Establishment Date. Unless
          otherwise agreed by the Parties, the first meeting of the Board shall
          be held within thirty (30) days after the Establishment Date.

     8.2  COMPOSITION OF THE BOARD

          8.2.1 The Board of Directors shall consist of 5 (five) Directors, of
               which 3 (three) Directors shall be appointed by TEFRON, 1 (one)
               Director shall be appointed by LANGSHA and 1 (one) Director shall
               be appointed by ITM.

          8.2.2 The Chairman of the Board, who shall also be the Company's legal
               representative, shall be appointed by TEFRON and the Vice
               Chairman of the Board shall be appointed by LANGSHA.

          8.2.3 As the legal representative of the Company, the Chairman of the
               Board shall have the authority to execute and deliver, on behalf
               of the Company, all agreements, contracts and other documents
               binding upon the Company, except as otherwise provided in this
               Agreement. If the Chairman is unable or unavailable to perform
               his/her duties, the Board shall designate and authorize another
               Director to perform such duties. Neither the Chairman, nor such
               Director designated and authorized by the Board shall be
               empowered to act on behalf of the Company beyond the scope of the
               express authorization of the Board.

          8.2.4 Each Director shall be entitled to one (1) vote. Neither the
               Chairman of the Board nor the Vice Chairman of the Board shall be
               entitled to an additional or casting vote. While serving in such
               position, all Directors shall owe a duty of loyalty to the
               Company, shall act to the Company's benefit and best interest and
               shall act in good faith in performing their duties and
               responsibilities.

     8.3  TERM OF APPOINTMENT

          8.3.1 Each individual serving in the capacity of Chairman, Vice
               Chairman or Director shall hold office for a term of 4 (four)
               years and each shall be eligible for consecutive terms of office
               upon reappointment by the original appointing Party. Any vacancy
               created in the Board shall be filled by the Party, which
               originally appointed the absent Director causing the vacancy.

                                       20
<PAGE>

          8.3.2 Any Party may at any time remove for any reason any or all of
               the individuals appointed by such Party as a Director or
               Directors and appoint in lieu thereof another individual or
               individuals to serve the remainder of the relevant term(s). Any
               Party removing or appointing a Director shall promptly notify the
               other Parties in writing of such removal and appointment in
               advance.

          8.3.4 The Parties shall cooperate to register any change in the
               composition of the Board with the relevant authorities in the
               PRC.

     8.4  AUTHORITY

          The Board of Directors shall monitor the CEO's performance of duties
          and shall be the highest decision-making body responsible for all
          important matters in the Company. Such primary matters shall include,
          without limitation, the followings:

          8.4.1 Current, mid-term and long-term operational planning (scheduling
               of production, planning for equipment, profitability, financing,
               etc.) and the budget estimation and approval required for these
               purposes.

          8.4.2 Quarterly business reports, approval of earnings distribution
               proposals.

          8.4.3 Creating restrictions or limitations on borrowing loans.

          8.4.4 Establishment and revision of major Company policies and rules.

          8.4.5 System of major Company policies and rules.

          8.4.6 Transfer of major assets.

          8.4.7 Entering, altering and renewal of factory rental contracts.

          8.4.8 Distribution of profit.

          8.4.9 Create any mortgage or charge on any part of the undertaking
               property or assets of the Company or any subsidiary of the
               Company.

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<PAGE>

          8.4.10 Enter into any contract or arrangement with any shareholder or
               Director or any person who is a connected person or Affiliated
               Company of a shareholder or Director or enter into any contract
               or arrangement in which any such person or Affiliated Company is
               interested, whether directly or indirectly.

          8.4.11 All other matters, which could have a significant impact on
               Company operations.

     8.5  MEETING OF THE BOARD; QUORUM

          8.5.1 The Board of Directors shall convene a minimum of four (4)
               meetings a year. The meetings shall be called and presided over
               by the Chairman of the Board. If the Chairman is unable,
               unavailable or fails to call or preside over a meeting, the
               meeting thereof shall be called and presided over by the Vice
               Chairman. If the Vice Chairman is unable, unavailable or fails to
               call or preside over a meeting, the meeting shall be called and
               presided over by a Director jointly recommended by half or more
               than half of the Directors. Each meeting shall be called by at
               least 15 (fifteen) working days prior notice. Such notice must
               specify the time and the place of a meeting as well as the issues
               to be discussed. The notice shall be given to all the members of
               the Board. The Chairman of the Board shall call an interim
               meeting based on a request made by at least two Directors. If the
               Chairman is unwilling, unable or unavailable to perform his/her
               duties, the Board shall designate and authorize another Director
               to perform such duties.

