Document:

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                                                                     Exhibit 4.2

                              EMPLOYMENT AGREEMENT
                              --------------------

        THIS AGREEMENT (the "Agreement") is made as of August 5, 2002 by and
        between Tefron Ltd. (the "Company") and Mr. Sigi Rabinowicz, EC Passport
        number 248932 (the "Employee") (collectively, the "Parties").

                               W I T N E S S E T H
                               -------------------

        WHEREAS, the Parties desire to establish the terms of employment of the
        Employee as the Company's President, effective as of August 5th, 2002
        (the "Effective Date") on such term and conditions set forth in this
        Agreement;

        NOW THEREFORE, in consideration of the respective agreements of the
        parties contained in this Agreement, the parties agree as follows:

        1.   RECITALS

        The recitals and the Exhibits to this Agreement constitute an integral
        part hereof.

        2.   EMPLOYMENT

        2.1    ENGAGEMENT. This Agreement shall rule the terms of employment of
               the Employee as the Company's President for a period of three
               (3) years commencing on the Effective Date (the "term of this
               Agreement"), unless previously terminated pursuant to section 8
               below. Employee will perform the duties, undertakes the
               responsibilities and will exercise the authority customarily
               performed, undertaken and exercised by persons situated in a
               similar capacity, as determined by the Board of Directors of the
               Company and/or the Chairman of the Board of Directors.

        2.2    FULL EFFORTS. Excluding periods of vacation and sick leave to
               which the Employee is entitled, the Employee agrees to devote
               total attention and full time to the business and affairs of the
               Company as required to discharge the responsibilities assigned to
               him under this Agreement. Accordingly, during the term of his
               employment, the Employee will not engage in any other employment
               or business activities for himself or any other person, without
               the prior written consent of the Board of Directors of the
               Company.

        2.3    MANAGEMENT DUTIES. The Employee's duties are in the nature of
               management duties that demand a special level of honesty,
               loyalty and fiduciary duty and responsibility and accordingly,
               the Law of Work Hours and Rest - 1951 will not apply to this
               Agreement. He will (i) notify the Chairman of the Board of
               Directors of the Company, promptly of and will immediately cease
               any activity/matter which may create a conflict of interest
               between him and the Company and (ii) report to the Chairman of
               the Board of Directors of the Company, immediately any
               information that reaches him, which may be of assistance or
               advantageous to the Company, within

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        the Company's business. Notwithstanding anything to the contrary
        contained herein, the provisions of this sub-paragraphs 2.2 and 2.3
        shall not apply to Saturdays and religious holidays.

2.4     Notwithstanding anything of the forgoing, it is agreed that the
        Employee's position in Macpell Industries Ltd. shall not be considered
        as a breach of this Section 2 or any other section of this Agreement.

        3.   BASE SALARY

        In consideration for the performance of his duties hereunder, the
        Company on or before the ninth (9) day of the month, will pay the
        Employee, monthly in arrears (in respect to the previous month salary),
        a monthly base salary of $US20,000 (twenty thousands) (gross) ("Base
        Salary"). The Base salary shall be paid in N.I.S as calculated based on
        the rate of exchange of the N.I.S and the $US last published by the Bank
        of Israel in the month for which the salary is paid.

        4.   EMPLOYEE BENEFITS

        The Company will give or cause to be given the following employee
        benefits ("Employee Benefits"):

        4.1     SICK LEAVE. The Employee will be entitled to fully paid sick
                leave pursuant to the Sick Pay Law - 1976.

        4.2     VACATION. The Employee will be entitled to annual vacation of 23
                working days at full pay. For the purposes of this Agreement
                "working day" means any day that the employees of the Company
                customarily work. Vacation days may be accumulated in amounts up
                to and including 90 vacation days. At the option of the
                Employee, vacation days may be converted into cash payments in
                an amount equal to the proportionate part of the Base Salary and
                related social benefits for such days.

        4.3     MANAGER'S INSURANCE (BITUACH MENAHALIM). The Company will
                contribute, for the benefit of the Employee, an amount equal to
                13.33% (8.33% to a severance plan + 5% to a pre-tax savings
                plan) of the Employee's monthly Base Salary to an insurance
                company of the Employee's choice, as premium for such plans. In
                addition, the Company will deduct and transfer to such insurance
                company from each of the Employee's monthly Base Salary payment
                an amount equal to 5% of such payment (to a pre-tax savings
                plan), as the Employee's contribution to such plan. Upon the
                Employee's ceasing to be employed by the Company, the right to
                receive the benefits of the plans purchased with the foregoing
                premiums will be automatically assigned to the Employee.

