Document:

<PAGE>

                                                                     EXHIBIT 4.4

        BANK LEUMI USA                              BANK HAPOALIM B.M.
       564 Fifth Avenue                        1177 Avenue of the Americas
      New York, NY 10021                         New York, New York 10036

                                                  As of January 12, 2006
Delta Galil USA Inc.
150 Meadowlands Parkway
Secaucus, New Jersey 07090

Ladies and Gentlemen:

         Reference is made to that certain Second Amended and Restated Credit
and Security Agreement (the "Credit Agreement") dated as of December 9, 2004
among Delta Galil USA Inc., a Delaware corporation having an office at 150
Meadowlands Parkway, Secaucus, New Jersey 07090 (the "Borrower"), Bank Leumi
USA, a New York banking corporation as agent for the Banks party thereto (the
"Agent"), having an office at 564 Fifth Avenue, New York, New York 10036, and
each of the Persons named in Schedule 1.1 annexed thereto (each a "Bank" and
collectively, the "Banks").

         Pursuant to the Credit Agreement, the Borrower executed a Term Note in
favor of the Agent, as agent for the Banks, in the principal sum of $70,000,000
and a Third Amended and Restated Revolving Note in favor of the Agent, as agent
for the banks, in the principal sum of $60,000,000. The Borrower has requested,
and the Banks have agreed, to amend the Credit Agreement to provide, among other
things (i) for an extension of the Maturity Date and (ii) payment of revised
letter of credit and acceptance fees as set forth herein.

         Accordingly, the parties hereby agree as follows:

         1. CAPITALIZED TERMS. Capitalized terms used in this letter agreement
(this "Amendment No. 1") and not otherwise defined herein, shall have the
meanings defined in the Credit Agreement.

         2. AMENDMENTS TO THE CREDIT AGREEMENT. Upon fulfillment of the
conditions specified in Paragraph 11 hereof (the "Effective Date"), the Credit
Agreement is hereby amended as follows:

            (a) The definitions of "Maturity Date," "Revolving LIBOR Loan
Rate," and "Term Loan Rate" contained in Section 1.1 of the Agreement are hereby
deleted in their entirety and amended to read as follows:

            ""MATURITY DATE" shall mean the earlier to occur of (i) May
15, 2006, and (ii) the date of acceleration pursuant to Section 10.1 of this
Agreement."

<PAGE>

            "REVOLVING LIBOR LOAN RATE" shall mean the LIBOR Rate plus one and
four-tenths of one (1.40%) percent.

            "TERM LOAN RATE" shall mean the LIBOR Rate plus one and sixty-five
hundredths (1.65%) percent."

            (b) The amount "$3,500,000" contained in Section 2.4.2 of the
Credit Agreement is hereby deleted in such instance and replaced by the amount
"$1,937,500"; and the amount "Three Million Five Hundred Thousand ($3,500,000)
Dollars" contained in the first paragraph of the form of Term Note annexed to
the Credit Agreement as EXHIBIT A is hereby deleted in such instance and
replaced by the amount "One Million Nine Hundred Thirty-Seven Thousand Five
Hundred ($1,937,500) Dollars."

            (c) Section 2.11.1 is hereby deleted in its entirety and replaced as
follows:

            "2.11.1 LETTERS OF CREDIT. Subject to the terms and conditions
hereof, the Agent, as a Bank, shall issue, or cause one or more of the other
Banks to issue, letters of credit ("Letters of Credit") on behalf of the
Borrower; provided, however, that the Agent will not issue or cause to be issued
any Letters of Credit to the extent that the face amount of such Letters of
Credit would then cause the Outstanding Revolving Loan Balance plus the
outstanding Letters of Credit and Acceptances to exceed the lesser of (a) the
Revolving Loan Commitment or (b) the Borrowing Base. In the event that the
Banks, in their sole discretion, at the request of the Borrower, agree to issue
a Letter of Credit having an expiry date after the Maturity Date, such Letters
of Credit shall be entitled to all the benefits and entitlements of this
Agreement and the other Loan Documents, including the Security Agreements. In
the event there is a draw against a Letter of Credit, which is not reimbursed as
provided in the applicable reimbursement agreement or otherwise, the amount of
the draw shall be deemed a Revolving Loan for the purposes of the Revolving
Facility Amount. All disbursements or payments related to Letters of Credit
shall bear interest at the applicable Prime Loan Rate; Letters of Credit that
have not been drawn upon shall not bear interest."

            (d) Section 2.11.4 is hereby deleted in its entirety and replaced as
follows:

            "Section 2.11.4 LETTER OF CREDIT FEES. The Borrower shall pay the
following fees to the Agent with respect to each Letter of Credit issued
hereunder: (i) in the case of a commercial Letter of Credit, (A) an issuance fee
equal to one-quarter of one percent (0.25%) of the face amount of each such
Letter of Credit, such fee to be payable on the date of issue thereof for the
account of the Banks in accordance with their Pro Rata Share; (B) a processing
fee equal to the greater of (a) $200, or (b) one-eighth of one percent (0.125%)
of the face amount of each such Letter of Credit, such fee to be payable on the
date of issue thereof for the account of the Issuing Bank, (C) on the last
Business Day of each fiscal quarter of the Borrower, an exposure fee equal to
one percent (1%) per annum (such fee to be calculated on the basis of a 360-day
year for the actual number of days elapsed) of the average face amount
outstanding during such quarter of all commercial Letters of Credit issued
hereunder, such fee to be for the account of the

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Banks in accordance with their Pro Rata Share, (D) on any draw under any such
Letter of Credit, a payment and negotiation fee equal to $300, such fee to be
payable on the making of a draw under such Letter of Credit for the account of
the Issuing Bank, (ii) in the case of a standby Letter of Credit, (A) an
issuance fee equal to the product of (1) the maximum face amount of such Letter
of Credit, TIMES (2) one and four tenths of one (1.40%) percent, times (3) the
period from the date of issuance of such Letter of Credit to its stated maturity
date divided by 360, such fee to be payable on the date of issue thereof for the
account of the Banks in accordance with their Pro Rata Share, and (B) on any
draw under any such Letter of Credit, a payment and negotiation fee equal to
$300, such fee to be payable on the making of a draw under such Letter of Credit
for the account of the Issuing Bank, and (iii) in the case of any amendment to a
standby Letter of Credit or a commercial Letter of Credit, an amendment fee
equal to the greater of (a) $200, or (b) one-eighth of one percent (0.125%) of
the face amount of such Letter of Credit, such fee to be payable on the
effective date of such amendment and retained by the Issuer for its own account,
and any and all reasonable fees and expenses as required by the Issuer in
connection with any such Letter of Credit, including, without limitation, in
connection with the opening, amendment or renewal of any such Letter of Credit
and any acceptances created thereunder, and shall reimburse the Agent for any
and all reasonable fees and expenses, if any, paid by the Agent or any Issuer.
All such fees and expenses shall be deemed earned in full on the date when the
same are due and payable hereunder and shall not be subject to rebate or
proration upon the termination of this Agreement for any reason. Any such fee or
expense in effect at the time of a particular transaction shall be the charge
for that transaction, notwithstanding any subsequent change in the Issuer's
prevailing fee or expense for that type of transaction. Following the occurrence
and during the continuance of an Event of Default, upon demand the Borrower will
cause cash to be deposited and maintained in an account with each Bank, as cash
collateral pursuant to this Agreement, in an amount equal to each Bank's Pro
Rata Share of the outstanding Letters of Credit plus two (2%) percent, and the
Borrower hereby irrevocably authorizes each Bank, in its discretion, on the
Borrower's behalf and in the Borrower's name, to open such an account and to
make and maintain deposits therein, and authorize the Agent to utilize the
proceeds of Accounts or other Collateral or any other funds of the Borrower
coming into the Agent's possession at any time to fund such accounts."