          8.5.2 The attendance of not less than two thirds of the Directors
               either in person or by proxy will constitute a quorum.

          8.5.3 Each Director shall be entitled to appoint an alternate Director
               to participate and vote in any Board meeting in his stead. The
               alternate Director shall provide a written pro-forma attestation
               issued by the Company certifying its right to serve as an
               alternate Director.

          8.5.4 A synopsis in English of the proceedings and resolutions passed
               in meetings and a Chinese translation thereof shall be recorded
               in the meeting minutes, which Directors present shall sign and
               seal, and which shall be archived by the Company.

                                       22
<PAGE>

     8.6  VOTING AND ADOPTION OF BOARD RESOLUTIONS

          8.6.1 Decisions of the Board shall be adopted by a majority vote,
               provided that a quorum is present. Notwithstanding the aforesaid,
               in the following matters, the approval of all of the Board
               members shall be required:

               8.6.1.1 Amendments to the Articles of Association of the Company.

               8.6.1.2 Termination or dissolution of the Company, provided that
                    upon the occurrence of any Event of Dissolution, such
                    consent shall be deemed granted by all Parties hereto.

               8.6.1.3 Increase or decrease in the registered capital of the
                    Company.

               8.6.1.4 Any merger or division of the Company.

          8.6.2. If all Directors are in agreement, decisions may be taken in
               writing by circulating documents containing the items in question
               to each of the Directors, rather than by convening and conducting
               a Board of Director meeting. The Board of Directors may conduct
               meetings by any means of telecommunications, including video or
               telephone conference, provided that all of the Directors
               participating may hear each other simultaneously.

          8.6.3 If upon any resolution there is a deadlock, another Board
               meeting shall be held within 30 days following the previous Board
               meeting. In the event that the subsequent Board meeting can not
               reach any resolution, then the matter shall then be referred to
               the chief executive officers of the parties to the Company. The
               chief executive officers of the parties to the Company will
               discuss the matter in good faith in order to resolve it.

9.   BUSINESS MANAGEMENT ORGANIZATION

     9.1  ESTABLISHMENT OF MANAGEMENT TEAM

          9.1.1 The Board shall establish a management team ("MANAGEMENT TEAM"),
               which shall be in charge of the day-to-day operations and
               management of the Company. The Management Team shall be consisted
               of one CEO, one CFO and department mangers.

          9.1.2 The CEO shall be nominated by a mutual decision among TEFRON and
               LANGSHA and ITM shall be engaged and removed following a decision
               of the Board.

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<PAGE>

          9.1.3 The CFO shall be recommended, appointed and removed by TEFRON
               following a decision of the Board. The CFO shall be in charge of
               the financial and account management of the Company and shall be
               accountable to the Board and CEO. Each of the financial
               statements shall require the approval and signature of the CFO
               and the CEO and the approval of the Board.

          9.1.4 All other employees, including projects managers, shall be hired
               and their employment shall be terminated by the CEO of the
               Company, subject to the relevant decisions adopted from time to
               time by the Board.

     9.2  AUTHORITIES OF THE CEO

          The responsibilities of the CEO shall be to carry out the decisions
          made by the Board and to organize and direct the daily management of
          the Company in accordance with the provisions of this Agreement. Such
          responsibilities of the CEO shall include, without limitation:

          9.2.1 routine operation of the Company within the scope of the
               operational plans as approved by the Board of Directors.

          9.2.2 preparation of an annual business report, earnings distribution
               proposals, current, mid-term and long-term operational planning
               (scheduling of production, planning for equipment, profitability,
               financing, etc.) and submission to the Board of Directors

          9.2.3 signing on routine business documents of the Company, within the
               scope of the powers granted by the Board of Directors and the
               Chairman, acting as the legal representative of the Company as
               provided in Article 8.2.2.

          9.2.4 preparation of monthly reports on business operations and
               monthly accounting statements, which shall be delivered to each
               of Parties hereto.

          9.2.5 providing timely notifications to each of the Parties hereto
               relating to any occurrence of events of significance.

          9.2.6 presenting for the approval of the Board the organizational
               structure of Company including its proposed appointments of
               department mangers as well as their remuneration.

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<PAGE>

          9.2.7 preparation of the annual budget of the Company for the approval
               of the Board.

     9.3  The Management Team shall assist the CEO in its abovementioned duties
          and will manage the tasks assigned to it by the CEO.