            (e) Section 2.12 is hereby deleted in its entirety and replaced as
follows:

      "SECTION 2.12 ACCEPTANCES. Subject to the terms and conditions of this
Agreement, upon the request of the Borrower, the Issuer will accept drafts
presented by the beneficiary of a commercial Letter of Credit, which drafts (i)
are being presented to the Agent in accordance with the terms of a commercial
Letter of Credit, and (ii) name the Issuer as drawee and the beneficiary as
payee and otherwise are in a form acceptable to the Issuer in its sole
discretion (each an "Acceptance" and collectively, "Acceptances"). In the event
that the Issuer, in its sole discretion, but with the consent of the Banks
(which consent shall may be withheld for any reason or no reason) and at the
request of the Borrower, agrees to issue an Acceptance having an expiry date
after the Maturity Date, such Acceptances shall be entitled to all the benefits
and entitlements of this Agreement and the other Loan Documents, including

                                       3

<PAGE>

the Security Agreements. The Borrower shall pay the Agent for the benefit of the
Banks in accordance with their Pro Rata Share a fee on each Acceptance at a rate
equal to one and four tenths of one (1.40%) percent of the full amount of such
Acceptance from the date the Acceptance is created to the date of its maturity,
such fee to be calculated on the basis of a 360-day year for the actual number
of days elapsed, and to be payable on the date the Acceptance is created. In
addition, the Borrower shall pay a fronting fee equal to the greater of (a)
$200, or (b) one-eighth of one percent (0.125%) of the face amount of such
Acceptance, such fee to be payable on the date of creation of such Acceptance
and any other reasonable costs or expenses of the Issuer."

            (f) Clause (i) of Section 3.1.9 of the Credit Agreement is amended
in its entirety to read as follows: "(i) an executed Unlimited Guaranty from
Delta Galil dated as of January 6, 2006, of all of the obligations of the
Borrowers to the Banks, which is governed by New York law."

            (g) Section 12.15 is hereby deleted in its entirety and replaced
                as follows:

      "SECTION 12.15 SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNITY.
All representations and warranties contained in this Agreement or any other Loan
Documents and the indemnification obligations of the Borrower pursuant to
Section 12.2 hereunder shall survive the execution and delivery of this
Agreement and the making and repayment of the Loans and the termination of this
Agreement."

      3. PREPAYMENT. Concurrently with the execution and delivery of this
Amendment No. 1, Borrower shall prepay a portion of the principal sum of the
Term Loan then outstanding in the amount equal to $25,000,000, such prepayment
to be applied pro rata to all installments due on the Term Note. Accordingly,
following the application of such prepayment, the amount due with respect to
each installment on the Term Note shall be $1,937,500 and the Term Note is
hereby deemed amended to read consistent with the amendments to the form of Term
Note annexed to the Credit Agreement as EXHIBIT A effectuated pursuant to this
Amendment No.1.

      4. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants as
follows (which representations and warranties shall survive the execution and
delivery of this Amendment No. 1):

            (a) The Borrower has taken all necessary action to authorize the
execution, delivery and performance of this Amendment No. 1.

            (b) This Amendment No. 1 has been duly executed and delivered by the
Borrower and the consent attached hereto has been duly executed and delivered by
each Guarantor. This Amendment No. 1 and the Credit Agreement (as amended by
this Amendment

                                       4

<PAGE>

No. 1) hereby constitute the legal, valid and binding obligation of the
Borrower, enforceable against it in accordance with their respective terms,
subject to applicable bankruptcy, reorganization, insolvency, moratorium and
similar laws affecting the enforcement of creditors' rights generally and by
general equity principles.

            (c) No consent or approval of any person, firm, corporation or
entity, and no consent, license, approval or authorization of any governmental
authority is or will be required in connection with the execution, delivery,
performance, validity or enforcement of this Amendment No. 1 other than any such
consent, approval, license or authorization which has been obtained and remains
in full force and effect or where the failure to obtain such consent, approval,
license or authorization which has been obtained and remains in full force and
effect.

            (d) After giving effect to this Amendment No. 1, the Borrower is in
compliance with all of the various covenants and agreements set forth in the
Credit Agreement and each of the other Loan Documents.

            (e) After giving effect to this Amendment No. 1, no event has
occurred and is continuing which constitutes a Default or an Event of Default.

            (f) All representations and warranties contained in the Credit
Agreement and each of the other Loan Documents are true and correct in all
material respects as of the date hereof, except to the extent that any
representation or warranty relates to a specified date, in which case such are
true and correct in all material respects as of the specific date to which such
representations and warranties relate.

      5. WAIVER. The Banks hereby waive any violation by the Borrower of the
provisions of Sections 8.18, 8.19 and 8.20 of the Credit Agreement solely for
the period ending December 31, 2005. This waiver is limited as written and shall
not be deemed (i) to be an amendment of or consent under or waiver of any other
term or condition of the Loan Documents or (ii) prejudice any right or rights
which the Banks now have or may have in the future, under or in connection with
the Loan Documents.

      6. CONTINUANCE. The Credit Agreement and the other Loan Documents
(including the Term Note) are, and shall continue to be, in full force and
effect and are hereby ratified and confirmed in all respects, except that after
giving effect to this Amendment No. 1, all references in the Credit Agreement to
"this Agreement," "hereto," "hereof," "hereunder" or words of like import
referring to the Credit Agreement shall mean the Credit Agreement as amended by
this Amendment No. 1.

      7. PAYMENT OF COSTS; AMENDMENT FEE. Concurrently with its execution and
delivery of this Amendment No. 1, the Borrower shall pay to the Bank all costs
and expenses (including attorneys' fees and disbursements) incurred by the Bank
in connection with the preparation, execution and delivery of this Amendment No.
1 and related documents, including, without

                                       5

<PAGE>

limitation an amendment fee in the principal sum of $30,000 (the "Amendment
Fee"). The Amendment Fee shall be for the account of the Banks in accordance
with their Pro Rata Share.

      8. COUNTERPARTS. This Amendment No. 1 may be executed in one or more
counterparts, each of which shall constitute an original, but all of which taken
together shall constitute one and the same instrument. Delivery of an executed
counterpart of a signature page to this Amendment No. 1 by facsimile shall be
effective as delivery of a manually executed signature page hereto.

      9. GUARANTY FROM DELTA GALIL. Concurrently with the execution and delivery
of this Amendment No. 1 by the Borrower, Delta Galil shall execute and deliver
to the Banks a Unlimited Guaranty in the form annexed to this Amendment No. 1 as
EXHIBIT A (the "Delta Galil New York Guaranty"). The Delta Galil New York
Guaranty shall replace in its entirety the guaranty referred to in clause (i) of
Section 3.1.9 of the Credit Agreement.

      10. DELIVERY OF DOCUMENTS. Within ninety (90) days from the Effective
Date, the Borrower shall deliver to the Agent for the benefit of the Banks all
documents and information required to be delivered under the Credit Agreement
then due or outstanding, including, without limitation, all documents and
information required to be delivered pursuant to Section 3.2 of the Credit
Agreement.