     9.4  The CEO may not hold managerial position at any other firm or
          commercial organization in the PRC or abroad and shall not participate
          in any way in competition of other economic organization against the
          Company's activities.

11.  PURCHASE OF EQUIPMENT AND RAW MATERIAL

     The Company is authorized to determine whether it shall purchase needed
     machinery and equipment, raw materials, fuel, accessories, transport
     vehicles, and administrative supplies within the People's Republic of China
     or from foreign sources. Notwithstanding the above it is hereby agreed that
     raw materials for the Company shall be purchased through ITM, provided
     however that such raw materials are timely supplied and offered for sale in
     competitive market prices all in accordance with the Company's best
     interest and needs and quality requirements.

12.  LABOR MANAGEMENT

     12.1 Policies on recruitment, hiring, dismissal, wages and salaries,
          employment insurance, welfare, and worker incentive programs will be
          established by the Board of Directors in conformity with the Labor Law
          of People's Republic of China, the regulations on foreign investment
          in the Jinhua City, Zhejiang Province labor management board and other
          effective national and local labor regulations. The Company will
          conclude individual labor contracts with workers and this document
          will be submitted to the local labor management board.

     12.2 The Board of Directors will discuss and decide upon matters relating
          to hiring of other top management except the CEO and CFO, and
          compensation of the CEO, CFO and other top management, social
          insurance, welfare and the standard of travel expense,

     12.3 The Company shall directly hire office staff and factory workers
          through a contract system, while observing the relevant laws and
          regulations of the People's Republic of China, and shall compensate
          employees through a direct payment system, provided that wages,
          allowances and bonuses for individual staff and workers shall depend
          upon their ability, performance, experience and general attitude.

                                       25
<PAGE>

     12.4 The CEO shall engage office staff and factory workers directly while
          observing the hiring policies established by the Board of Directors.
          Contracts for new hires shall contain a fixed probation period, at the
          conclusion of which the CEO shall determine whether or not to formally
          hire the employee. Upon the CEO's request LANGSHA shall provide the
          CEO with all the assistance necessary for the purpose of locating
          compatible factory workers and personnel.

     12.5 The Company's employees shall be entitled to establish the labor union
          organization (hereunder referred to as "LABOR UNION") in accordance
          with the LABOR UNION LAW OF THE PEOPLE'S REPUBLIC OF CHINA and the
          ARTICLES OF ASSOCIATION OF THE LABOR UNION OF CHINA. Based on the
          relevant PRC laws, the Company shall pay each month two percent (2%)
          of the total amount of the wages to be received by its staff and
          workers as the Labor Union fund

13.  TAXATION, FINANCIAL AFFAIRS AND FINANCIAL AUDITING

     13.1 Employees of the Company shall contribute individual income taxes in
          conformity with the "Individual Income Tax Law of the People's
          Republic of China." Staff members and employees of the Company shall
          be responsible for paying their own individual income tax. in
          accordance with the relevant Chinese laws and regulations. After
          paying their taxes, the expatriate member of the Company shall be
          entitled to remit their money abroad.

     13.2 Pursuant to relevant China laws and regulations, the Company shall
          accumulate savings in three areas, namely for reserve funding,
          business development, and promotion of employee welfare. Each year the
          Board of Directors shall determine the annual rate of savings based
          upon Company performance, provided however that such rate of savings
          shall be at the minimum amount as mandatory required by law..

     13.3 The fiscal year of the Company shall be from January 1 to December 31
          of each year. All vouchers, receipts, statistical statements, reports
          and account books shall be written in both Chinese and English.

     13.4 Monthly, quarterly and annual financial reports shall be prepared in
          Chinese and in English and shall be submitted to the Board. Financial
          statements shall include amounts in both RMB and US dollars. The
          financial reports shall include Profit and loss statement, balance
          sheet and cash flow statement. The financial and accounting affairs of
          the Company shall be conducted in accordance with: (I) the ENTERPRISE
          ACCOUNTING SYSTEM OF THE PRC, (II) this Agreement, and (III) the GAAP.
          The Parties shall cause the Company to maintain its books and records
          and to prepare financial statements. Furthermore, the financial and
          accounting affairs of the Company shall be conducted in a manner
          sufficient to satisfy the financial and tax reporting requirements of
          each Party. To enable the Parties to satisfy such requirements, the
          Company shall provide to the Parties copies of all such documents as
          requested by the Parties and access to such materials.