      11. CONDITIONS PRECEDENT. The obligation of the Banks to execute and
deliver this Amendment No. 1 is conditioned upon receipt by the Banks of (i)
this Amendment No. 1 executed by all of the parties hereto, (ii) the Consent
attached hereto executed by each Guarantor, (iii) the Delta Galil New York
Guaranty, (iv) prepayment of $25,000,000 of the amount outstanding under the
Term Loan, (v) payment of the Amendment Fee and (vi) payment of all outstanding
legal fees and disbursements of Warshaw Burstein Cohen Schlesinger & Kuh, LLP in
connection with the preparation of this Amendment No. 1.

      12. GOVERNING LAW/ENTIRE AGREEMENT. This Amendment No. 1 shall be
construed in accordance with and governed by the laws of the State of New York
(other than the conflicts of laws principles thereof). This Amendment No. 1
contains the entire agreement of the parties with respect to the subject matter
contained herein and may not be amended or modified except pursuant to a written
instrument executed by the party sought to be bound thereby.

                                       6

<PAGE>

         If the foregoing correctly sets forth our understanding and agreement,
kindly indicate your acceptance thereof by signing below.

                                         Very truly yours,

                                         BANK LEUMI USA

                                         By:  /s/ Michaela Klein
                                         -------------------------------------
                                         Name: Michaela Klein
                                         Title: Senior Vice President

                                         By: /s/ Yuval Talmy
                                         -------------------------------------
                                         Name: Yuval Talmy
                                         Title: Vice President

                                         BANK HAPOALIM, B.M.

                                         By: /s/ Boaz Dan
                                         -------------------------------------
                                         Name: Boaz Dan
                                         Title: Senior Vice President

                                         By: /s/ Maxine Levy
                                         -------------------------------------
                                         Name: Maxine Levy
                                         Title: Vice President
AGREED TO:

DELTA GALIL USA INC.

By: /s/ David Kostman
------------------------------------
Name: David Kostman
Title: Chief Executive Officer

By: /s/ Steven Lockcuff
------------------------------------
Name: Steven Lockcuff
Title: Vice President for Finance and Secretary

                                       7

<PAGE>

                                     CONSENT

Each of the undersigned hereby confirms that:

      It is fully informed as to the amendment, dated as of even date herewith
("Amendment No. 1") to the Second Amended and Restated Credit and Security
Agreement, dated as of December 9, 2004 (the "Credit Agreement"). Capitalized
terms used herein and not defined shall have the meanings defined in the Credit
Agreement.

      It has executed and delivered a Guarantee in favor of the Banks, wherein
and whereby, the undersigned, among other things, unconditionally guaranteed to
the Banks payment when due, whether by acceleration or otherwise of any and all
Obligations of the Borrower to the Banks, including interest and attorneys'
fees, costs and expenses of collection incurred by the Banks in enforcing any of
the Obligations.

      Notwithstanding the Amendment No. 1 and the effectiveness of the
agreements contained therein, the Guarantee of the undersigned is in full force
and effect, has not been terminated, rescinded, amended or modified, and the
undersigned has no defenses or offsets with respect to its obligations to the
Banks under its Guarantee. The provisions of this Consent relating to Delta
Galil Industries, Ltd. shall be deemed made after giving effect to Paragraph 9
of Amendment No. 1.

Dated as of:  January 6, 2006

AUBURN HOSIERY MILLS, INC.              BURLEN CORP.

By:_________________________________    By:_____________________________________
Steven Lockcuff, Treasurer and          Steven Lockcuff, Treasurer and Assistant
Secretary                               Secretary

DELTA GALIL INDUSTRIES LTD.

By:_________________________________
   Arnon Tiberg, Chief Executive
   Officer

<PAGE>

        BANK LEUMI USA                                  BANK HAPOALIM B.M.
       564 Fifth Avenue                            1177 Avenue of the Americas
      New York, NY 10021                             New York, New York 10036

                                                        As of May 9, 2006
Delta Galil USA Inc.
150 Meadowlands Parkway
Secaucus, New Jersey 07094

Ladies and Gentlemen:

      Reference is made to the Second Amended and Restated Credit and Security
Agreement (the "Credit Agreement"), dated as of December 9, 2004, among Delta
Galil USA Inc., a Delaware corporation having an office at 150 Meadowlands
Parkway, Secaucus, New Jersey 07094 (the "Borrower"), Bank Leumi USA, a New York
banking corporation as agent for the Banks party thereto (the "Agent"), having
an office at 564 Fifth Avenue, New York, New York 10036, and each of the Persons
named in Schedule 1.1 annexed thereto (each a "Bank" and collectively, the
"Banks"), as amended by Amendment No. 1 thereto, dated as of January 12, 2006.

      The Borrower has requested, and the Banks have agreed, to amend the Credit
Agreement to provide, among other things, for (i) an extension of the Maturity
Date and (ii) the amendment to certain financial covenants contained in the
Credit Agreement, all as set forth herein.

      Accordingly, the parties hereby agree as follows:

      3. CAPITALIZED TERMS. Capitalized terms used in this letter agreement
(this "Amendment No. 2") and not otherwise defined herein, shall have the
meanings defined in the Credit Agreement.

      4. AMENDMENTS TO THE CREDIT AGREEMENT. Upon fulfillment of the conditions
specified in Paragraph 9 hereof (the "Effective Date"), the Credit Agreement is
hereby amended as follows:

         (a) The definitions of "Loan Documents" and "Maturity Date"
contained in Section 1.1 of the Agreement are hereby deleted in their entirety
and amended to read as follows:

         ""LOAN DOCUMENTS" shall mean, this Agreement, the Revolving Note,
the Term Note, the Pledge Agreement, the Borrower Pledge Agreement, the Real
Estate Collateralization Documents, the Security Agreements, the Trademark
Security Agreements, the guarantees and any other agreements executed and
delivered by each Guarantor, and all other agreements,

                                       2

<PAGE>

instruments and documents, including, without limitation, security agreements,
loan agreements, notes, mortgages, deeds of trust, intercreditor agreements,
assignment of leases, pledges, powers of attorney, consents, assignments,
collateral assignments, letter agreements, contracts, notices, financing
statements, account opening documents, and all other writings, all of which must
be in form and substance satisfactory to the Agent, heretofore, now, or
hereafter executed by or on behalf of the Borrower or any Guarantor and
delivered to the Agent or any Bank pursuant to or in furtherance of this
Agreement, together with all agreements, instruments and documents referred to
therein or contemplated thereby and as now in effect or as at any time amended,
modified or changed.

         "MATURITY DATE" shall mean the earlier to occur of (i) January 31,
2007, and (ii) the date of acceleration pursuant to Section 10.1 of this
Agreement."

         (b) A new definition captioned "Borrower Pledge Agreement" is hereby
added to Section 1.1 of the Credit Agreement in its proper alphabetical order
and shall read as follows:

         ""BORROWER PLEDGE AGREEMENT" shall mean the Pledge and Assignment

Agreement substantially in the form of Exhibit K hereto, dated as of ________
__, 2006, from the Borrower to the Agent, as amended, modified or supplemented
from time to time."

         (c) The seventh sentence of Section 2.2 is hereby deleted in its
entirety and replaced as follows:

         "The Borrower may not give more than seven (7) Notices of Advance in
any one month."

         (d) The first and second sentences of Section 2.11.1 are hereby
deleted in their entirety and replaced as follows:

         "Subject to the terms and conditions hereof, the Agent, as a Bank,
shall issue, or cause one or more of the other Banks to issue, letters of credit
("Letters of Credit") on behalf of the Borrower; provided, however, that the
Agent will not issue or cause to be issued any Letters of Credit: (i) to the
extent that the face amount of such Letters of Credit would then cause the
Outstanding Revolving Loan Balance plus the outstanding Letters of Credit and
Acceptances to exceed the lesser of (a) the Revolving Loan Commitment or (b) the
Borrowing Base or (ii) which have an expiration date which is more than sixty
(60) days after the Maturity Date. At the request of the Borrower, the Agent,
with the consent of the Banks (which consent may be withheld for any reason or
no reason), may issue or cause to be issued a Letter of Credit having an expiry
date of greater than sixty (60) days after the Maturity Date. In the event a
Letter of Credit is issued having an expiry date after the Maturity Date, such
Letter of Credit shall be entitled to all the benefits and entitlements of this
Agreement and the other Loan Documents, including the Security Agreements."

                                       3

<PAGE>

         (e) The second sentence of Section 2.12 is hereby deleted in its
entirety and replaced as follows:

         "No Acceptance shall have a maturity date which is later than (i)
ninety (90) days after its creation or (ii) sixty (60) days after the Maturity
Date. At the request of the Borrower, the Agent, with the consent of the Banks
(which consent may be withheld for any reason or no reason), may create or cause
to be created an Acceptance having a maturity date of greater than sixty (60)
days after the Maturity Date. In the event that an Acceptance is created having
a maturity date after the Maturity Date, such Acceptance shall be entitled to
all the benefits and entitlements of this Agreement and the other Loan
Documents, including the Security Agreements."

         (f) The second sentence of Section 8.18 is hereby deleted in its
entirety and replaced as follows:

         "Compliance with this covenant shall be measured on a quarterly
basis for a rolling twelve (12) month period; provided, however, that for the
2006 calendar year compliance with this covenant shall be measured on a
quarterly basis for a rolling three (3) month period."

      Section 8.18 is hereby further amended by deleting the phrase "For the
twelve (12) month period ending March 31, 2006" and corresponding ratio "1.25 to
1.0".

      Section 8.18 is hereby further amended by deleting the ratios for the
following periods and replacing such ratios as follows:

<TABLE>
<CAPTION>
         "PERIOD                                                            RATIO

         <S>                                                                <C>
         For the three (3) month period ending June 30, 2006                1.0 to 1.0

         For the three (3) month period ending September 30, 2006           1.0 to 1.0

         For the three (3) month period ending December 31, 2006            1.0 to 1.0"
</TABLE>

         (g) Section 8.19 is hereby amended by deleting the ratios for the
following periods and replacing such ratios as follows:

<TABLE>
<CAPTION>
         "PERIOD                                                            RATIO
         <S>                                                                <C>
         For the twelve (12) month period ending September 30, 2006         0.28 to 1.0

         For the twelve (12) month period ending December 31, 2006          0.28 to 1.0"
</TABLE>

                                        4

<PAGE>

         (h) Section 8.20 is hereby amended by deleting the ratios for the
following periods and replacing such ratios as follows:

<TABLE>
<CAPTION>
         "PERIOD                                                            RATIO
         <S>                                                                <C>
         For the twelve (12) month period ending March 31, 2006             6.70 to 1.0

         For the twelve (12) month period ending June 30, 2006              5.70 to 1.0"
</TABLE>

         (i) A new Exhibit K is hereby added to the Credit Agreement in the form
attached to this Amendment No. 2 as Exhibit K.

      3. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants as
follows (which representations and warranties shall survive the execution and
delivery of this Amendment No. 2):

         (a) The Borrower has taken all necessary action to authorize the
execution, delivery and performance of this Amendment No. 2.

         (b) This Amendment No. 2 has been duly executed and delivered by the
Borrower and the consent attached hereto has been duly executed and delivered by
each Guarantor. This Amendment No. 2 and the Credit Agreement (as amended by
this Amendment No. 2) hereby constitute the legal, valid and binding obligation
of the Borrower, enforceable against it in accordance with their respective
terms, subject to applicable bankruptcy, reorganization, insolvency, moratorium
and similar laws affecting the enforcement of creditors' rights generally and by
general equity principles.

         (c) No consent or approval of any person, firm, corporation or
entity, and no consent, license, approval or authorization of any governmental
authority is or will be required in connection with the execution, delivery,
performance, validity or enforcement of this Amendment No. 2 other than any such
consent, approval, license or authorization which has been obtained and remains
in full force and effect or where the failure to obtain such consent, approval,
license or authorization would not have a Material Adverse Effect.

         (d) After giving effect to this Amendment No. 2, the Borrower is in
compliance with all of the various covenants and agreements set forth in the
Credit Agreement and each of the other Loan Documents.

         (e) After giving effect to this Amendment No. 2, no event has
occurred and is continuing which constitutes a Default or an Event of Default.

                                       5

<PAGE>

         (f) All representations and warranties contained in the Credit
Agreement and each of the other Loan Documents are true and correct in all
material respects as of the date hereof, except to the extent that any
representation or warranty relates to a specified date, in which case such are
true and correct in all material respects as of the specific date to which such
representations and warranties relate.

      4. DEPOSIT. Concurrently with its execution and delivery of this Amendment
No. 2, (i) the Borrower shall deposit with the Agent $4,000,000, which amount
shall be pledged to the Bank in accordance with the terms and conditions of the
Borrower Pledge Agreement, in the form attached hereto as Exhibit K, and (ii)
the Borrower shall execute and deliver the Borrower Pledge Agreement to the
Agent.

      5. CONTINUANCE. The Credit Agreement and the other Loan Documents
(including the Term Note) are, and shall continue to be, in full force and
effect and are hereby ratified and confirmed in all respects, except that after
giving effect to this Amendment No. 2, all references in the Credit Agreement to
"this Agreement," "hereto," "hereof," "hereunder" or words of like import
referring to the Credit Agreement shall mean the Credit Agreement as amended by
this Amendment No. 2.

      6. PAYMENT OF COSTS; AMENDMENT FEE. Concurrently with its execution and
delivery of this Amendment No. 2, the Borrower shall pay (i) to the Banks all
costs and expenses (including attorneys' fees and disbursements) incurred by the
Banks in connection with the preparation, execution and delivery of this
Amendment No. 2 and related documents, and (ii) for the account of the Banks in
accordance with their Pro Rata Share, an amendment fee in the sum of $60,000
(the "Amendment Fee").

      7. AMENDMENT TO SPRINGING GUARANTY FROM DELTA GALIL INDUSTRIES LTD.
Concurrently with the execution and delivery of this Amendment No. 2 by the
Borrower, Delta Galil Industries Ltd. ("Delta Galil") shall execute and deliver
to the Agents an amendment to the Springing Guaranty (the "Springing Guaranty"),
dated June 13, 2002, as amended by letter dated December 9, 2004, in the form
annexed to this Amendment No. 2 as EXHIBIT A (the "Guaranty Amendment").

      8. OPINION WITH RESPECT TO GUARANTIES. On the date hereof, the Banks shall
have received (i) a written opinion of Pryor Cashman Sherman & Flynn LLP,
special counsel to Delta Galil, in form and substance satisfactory to the Banks
and their counsel, relating to such matters as the Banks may reasonably request,
and (ii) an opinion from Israeli counsel substantially similar to the opinion
received by the Agent from I. Amihud Ben-Porath, Hamou & Co. dated December 9,
2004, with respect to said Springing Guaranty.