                                       26
<PAGE>

     13.5 The Company shall engage an accountant registered in China, agreed by
          all parties and familiar with the GAAP to conduct its annual financial
          audit and examination and to provide a report, which would be
          submitted to the CEO and the Board. In the event that either Party
          considers it necessary, a foreign auditor may be engaged to conduct a
          separate annual financial audit on such Party's account.

     13.6 Within the first two-month period of every fiscal year, the CEO shall
          organize the preparation of a balance sheet and a profit and loss
          statement with respect to the preceding year as well as an earnings
          distribution proposal, and submit them to the Board for approval after
          being examined and signed by the auditor. Quarterly statements will be
          submitted up to 30 days after quarter end in the same manner.

     13.7 All disbursements shall be signed by the CEO or his authorized
          personnel. Any disbursements or the equivalent of over US$ 5,000 shall
          also require the signature of the Chairman of the Board.

14.  FOREIGN CURRENCY CONTROL, BANK ACCOUNTS AND OPERATING EXPENSES

     14.1 All of the Company's foreign currency operations shall be in
          compliance with China's foreign exchange laws and regulations and all
          other related regulations. The Company shall remit the profit due to
          TEFRON to a bank account designated by TEFRON in accordance with the
          foreign exchange laws and regulations.

     14.2 The Company shall open foreign exchange deposit accounts and RMB
          accounts as designated by the Board. All foreign exchange receipts of
          the Company (including any loans from foreign banks, export revenues
          etc.) shall be deposited in the Company's foreign exchange account.
          All on-going foreign exchange disbursements (including imports of raw
          material, transportation expenses, principal and interest repayments
          for foreign bank loans, overseas traveling expenses, after tax profits
          distributed to TEFRON, salaries of foreign staff etc.) shall be paid
          through such foreign exchange account.

     14.3 Based on its business needs and upon the approval of the local
          Administration of Foreign Exchange Control, the Company shall be
          entitled to open foreign exchange deposit accounts in banks outside of
          the PRC or in Hong Kong. The Company shall also be entitled to borrow
          foreign exchange funds from banks abroad or in Hong Kong, provided
          that the Company shall file such matters with the local Administration
          of Foreign Exchange Control.

                                       27
<PAGE>

     14.4 RMB shall generally be used in transactions between the Company and
          Chinese entitles, enterprises or individuals, unless otherwise
          approved by the local Administration of Foreign Exchange Control or
          were relevant government regulations permit the Company to use foreign
          exchange in such transactions. Payments for all imported products and
          salaries of foreign staff shall be paid in US dollars.

     14.5 The Parties agree that the Operating Expenses of the Company, as
          approved by the Board, shall be borne by the Company. The Parties
          agree to keep the Operating Expenses at the minimum required in order
          to enable the Company to fulfill its Objectives. It is also agreed
          that all costs and expenses associated with the establishment of the
          Company including, without limitation any costs and expenses relating
          to the transfer of the Machines to the Company shall be borne by the
          Company.

15.  DURATION

     The duration of the Company shall be 50 (fifty) years commencing on the
     Establishment Date (the: "TERM"). The Parties may agree in writing, at any
     time, to extend the Term.

16.  DISSOLUTION

     16.1 EVENTS OF DISSOLUTION

          The Company shall be dissolved in accordance with and upon expiration
          of the Term or any extension thereof. Without derogating from the
          aforesaid and unless the Parties mutually agreed otherwise in writing,
          this Agreement shall be terminated and the Company shall be dissolved
          prior to the expiration of the Term and any extension thereof in any
          of the following events ("EVENTS OF DISSOLUTION"):

          16.1.1 The Establishment Date does not occur within 6 (six) months
               after the date hereof, provided however that at least one Party
               wishes to stop the establishment process of the Company;

          16.1.2 A material breach of this Agreement has occurred and such
               breach is not cured by the breaching Party within 30 (thirty)
               days after receipt of written notice of the breach from the
               non-breaching Party, provided however that the non-breaching
               Party wishes to dissolve and liquidate the Company or when any of
               the Parties to this agreement is in default of its obligations as
               stipulated by the Agreement, making continued operation of the
               Company impossible.

                                       28
<PAGE>

          16.1.3 The Company becomes bankrupt, or is the subject of proceedings
               for liquidation or dissolution, or ceases to carry on business or
               becomes unable to pay its debts as they come due;

          16.1.4 Any Party becomes bankrupt, or is the subject of proceedings
               for liquidation or dissolution, or ceases to carry on business or
               becomes unable to pay its debts as they come due, provided
               however that the other Parties wish to dissolve and liquidate the
               Company;

          16.1.5 In the event that the failure in total or partial performance
               of this Agreement caused by any Event of Force Majeure continues
               for more than 90 (ninety) days, provided however that at least
               one Party (other than the non performing Party) wishes to
               dissolve and liquidate the Company;

          16.1.6 In the event that the Company's losses amount to 80% (eighty
               percent) or more of its Registered Capital, provided however
               that: (I) the Parties could not reach within 30 days a mutual
               agreement with respect to the additional financing of the Company
               and (II) at least one Party wishes to dissolve and liquidate the
               Company.

          Without derogating from the aforesaid, it is hereby agreed that the
          Company shall be dissolved pursuant to a demand of TEFRON provided
          however that any new law or regulation, or any new interpretation of
          existing law or regulation, is put into effect which (I) materially
          and adversely affects the profitability of the Company and/or TEFRON;
          (II) materially or severely limits or prevents the repatriation of any
          funds invested in the Company and all profits accrued thereon out of
          the PRC. Upon TEFRON's decision any of the aforementioned events shall
          be deemed as an Event of Dissolution.

     16.2 DISSOLUTION PROCEDURE

          16.2.1 Upon the occurrence of an Event of Dissolution and following
               the delivery of a written request from one Party to the others,
               the Parties shall act in good faith, take all the necessary
               actions, submit all the necessary filings and fully cooperate for
               the purpose of dissolving and liquidating the Company.

                                       29
<PAGE>

          16.2.2 The Chairman of the Board shall convene a Board meeting within
               30 (thirty) of the occurrence of any Event of Dissolution. The
               Directors of the Company shall attend the meeting in person or by
               proxy. After the approval of the dissolution of the Company by
               the Board and upon approval of the dissolution of the Company by
               the relevant Chinese authorities, the dissolution and liquidation
               of the Company shall be handled in accordance with Article 17
               hereof.

     16.3 ESCROW

          Promptly after the execution hereof and prior to making any
          contribution or payment hereunder, each Party and all of the Directors
          shall deposit a duly signed power of attorney with the Escrow Agent
          enabling the other Party (the: "BENEFICIARY") to carry out, on its
          behalf, all necessary actions and sign and submit all the necessary
          documents for the dissolution and liquidation of the Company (the:
          "POWER OF ATTORNEY"). The Escrow Agent shall deliver the Power of
          Attorney to a Beneficiary, provided that such Beneficiary has
          furnished the Escrow Agent with an arbitrational judgment, pursuant to
          Article 24 below, ruling that the Company shall be dissolved. For the
          avoidance of any doubt it is hereby clarified that the abovementioned
          does not derogate from any right granted to the Parties under any
          applicable law. For the avoidance of any doubt, in the event that for
          any reason whatsoever any new person or entity is appointed as
          Director of the Company, such Party appointing such new Director shall
          procure that the new Director appointed by it will sign a Power of
          Attorney in accordance with to this Article 16.3.

17.  LIQUIDATION AND TERMINATION

     17.1 LIQUIDATION

          Upon approval by the relevant Chinese Authority to dissolve the
          Company, the Parties shall cause the Directors appointed by them to
          adopt a resolution to liquidate the Company, formulate liquidation
          procedures in accordance with applicable PRC laws and regulations,
          establish a liquidation committee, and submit the Board's proposals
          regarding liquidation to the government authority in charge for
          approval or verification, if required.

     17.2 SALES OF ASSETS

          17.2.1 Upon liquidation of the Company by the Parties, all assets of
               the Company shall be liquidated and sold, at market prices (to
               the extent possible), first to either Party which wishes to
               purchase the assets. If two or more Parties wish to purchase the
               assets, they will be entitled to purchase the amount of the
               assets in proportion to their respective then actual Interests in
               the Company. If neither Party wishes to purchase the assets, the
               Company may sell the assets to one or more third parties. All
               such sales shall be conducted in a manner so as to maximize the
               return to the Company.

                                       30
<PAGE>

          17.2.2 All assets shall be used to settle outstanding liabilities and
               expenses, and any remaining balance shall be distributed to each
               Party in proportion to their then respective fully paid Interests
               in the Company.

          17.2.3 Notwithstanding anything to the contrary, it is agreed that
               TEFRON shall have a right of first refusal to repurchase the
               Machines, in whole or in part, by paying an amount equal the
               higher between: (I) the price offered by any third party(s),
               including the Parties hereto (other than TEFRON) or (II) the
               proportionate original value of such machines (calculated
               pursuant to Article 4.1.1 above) LESS depreciation thereof, as
               determined in the Company's books.