      9. CONDITIONS PRECEDENT. The obligation of the Banks to execute and
deliver this Amendment No. 2 is conditioned upon receipt by the Banks of (i)
this Amendment No. 2

                                       6

<PAGE>

executed by all of the parties hereto, (ii) the Consent attached hereto executed
by each Guarantor, (iii) the Guaranty Amendment, (iv) evidence satisfactory to
the Agent, in its sole discretion, that the Borrower has received a capital
contribution or loan from Delta Galil in the principal sum of $4,000,000, (v)
the Pledge Agreement in the form annexed hereto as Exhibit K and executed by the
Borrower, (vi) each of the opinions of counsel referenced in Paragraph 8 above,
(vii) payment of the Deposit, (viii) payment of the Amendment Fee, and (ix)
payment of all outstanding legal fees and disbursements of Warshaw Burstein
Cohen Schlesinger & Kuh, LLP in connection with the preparation of this
Amendment No. 2.

      10. COUNTERPARTS. This Amendment No. 2 may be executed in one or more
counterparts, each of which shall constitute an original, but all of which taken
together shall constitute one and the same instrument. Delivery of an executed
counterpart of a signature page to this Amendment No. 2 by facsimile shall be
effective as delivery of a manually executed signature page hereto.

      11. GOVERNING LAW/ENTIRE AGREEMENT. This Amendment No. 2 shall be
construed in accordance with and governed by the laws of the State of New York
(other than the conflicts of laws principles thereof). This Amendment No. 2
contains the entire agreement of the parties with respect to the subject matter
contained herein and may not be amended or modified except pursuant to a written
instrument executed by the party sought to be bound thereby.

      12. MODIFICATIONS. This Amendment No. 2 cannot be amended, terminated or
modified, except pursuant to a writing executed by all parties to this Amendment
No. 2.

                           [SIGNATURE PAGE TO FOLLOW]

                                       7

<PAGE>

         If the foregoing correctly sets forth our understanding and agreement,
kindly indicate your acceptance thereof by signing below.

                                         Very truly yours,

                                         BANK LEUMI USA

                                         By:  /s/ Michaela Klein
                                         -------------------------------------
                                         Name: Michaela Klein
                                         Title: Senior Vice President

                                         By: /s/ Yuval Talmy
                                         -------------------------------------
                                         Name: Yuval Talmy
                                         Title: First Vice President

                                         BANK HAPOALIM, B.M.

                                         By: /s/ Boaz Dan
                                         -------------------------------------
                                         Name: Boaz Dan
                                         Title: Senior Vice President

                                         By: /s/ Mickey Berger
                                         -------------------------------------
                                         Name: Mickey Berger
                                         Title: Vice President
AGREED TO:

DELTA GALIL USA INC.

By: /s/ David Kostman
------------------------------------
Name: David Kostman
Title: Chief Executive Officer

By: /s/ Steven Lockcuff
------------------------------------
Name: Steven Lockcuff
Title: Vice President for Finance and Secretary

<PAGE>

                                     CONSENT

Each of the undersigned hereby confirms that:

      It is fully informed as to the amendment, dated as of even date herewith
("Amendment No. 2") to the Second Amended and Restated Credit and Security
Agreement, dated as of December 9, 2004 (the "Credit Agreement"), as amended by
Amendment No. 1 thereto, dated as of January 12, 2006. Capitalized terms used
herein and not defined shall have the meanings defined in the Credit Agreement.

      Each is a Guarantor and has executed and delivered a guarantee in favor of
the Banks, wherein and whereby, the undersigned, among other things,
unconditionally guaranteed to the Banks payment when due, whether by
acceleration or otherwise of any and all Obligations of the Borrower to the
Banks, including interest and attorneys' fees, costs and expenses of collection
incurred by the Banks in enforcing any of the Obligations (individually a
"Guarantee" and collectively, the "Guarantees"). The Delta Galil Guarantees are
part of the Guarantees.

      Notwithstanding Amendment No. 2 and the effectiveness of the agreements
contained therein, each Guarantee is in full force and effect, has not been
terminated, rescinded, amended or modified, and the undersigned has no defenses
or offsets with respect to its obligations to the Banks under its Guarantee.

      Each Bank shall have the right to proceed under any or all of such
Guarantees at any time or from time to time.

Dated as of:  May 9, 2006

AUBURN HOSIERY MILLS, INC.               BURLEN CORP.

By:_________________________________     By:____________________________________
Name: Steven Lockcuff                     Name: Steven Lockcuff
Title: Treasurer and Secretary            Title: Vice President, Treasurer
                                          and Assistant Secretary

DELTA GALIL INDUSTRIES LTD.

By:____________________________________
Name:
Title:<PAGE>

                                                                    EXHIBIT 4.10

                           DELTA GALIL INDUSTRIES LTD.
                               2006 INCENTIVE PLAN

      1. DEFINITIONS. In this Plan, except where the context otherwise
indicates, the following definitions shall apply:

         1.1. "Affiliate" means a corporation, partnership, business trust,
limited liability company, or other form of business organization at least a
majority of the total combined voting power of all classes of stock or other
equity interests of which is owned by the Company, either directly or
indirectly, and any other entity designated by the Committee in which the
Company has a significant interest.

         1.2. "Agreement" means a written agreement or other document
evidencing an Award that shall be in such form as the Committee may specify. The
Committee in its discretion may, but need not, require a Participant to sign an
Agreement.

         1.3. "Award" means a grant of an Option, a SAR, Restricted Stock, a
Restricted Stock Unit, a Performance Award, or an Other Stock-Based Award.

         1.4. "Board" means the Board of Directors of the Company.

         1.5. "Code" means the Internal Revenue Code of 1986, as amended.

         1.6. "Committee" means the committee(s), subcommittee(s), or
person(s) the Board appoints to administer this Plan or to make or administer
specific Awards hereunder. If no appointment is in effect at any time,
"Committee" means the Board.

         1.7. "Common Stock" means the ordinary shares of the Company, par
value NIS 1 per share.

         1.8. "Company" means Delta Galil Industries Ltd. and any successor
thereto.

         1.9. "Date of Exercise" means the date on which the Company receives
notice of the exercise of an Option or SAR in accordance with the terms of
Section 8.

         1.10. "Date of Grant" means the date on which an Award is granted
under this Plan.

         1.11. "Eligible Person" means any person who is an Employee or hired
to be an Employee of the Company or an Affiliate. Directors and Ten-Percent
Stockholders are not Eligible Persons.

<PAGE>

         1.12. "Employee" means any person who the Committee determines to be
an employee of the Company or an Affiliate.

         1.13. "Exercise Price" means the price per Share at which an Option
may be exercised.

         1.14. "Fair Market Value" means, unless otherwise determined by the
Committee, the last sale price of a share of Common Stock on the Tel Aviv Stock
Exchange ("TASE") as of the relevant date (or if the TASE is not open on such
date or the Common Stock is not traded on that day, the most recent prior date
that the TASE was open for trading and the Common Stock was traded) or, if the
Common Stock is not traded on the TASE, an amount determined by the Committee
pursuant to a reasonable method adopted in good faith for such purpose;
provided, however, that in the case of an Option or a SAR, in all events shall
Fair Market Value be determined pursuant to a method that complies with the
applicable guidance issued by the U.S. Treasury Department and the U.S. Internal
Revenue Service pursuant to Section 409A of the Code.