     17.3 TERMINATION

          After the liquidation of the Company is completed and the Company has
          been effectively dissolved, the Parties shall terminate this Agreement
          by a written document executed by their duly authorized
          representatives or their beneficiaries.

18.  INSURANCE

     In conformity with the applicable laws and regulations of the People's
     Republic of China, the Company shall obtain insurance coverage. The
     insurance coverage shall be provided by insurers within the People's
     Republic of China, provided however that the identity of such insurer as
     well as the types, value and duration of insurance shall be subject to the
     decision of the Board.

19.  AMENDMENTS

     Amendments or revisions to this Agreement must bear the signatures of all
     the Parties hereto and shall be submitted to the relevant examination
     authority. Such amendments and revisions shall become effective upon their
     approval.

                                       31
<PAGE>

20.  BREACH OF CONTRACT

     20.1 Failure by one of the Parties to perform in accordance with the
          stipulations of this Agreement or a serious breach of contract leading
          to the Company's inability to continue to operate or to fulfill its
          managerial objectives, or any of the above causes shall be recognized
          as unilaterally terminating the Agreement, provided however that a
          prior written notice of at least 30 days was given to the breaching
          Party.

     20.2 Termination of this Agreement following a breach shall be without
          prejudice to any rights or remedies accrued to either Party prior to
          such termination. The non-breaching Parties shall be entitled to seek
          recognition by the examination authority of termination of the
          Agreement, pursuant to the provisions of this Agreement.

21.  FORCE MAJEURE

     21.1 If any Party is prevented from performing any of its obligations under
          this Agreement due to an Event of Force Majeure, the time for
          performance of such obligations under this Agreement shall be extended
          by a period equal to the period of delay caused by such Event of Force
          Majeure. A Party claiming inability to perform due to an Event of
          Force Majeure shall take appropriate measures to minimize or remove
          the effects of the Event of Force Majeure and, within the shortest
          possible time, attempt to resume performance of the obligation(s)
          affected by the Event of Force Majeure.

     21.2 The affected Party shall immediately notify the other Party of the
          occurrence of any Event of Force Majeure and shall provide available
          evidence thereof. Should the delay caused by any Event of Force
          Majeure continue for more than 90 (ninety) days, either Party may
          initiate the termination of this Agreement and the dissolution of the
          Company pursuant to Article 17 hereof.

22.  APPLICABLE LAW

     22.1 The formation and the registration of the Company in China and the
          operation of the Company in China shall be governed by the relevant
          officially promulgated laws, regulations, measures and rules of the
          PRC.

     22.2 The formation, validity, interpretation, execution, amendment and
          termination of this Agreement shall be governed by the published laws
          and regulations of PRC.

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<PAGE>

23.  SETTLEMENT OF DISPUTES

     23.1 Any dispute arising from, out of or in connection with this Agreement
          shall be first settled through friendly consultations between the
          Parties. Such consultations shall begin immediately after one Party
          has delivered to the other Parties written request for such
          consultation. If within thirty (30) days following the date on which
          such notice is given, the dispute was not settled through
          consultations, the dispute shall be conducted in Singapore under the
          Arbitration Institute of Singapore International Arbitration Center
          (the: "ARBITRATION INSTITUTE") in accordance with its arbitration
          rules in effect on the date on which the application for arbitration
          is submitted.

     23.2 One arbitrator shall be elected in mutual consent of the Parties. In
          the event that the Parties do not reach mutual agreement with respect
          to the identity of the arbitrator, such arbitrator shall be chosen by
          the Arbitration Institute. The arbitration proceedings shall be
          conducted for no more than 30 (thirty) days.

     23.3 The arbitral award shall be final and binding upon the Parties, not
          subject to any appeal, and shall deal with the question of costs of
          arbitration and all matters related thereto.

     23.4 Judgment upon the enforcement of award rendered by the arbitration may
          be entered in any court having jurisdiction, or application may be
          made to such court for a judicial recognition of the award or any
          order of enforcement thereof.

     23.5 During the period when a dispute is being resolved, the Parties shall
          in all other respects continue their implementation of this Agreement.

24.  LANGUAGE

     This agreement shall be executed in three languages: English, Chinese and
     Japanese. All language versions shall be equally valid.

25.  REPRESENTATIONS AND WARRANTIES OF THE PARTIES

     25.1 REPRESENTATIONS AND WARRANTIES OF TEFRON

          TEFRON hereby represents and warrants towards LANGSHA and ITM as
          follows:

          25.1.1 it is a corporation duly formed and validly existing under the
               laws of the State of Israel and is in compliance with all
               conditions required to maintain its status as a company under
               these laws;

                                       33
<PAGE>

          25.1.2 it has delivered to LANGSHA and ITM, a copy of certificate of
               incorporation evidencing its due formation;

     25.2 REPRESENTATIONS AND WARRANTIES OF LANGSHA

          LANGSHA hereby represents and warrants towards TEFRON and ITM as
          follows:

          25.2.1 it is a company duly established and validly existing under the
               laws of the PRC, and is in compliance with all conditions
               required to maintain its status as a company under the laws of
               the PRC.

          25.2.2 it has submitted to TEFRON and ITM a true and complete copy of
               its current business license bearing a current annual inspection
               seal from the relevant governmental authority in the PRC;

          25.2.3 It is one of the leading companies in the Chinese Textile Cut &
               Sew industry having an outstanding experience and strong
               distribution network and brand name recognition in the PRC as
               well as good access to domestic information and local networks in
               the PRC. It well understands the Chinese business environment; it
               is capable of helping the Company in meeting the Annual
               Production Volume and the Annual Profitability Forecast achieving
               large sales in the PRC. It is well acquainted with the Chinese
               regulatory system and therefore is able to provide the Company
               with favorable local regulatory and financial support along with
               incentives and tax preferential treatment.

     25.3 REPRESENTATIONS AND WARRANTIES OF ITM

          ITM hereby represents and warrants towards LANGSHA and TEFRON as
          follows:

          25.3.1 It is a corporation duly formed and validly existing under the
               laws of Hong Kong and is in compliance with all conditions
               required to maintain its status as a company under these laws;

          25.3.2 It has delivered to LANGSHA and TEFRON, a copy of certificate
               of incorporation evidencing its due formation;

                                       34
<PAGE>

     25.4 MUTUAL REPRESENTATIONS AND WARRANTIES OF THE PARTIES

          Each Party hereby represents and warrants towards the other Parties as
          follows:

          25.4.1 it has full power and authority to enter into this Agreement,
               the transactions contemplated hereunder and to perform its
               obligations hereunder. It has taken all appropriate and necessary
               corporate actions to authorize its authorized representative to
               execute and deliver this Agreement on its behalf.

          25.4.2 It has obtained all consents, approvals and authorizations
               necessary for the valid execution and delivery of this Agreement.

          25.4.3 Its execution, delivery and performance of this Agreement will
               not violate any of its charter documents, any of its other
               agreement or obligation, or currently effective law, regulation
               or decree that may be applicable to any aspect of this Agreement.

          25.4.4 Upon the approval of this Agreement by the relevant PRC
               Examination and Approval authority, this Agreement shall
               constitute a legal, valid and binding obligation of such Party.

26.  MISCELLANEOUS

     26.1 SEVERABILITY

          If any one or more of the provisions contained in this Agreement or
          any document executed in connection herewith shall be invalid, illegal
          or unenforceable in any respect under any applicable law, (I) the
          validity, legality and enforceability of the remaining provisions
          contained herein or therein shall not in any way be affected or
          impaired and shall remain in full force and effect; and (II) the
          invalid, illegal or unenforceable provision shall be replaced by a
          provision that is valid, legal and enforceable and that comes closest
          to expressing the intention of such invalid, illegal or unenforceable
          provision.

     26.2 ENTIRE AGREEMENT

          This Agreement including all annexes and exhibits hereto constitutes
          the entire agreement among the Parties with respect to the subject
          matters set forth herein and supersedes all previous oral and written
          discussions, negotiations, notes, memoranda, documents, agreements,
          contracts, and communications of the Parties in respect of such
          subject matters.

                                       35
<PAGE>

     26.3 NO WAIVER

          Unless otherwise provided for, failure or delay on the part of any
          Party to exercise any right, power or privilege under this Agreement
          shall not operate as a waiver thereof, nor shall any single or partial
          exercise of any right, power or privilege preclude further exercise
          thereof or exercise of any other right, power or privilege. Any waiver
          by a Party at any time of a breach of any term or provision of this
          Agreement shall not be construed as a waiver by such Party of any
          subsequent breach, its rights under such provision, or any of its
          other rights hereunder.