         1.15. "Incentive Stock Option" means an Option granted under this
Plan that the Committee designates as an incentive stock option under Section
422 of the Code.

         1.16. "Nonqualified Stock Option" means an Option granted under this
Plan that is not an Incentive Stock Option.

         1.17. "Option" means an option to purchase Shares granted under this
Plan in accordance with the terms of Section 6.

         1.18. "Option Period" means the period during which an Option may be
exercised.

         1.19. "Other Stock-Based Award" has the meaning provided in Section
13.

         1.20. "Participant" means an Eligible Person who has been granted an
Award hereunder.

         1.21. "Performance Award" means a performance award granted under
this Plan in accordance with the terms of Section 11.

         1.22. "Performance Goals" means performance goals that the Board or
the Committee establishes, which may be based on satisfactory internal or
external audits, achievement of balance sheet or income statement objectives,
cash flow, customer satisfaction metrics and achievement of customer
satisfaction goals, dividend payments, earnings (including before or after
taxes, interest, depreciation, and amortization), earnings growth, earnings per
share; economic value added, expenses, improvement of financial ratings,
internal rate of return, market share, net asset value, net income, net
operating gross margin, net operating profit after taxes ("NOPAT"), net sales
growth,

                                       2

<PAGE>

NOPAT growth, operating income, operating margin, comparisons to the performance
of other companies, pro forma income, regulatory compliance, return measures
(including return on assets, designated assets, capital, committed capital, net
capital employed, equity, sales, or stockholder equity, and return versus the
Company's cost of capital), revenues, sales, stock price (including growth
measures and total stockholder return), comparison to stock market indices,
implementation or completion of one or more projects or transactions, working
capital, or any other objective goals that the Committee establishes.
Performance Goals may be absolute in their terms or measured against or in
relationship to other companies comparably, similarly or otherwise situated.
Performance Goals may be particular to an Eligible Person or the department,
branch, Affiliate, or division in which the Eligible Person works, or may be
based on the performance of the Company, one or more Affiliates, or the Company
and one or more Affiliates, and may cover such period as the Board or the
Committee may specify.

         1.23. "Plan" means this Delta Galil Industries Ltd. 2006 Incentive
Plan, as amended from time to time.

         1.24. "Related Option" means an Option in connection with which, or
by amendment to which, a SAR is granted.

         1.25. "Related SAR" means a SAR granted in connection with, or by
amendment to, an Option.

         1.26. "Restricted Stock" means Shares granted under this Plan
pursuant to the provisions of Section 9.

         1.27. "Restricted Stock Units" means an award providing for the
contingent grant of Shares (or the cash equivalent thereof) pursuant to the
provisions of Section 10.

         1.28. "SAR" means a stock appreciation right granted under this Plan
in accordance with the terms of Section 7.

         1.29. "Section 422 Employee" means an Employee who is employed by
the Company or a "parent corporation" or "subsidiary corporation" (both as
defined in Sections 424(e) and (f) of the Code) with respect to the Company,
including "parent corporations" and "subsidiary corporations" that become such
after adoption of the Plan.

         1.30. "Share" means a share of Common Stock.

         1.31. "Ten-Percent Stockholder" means a Section 422 Employee who
(applying the rules of Section 424(d) of the Code) owns stock possessing more
than ten percent of the total combined voting power of all classes of stock of
the Company or a "parent corporation" or "subsidiary corporation" (as defined in
Sections 424(e) and (f), respectively, of the Code) with respect to the Company.

                                       3

<PAGE>

Unless the context expressly requires the contrary, references in this Plan to
(a) the term "Section" refers to the sections of this Plan, and (b) the word
"including" means "including (without limitation)."

      2. PURPOSE. This Plan is intended to assist the Company and its Affiliates
in attracting and retaining Eligible Persons of outstanding ability and to
promote the identification of their interests with those of the stockholders of
the Company and its Affiliates.

      3. ADMINISTRATION. The Board shall have plenary authority, in its
discretion, to grant Awards to Eligible Persons, subject to the provisions of
the Plan and to determine the Eligible Persons to whom it grants Awards. The
Board and the Committee shall each have authority and discretion, subject to the
provisions of the Plan, to administer the Plan and to determine the terms (which
terms need not be identical) of all Awards, including the Exercise Price of
Options, the time or times at which Awards are granted or vest, the number of
Shares covered by Awards, whether an Option shall be an Incentive Stock Option
or a Nonqualified Stock Option, any exceptions to nontransferability, and any
Performance Goals applicable to Awards. In making these determinations, the
Board and the Committee may take into account the nature of the services
rendered or to be rendered by Award recipients, their present and potential
contributions to the success of the Company and its Affiliates, and such other
factors as the Committee in its discretion shall deem relevant. Subject to the
provisions of this Plan, the Board and the Committee shall each have plenary
authority to interpret this Plan and Agreements, prescribe, amend and rescind
rules and regulations relating to them, and make all other determinations deemed
necessary or advisable for the administration of this Plan and Awards granted
hereunder. The determinations of the Board or the Committee on the matters
referred to in this Section 3 shall be binding and final. The Committee may
delegate its authority under this Section 3 and the terms of this Plan to such
extent it deems desirable and is consistent with the requirements of applicable
law.

      4. ELIGIBILITY. Awards may be granted only to Eligible Persons, provided
that (a) Incentive Stock Options may only be granted to Eligible Persons who are
Section 422 Employees; and (b) Options and SARs may only be granted to persons
with respect to whom Shares constitute stock of the service recipient (within
the meaning of Section 409A of the Code) determined by applying a 50% (or 20%,
in the presence of legitimate business criteria determined in accordance with
Section 409A of the Code) ownership test for purposes of applying Sections
414(b) and (c) of the Code.

      5. STOCK SUBJECT TO PLAN.

         5.1. Subject to adjustment as provided in Section 14, the maximum
number of Shares that may be issued under this Plan is 300,000 Shares. Shares
issued under this Plan may, in whole or in part, be authorized but unissued
Shares or Shares that shall have been, or may be, reacquired by the Company in
the open market, in private transactions, or otherwise.

                                       4

<PAGE>

         5.2. Subject to adjustment as provided in Section 14, the maximum
number of Shares with respect to which an Employee may be granted Awards under
this Plan during any calendar year is 150,000 Shares. The maximum number of
Shares with respect to which an Employee has been granted Awards shall be
determined in accordance with Section 162(m) of the Code.

         5.3. If shares of Restricted Stock are forfeited, or if an Award
otherwise terminates or expires (other than termination by virtue of the
exercise of a Related SAR or Related Option, as the case may be), without all or
a portion of the Shares covered by the Award being issued, the forfeited or
unissued Shares under the Award shall again be available for the grant of Awards
under this Plan; provided, however, that in the case of Shares that are withheld
to pay withholding taxes with respect to an Award, no such withheld Shares shall
again be available for the grant of Awards hereunder. Upon exercise of a SAR
(regardless of whether the SAR is settled in cash or Shares), the number of
Shares with respect to which the SAR is exercised shall be charged against the
number of Shares issuable under this Plan, and shall not again become available
for the grant of Awards.

      6. OPTIONS.

         6.1. Options granted under this Plan shall be either Incentive Stock
Options or Nonqualified Stock Options, as designated by the Board or the
Committee. Each Option granted under this Plan shall be identified either as a
Nonqualified Stock Option or an Incentive Stock Option, and each Option shall be
evidenced by an Agreement that specifies the terms and conditions of the Option.
Options shall be subject to the terms and conditions set forth in this Section 6
and such other terms and conditions not inconsistent with this Plan as the Board
or the Committee may specify. The Board or the Committee may, in its discretion,
condition the grant or vesting of an Option upon the achievement of one or more
specified Performance Goals.