     26.4 NOTICES

          Notices or other communications required to be given by any Party or
          the Company pursuant to this Agreement shall be in writing. Such
          notices or other communications may be delivered personally, sent by
          registered airmail (postage prepaid), by a recognized courier service
          or sent by facsimile transmission to the addresses of the other Party
          or Parties set forth below. The dates on which such notices shall be
          deemed to have been effectively given shall be determined as follows:

          26.4.1 Notices given by personal delivery shall be deemed effectively
               given on the date of personal delivery.

          26.4.2 Notices given by registered airmail (postage prepaid) shall be
               deemed effectively given on the fifteenth (15th) day after the
               date on which they were mailed (as indicated by the postmark).

          26.4.3 Notices given by courier shall be deemed effectively given on
               the third (3rd) day after they were sent by recognized courier
               service.

          26.4.4 Notices given by facsimile transmission shall be deemed
               effectively given on the first (1st) business day following the
               date of transmission.

               For the purpose of notices, the addresses of the Parties are as
               follows:

               IF TO TEFRON:       Mr. Yos Shiran
                                   TEFRON Ltd.
                                   Industrial Center
                                   Teradyon, Misgav,
                                   20179, Israel
                                   Tel:_____________
                                   Fax: _____________

                                       36
<PAGE>

               With a copy to:     Mr. Yaacov Yisraeli, Adv.
                                   Shiboleth, Yisraeli, Roberts, Zisman & Co.
                                   46 Montefiore Street
                                   Tel Aviv 65201, Israel
                                   Tel: + (972) 3-7103311
                                   Fax: + (972) 3-7103322

               IF TO LANGSHA:      Mr./Mrs. ____________
                                   LANGSHA Knitting Co., Ltd.
                                   308 Jinfa Road, Yiwu City,
                                   Zhejiang (economic development zone)
                                   People's Republic of China
                                   Tel:_____________
                                   Fax: _____________

               With a copy to:     _________________

                                   _________________

                                   _________________

                                   _________________

               If to ITM:          Mr./Mrs. ____________
                                   Itochu Textile Materials (Asia) Ltd.
                                   Suites 2304-6,
                                   The Gateway Tower 2,
                                   25-27, Canton Road
                                   Tsim Sha Tsui, Kowloon,
                                   Hong Kong, Japan
                                   Tel:_____________
                                   Fax: _____________

                                       37
<PAGE>

               With a copy to:     _________________

                                   _________________

                                   _________________

                                   _________________

          Any Party may at any time change its address by notice in writing
          delivered to the other Parties in accordance with the terms hereof.

     26.5 ASSIGNMENT

          The terms, conditions and obligations of this Agreement shall inure to
          the benefit of and be binding upon the Parties hereto and their
          respective permitted successors and assigns. Without the prior written
          consent of the other Party hereto, a Party may not assign its rights,
          duties or obligations hereunder or any part thereof to any other
          person or entity.

          Notwithstanding anything to the contrary, in light of the fact that
          the tax planning of the transaction contemplated hereunder has not
          been completed prior to the execution hereof, it is hereby agreed
          that, TEFRON shall be entitled, at its sole discretion to assign its
          rights hereunder, in whole or in part, to other legal entity(s) or
          individual(s), provided however that such assignees agreed to the
          terms, conditions, right and obligations hereunder.

     26.6 COUNTERPARTS

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

     26.7 ARTICLES OF ASSOCIATION

          The articles of Association of the Company shall reflect the
          provisions hereof and in any event of contradiction between this
          Agreement and the Articles of Association, the provisions of this
          Agreement shall prevail. The Articles of Association of the Company
          shall be submitted to the Yiwu City, Zhejiang Bureau of Foreign Trade
          & Economic Cooperation for approval.

                                       38
<PAGE>

 THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK - SIGNATURE PAGE FOLLOWS

                                       39
<PAGE>

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
date set forth in the first paragraph hereof.

TEFRON CO., LTD. (ISRAEL)

By: /s/ Yosef Shiran
--------------------
Name: YOSEF SHIRAN
Title: CHIEF EXECUTIVE OFFICER, TEFRON LTD.

/s/ Asaf Alperovitz
-------------------
Name: ASAF ALPEROVITZ
Title: CHIEF FINANCIAL OFFICER, TEFRON LTD.

LANGSHA KNITTING CO., LTD. ZHEJIANG (CHINA)

By /s/ Weng Rongdi
------------------
Name: WENG RONGDI
Title: CHAIRMAN OF THE BOARD

ITOCHU TEXTILE MATERIALS (ASIA) LTD

By /s/ Yoichi Ikezoe
--------------------
Name: YOICHI IKEZOE
Title: EXECUTIVE DIR

                                       40

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