         6.2. The Exercise Price of an Option granted under this Plan shall
not be less than 100% of the Fair Market Value of a Share on the Date of Grant.

         6.3. The Board or the Committee shall determine the Option Period
for an Option, which shall be specifically set forth in the Agreement, provided
that an Option shall not be exercisable after ten years from its Date of Grant.

      7. SARS.

         7.1. A SAR granted under this Plan shall be evidenced by an
Agreement specifying the terms and conditions of the Award.

         7.2. A SAR may be granted under this Plan (a) in connection with,
and at the same time as, the grant of an Option under this Plan, (b) by
amendment of an outstanding Option granted under this Plan, or (c) independently
of any Option granted under this Plan. A SAR described in clause (a) or (b) of
the preceding sentence is a

                                       5

<PAGE>

Related SAR. A Related SAR may, in the Committee's discretion, apply to all or
any portion of the Shares subject to the Related Option.

         7.3. A SAR may be exercised in whole or in part as provided in the
applicable Agreement. Subject to the terms of the Agreement, a SAR entitles a
Participant to receive, upon exercise and without payment to the Company (but
subject to required tax withholding), either cash or that number of Shares
(equal to the highest whole number of Shares), or a combination thereof, in an
amount or having an aggregate Fair Market Value as of the Date of Exercise not
to exceed the number of Shares subject to the portion of the SAR exercised
multiplied by an amount equal to the excess of the Fair Market Value on the Date
of Exercise of the SAR over either (a) the Fair Market Value on the Date of
Grant of the SAR if it is not a Related SAR (or such amount in excess of the
Fair Market Value as the Committee may specify), or (b) the Exercise Price as
provided in the Related Option if the SAR is a Related SAR.

         7.4. The Board or the Committee shall determine the period during
which a SAR may be exercised, which period shall be specifically set forth in
the Agreement; provided that a SAR will expire no later than the earlier of (a)
ten years from the Date of Grant, or (b) in the case of a Related SAR, the
expiration of the Related Option. A Related SAR that is related to an Incentive
Stock Option may be exercised only when and to the extent the Related Option is
exercisable.

         7.5. The exercise, in whole or in part, of a Related SAR shall cause
a reduction in the number of Shares subject to the Related Option equal to the
number of Shares with respect to which the Related SAR is exercised. The
exercise, in whole or in part, of a Related Option shall cause a reduction in
the number of Shares subject to the Related SAR equal to the number of Shares
with respect to which the Related Option is exercised.

      8. EXERCISE OF OPTIONS AND SARS.

         8.1. Subject to the terms of the applicable Agreement, an Option or
SAR may be exercised, in whole or in part, by delivering to the Company a notice
of the exercise, in such form as the Board or the Committee may prescribe,
accompanied, in the case of an Option, by full payment for the Shares with
respect to which the Option is exercised, or to the extent provided in the
applicable Agreement, irrevocable instructions to a broker to deliver promptly
to the Company cash equal to the exercise price of the Option.

         8.2. To the extent provided in the applicable Agreement or otherwise
authorized by the Board or the Committee, payment may be made by delivery
(including constructive delivery) of unencumbered Shares (provided that if the
Shares were acquired pursuant to an option or other award granted hereunder or
under any other compensation plan maintained by the Company or any Affiliate,
the Shares shall have been held for such period, if any, as the Committee may
specify) valued at Fair Market Value on the Date of Exercise.

                                       6

<PAGE>

      9. RESTRICTED STOCK AWARDS. Each grant of Restricted Stock under this Plan
shall be subject to an Agreement specifying the terms and conditions of the
Award. Restricted Stock granted under this Plan shall consist of Shares that are
restricted as to transfer, subject to forfeiture, and subject to such other
terms and conditions as the Committee may specify. The terms and conditions may
provide, in the discretion of the Committee, for the lapse of transfer
restrictions or forfeiture provisions to be contingent upon the achievement of
one or more specified Performance Goals.

      10. RESTRICTED STOCK UNIT AWARDS. Each grant of Restricted Stock Units
under this Plan shall be evidenced by an Agreement that (a) provides for the
issuance of Shares to a Participant at such time(s) as the Board or the
Committee may specify, and (b) contains such other terms and conditions as the
Board or the Committee may specify, including terms that condition the issuance
of Shares upon the achievement of one or more specified Performance Goals.

      11. PERFORMANCE AWARDS. Each Performance Award granted under this Plan
shall (a) provide for the payment of cash or issuance of Shares contingent upon
the attainment of one or more specified Performance Goals over such period as
the Committee may specify, and (b) be subject to such other terms and conditions
as the Committee may specify. For purposes of Section 5.2, a Performance Award
shall be deemed to cover a number of Shares equal to the maximum number of
Shares that may be issued upon payment of the Award if the terms of the Award
provide for payment in the form of Shares. The maximum cash amount payable to
any Employee pursuant to all Performance Awards granted to an Employee during a
calendar year shall not exceed $1 million.

      12. DIVIDENDS AND DIVIDEND EQUIVALENTS. The terms of an Award may, subject
to such terms and conditions as the Board or the Committee may specify, provide
a Participant with the right to receive dividend payments or dividend equivalent
payments with respect to Shares covered by the Award, which payments may be
either made currently or credited to an account established for the Participant,
and may be settled in cash or Shares, as determined by the Committee. The
Participant shall not be entitled to receive dividend payments or dividend
equivalent payments with respect to Options before their exercise.

      13. OTHER STOCK-BASED AWARDS. The Board or the Committee may in its
discretion grant stock-based awards of a type other than those otherwise
provided for in this Plan, including the issuance or offer for sale of
unrestricted Shares ("Other Stock-Based Awards"). Other Stock-Based Awards shall
cover such number of Shares and have such terms and conditions as the Board or
the Committee shall determine, including terms that condition the payment or
vesting the Other Stock-Based Award upon the achievement of one or more
Performance Goals.

      14. CAPITAL EVENTS AND ADJUSTMENTS.

                                       7

<PAGE>

          14.1. In event of any change in the outstanding Common Stock by
reason of a stock dividend, stock split, reverse stock split, spin-off,
recapitalization, reclassification, combination or exchange of shares, merger,
consolidation, liquidation or the like, the Board or the Committee may, as it
deems equitable in its discretion, provide for a substitution for or adjustment
in: (a) the number and class of securities subject to outstanding Awards or the
type of consideration to be received upon the exercise or vesting of outstanding
Awards, (b) the Exercise Price of Options and the base price upon which payments
under SARs that are not Related SARs are determined, (c) the aggregate number
and class of securities for which Awards thereafter may be granted under this
Plan, and (d) the maximum number of securities with respect to which an Employee
may be granted Awards during any calendar year.

          14.2. Any provision of this Plan or any Agreement to the contrary
notwithstanding, in the event of a merger or consolidation to which the Company
is a party, the Board or the Committee shall take such actions, if any, as it
deems necessary or appropriate to prevent the enlargement or diminishment of
Participants' rights under this Plan and Awards granted hereunder, and may, in
its discretion, cause any Award granted hereunder to be canceled in
consideration of a cash payment equal to the fair value of the canceled Award,
as determined by the Committee in its discretion. Unless the Board or the
Committee determines otherwise, the fair value of an Option shall be deemed to
be equal to the product of (a) the number of shares the Option covers (and has
not previously been exercised) and (b) the excess, if any, of the Fair Market
Value of a Share as of the date of cancellation over the Exercise Price of the
Option.

      15. TERMINATION OR AMENDMENT. The Board may amend or terminate this Plan
in any respect at any time; provided, however, that after the stockholders of
the Company have approved this Plan, the Board shall not amend or terminate this
Plan without approval of (a) the Company's stockholders to the extent applicable
law or regulations or the requirements of the principal exchange or interdealer
quotation system on which the Common Stock is listed or quoted, if any, requires
stockholder approval of the amendment, and (b) each affected Participant if the
amendment or termination would adversely affect the Participant's rights or
obligations under any Award granted prior to the date of the amendment or
termination.

      16. MODIFICATION, SUBSTITUTION OF AWARDS.

          16.1. Subject to the terms and conditions of this Plan, the Board or
the Committee may modify the terms of any outstanding Awards; provided that (a)
no modification of an Award shall, without the consent of the Participant, alter
or impair any of the Participant's rights or obligations under the Award, and
(b) subject to Section 14, in no event may (i) an Option be modified to reduce
the Exercise Price of the Option, (ii) a SAR be modified to reduce the
applicable Exercise Price (in the case of a Related SAR) or base price (in the
case of other SARs), or (iii) an Option or a SAR be cancelled or surrendered in
consideration for the grant of a new Option or SAR with a lower Exercise Price
or base price.

                                       8

<PAGE>

          16.2. Anything contained herein to the contrary notwithstanding,
Awards may, in the Board's or the Committee's discretion, be granted under this
Plan in substitution for stock options and other awards covering capital stock
of another corporation which is merged into, consolidated with, or all or a
substantial portion of the property or stock of which is acquired by, the
Company or one of its Affiliates. The terms and conditions of the substitute
Awards so granted may vary from the terms and conditions set forth in this Plan
to such extent as the Board or the Committee may deem appropriate to conform, in
whole or part, to the provisions of the awards in substitution for which they
are granted. Substitute Awards granted hereunder shall not be counted toward the
Share limit imposed by Section 5.2, except to the extent the Committee
determines that counting such Awards is required for Awards granted hereunder to
be eligible to qualify as "performance-based compensation" within the meaning of
Section 162(m) of the Code.

      17. NON-U.S. EMPLOYEES. Without amendment of this Plan, the Board may
grant Awards to Eligible Persons who are subject to the laws of foreign
countries or jurisdictions on such terms and conditions different from those
specified in this Plan as may in the judgment of the Board be necessary or
desirable to foster and promote achievement of the purposes of this Plan. The
Board or the Committee may make such modifications, amendments, procedures,
sub-plans and the like as may be necessary or advisable to comply with
provisions of laws of other countries or jurisdictions in which the Company or
any of its Affiliates operates or has employees.

      18. STOCKHOLDER APPROVAL. This Plan, and any amendments hereto requiring
stockholder approval pursuant to Section 15, are subject to approval by vote of
the stockholders of the Company at the next annual or special meeting of
stockholders following adoption by the Board. Notwithstanding the preceding
sentence, in the event that stockholder approval of this Plan is not obtained,
this Plan and all grants of Awards hereunder shall remain valid, except that any
Option granted hereunder that would require such stockholder approval to qualify
as an Incentive Stock Option under the Code shall be treated as a Nonqualified
Stock Option.

      19. WITHHOLDING. The Company's obligation to issue or deliver Shares or
pay any amount pursuant to the terms of any Award granted hereunder shall be
subject to satisfaction of applicable federal, state, local and foreign tax
withholding requirements. To the extent provided in the applicable Agreement,
and in accordance with such rules as the Board or the Committee may prescribe, a
Participant may satisfy any withholding tax requirements by one or any
combination of the following means: tendering a cash payment; authorizing the
Company to withhold Shares otherwise issuable to the Participant; or delivering
to the Company already-owned and unencumbered Shares.

      20. TERM OF PLAN. Unless the Board terminates this Plan pursuant to
Section 15 on an earlier date, this Plan shall terminate on the date that is ten
years after the earlier of the date that the Board adopts this Plan or the
Company's stockholders approve this Plan, and no Awards may be granted after
such date. The termination of this Plan shall not affect the validity of any
Award outstanding on the date of termination.

                                       9

<PAGE>

      21. GENERAL PROVISIONS.

          21.1. The establishment of this Plan shall not confer upon any
Eligible Person any legal or equitable right against the Company, any Affiliate
or the Committee, except as expressly provided in this Plan. Participation in
this Plan shall not give an Eligible Person any right to be retained in the
service of the Company or any Affiliate.

          21.2. Neither the adoption of this Plan nor its submission to the
Company's stockholders shall be taken to impose any limitations on the powers of
the Company or its Affiliates to issue, grant, or assume options, warrants,
rights, or restricted stock, or other awards otherwise than under this Plan, or
to adopt other stock option, restricted stock, or other plans, or to impose any
requirement of stockholder approval upon the same.

          21.3. The interests of any Eligible Person under this Plan or Awards
granted hereunder are not subject to the claims of creditors and may not, in any
way, be transferred, assigned, alienated or encumbered, except to the extent
provided in an Agreement.

          21.4. This Plan shall be governed, construed and administered in
accordance with the laws of the State of New York without giving effect to the
conflict of laws principles.

          21.5. The Board or the Committee may require each person acquiring
Shares pursuant to Awards granted hereunder to represent to and agree with the
Company in writing that the person is acquiring the Shares without a view to
distribution thereof. The certificates for the Shares may include any legend
which the Board or the Committee deems appropriate to reflect any restrictions
on transfer. All certificates for Shares issued pursuant to this Plan shall be
subject to such stock transfer orders and other restrictions as the Board or the
Committee may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which the Common Stock is then listed or interdealer quotation system upon which
the Common Stock is then quoted, and any applicable federal or state securities
laws. The Board or the Committee may place a legend or legends on certificates
for Shares to make appropriate reference to the restrictions.

          21.6. The Company shall not be required to issue any certificate or
certificates for Shares with respect to Awards granted under this Plan, or
record any person as a holder of record of Shares, without obtaining, to the
complete satisfaction of the Board or the Committee, the approval of all
regulatory bodies the Board or the Committee deems necessary, and without
complying to the Board's or Committee's complete satisfaction, with all rules
and regulations, under federal, state or local law the Committee deems
applicable.

          21.7. To the extent that this Plan provides for issuance of stock
certificates to reflect the issuance of Shares, the issuance may be effected on

                                       10

<PAGE>

a noncertificated basis, to the extent not prohibited by applicable law or the
rules of any stock exchange or automated dealer quotation system on which the
Shares are traded. No fractional Shares shall be issued or delivered pursuant to
this Plan or any Award. The Board or the Committee shall determine whether cash,
other Awards, or other property shall be issued or paid in lieu of any
fractional Shares or whether any fractional Shares or any rights thereto shall
be forfeited or otherwise eliminated.

          21.8. Notwithstanding any other provision of this Plan to the
contrary, to the extent any Award (or a modification of an Award) under this
Plan results in the deferral of compensation (for purposes of Section 409A of
the Code), the terms and conditions of the Award shall comply with Section 409A
of the Code.

          21.9. The issuance of any Shares under this Plan is subject to the
prior approval of the TASE for the listing of such Shares thereon.

                                       11

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