                The above mentioned contributions to manager's insurance for
                severance pay coverage shall apply for all purposes instead of
                the severance pay, in accordance with Section 14 of the
                Severance Pay Law (1963), and the Employee will not be entitled
                to any additional payment from the Company in this regard. The
                parties shall request the Labor Ministry approval for the
                foregoing under the above mentioned Section 14 of the Severance
                Pay Law (1963).

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        4.4     DISABILITY INSURANCE. The Company will contribute, for the
                benefit of the Employee, an amount equal to 2.5% of the
                Employee's monthly Salary to an insurance company of the
                Employee's choice, as premium for disability insurance.

        4.5     EDUCATIONAL FUND (KEREN HISHTALMUT). The Company will
                contribute, for the benefit of the Employee, an amount equal to
                7.5% of the Employee's monthly Base Salary to an educational
                fund of the Employee's choice. In addition, the Company will
                deduct and transfer to such educational fund from each of the
                Employee's monthly Base Salary payment an amount equal to 2.5%
                of such payment, as the Employee's contribution to such fund.

        4.6     RECUPERATION PAYMENTS (D'MEI HAVRA'AH). The Employee will be
                entitled to recuperation payments as required by law.

        5.   VEHICLE

        5.1     The Company will grant or make available to the Employee, for
                the purposes of the performance of his position and for his
                private use, an appropriate vehicle, in accordance with the
                Company's policy for its senior personnel.

        5.2     The Employee undertakes to take care of the vehicle made
                available to him and to service it to the Company's
                satisfaction. The Company will promptly reimburse the Employee
                for any and all expenses reasonably related to using and
                maintaining the vehicle, including the cost of repairs,
                maintenance, registration, insurance, gasoline and parking,
                provided that the Employee produces written receipts for such
                expenses. The Company shall bear the tax resulting from said
                benefit and reimbursement.

        6.   EXPENSES

        The Company will promptly reimburse the Employee for any and all
        reasonable direct expenses incurred by him on behalf of the Company
        and/or in connection with the performance of his duties, provided that
        he produces written receipts for such expenses, and that the
        reimbursement of said expenses shall be in accordance with the Company's
        policy for its management personnel. Without derogating from the
        generality of the above, the Company shall reimburse the Employee, once
        a month, for his home telephone bills, but the Employee shall bear the
        tax resulting from said reimbursement.

        The Company will grant or make available to the Employee, for the
        purposes of the performance of his position and for his private use, a
        cellular telephone. The Company will promptly reimburse the Employee for
        any and all expenses reasonably related to using and maintaining the
        phone.

        7.   BONUS

        Once a year, the audit committee (the "Committee") of the Board of
        Directors will determine the amount to be paid as a bonus for the
        Employee (the "Yearly Bonus"). The bonus will be no higher than 2.5% of
        the Company's Net Profit, as defined hereunder, and no lower than 1.5%
        of such Net Profit. In any case that the Committee shall determine that
        the bonus should be higher than 1.5% of the Net Profit, its decision
        will be subject to approvals of both the

                                       3
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        Board of Directors and the General Meeting of the Shareholders of the
        Company, unless such approvals will no longer be required under
        applicable law. By way of clarification but not by way of limitation, to
        the extent a bonus is paid it will not be taken into account for the
        purposes of calculating the payment of Employee Benefits and severance
        benefits.

        For the purpose of this section, "Net Profit" means the outcome of the
        following calculation:

        Net Profit = P * (14,500,000 / N).

        P = the Company's net profit as determined by the Company's yearly
        approved audited reports, after deducting tax, and without taking into
        consideration special profits or losses (except special profits which
        resulted from the Employee's actions, which will be taken into
        consideration), or profits or losses which are not derived from the
        ordinary operation of the Company.

        N = the Company's issued stock (in NIS par value) at the end of the year
        for which the bonus is paid, plus the Option Shares (in NIS par value)
        of all Options which are under the Company's approved stock Option plans
        at the end of the said year (whether issued at that time, or not).

        The yearly bonus will be paid for each calendar year in which the
        Employee worked as the Company's President according to this Agreement
        (the first bonus payment will be paid during the year 2003 for the year
        beginning in 1.1.2002). In case of a year in which the Employee will
        work only part of the calendar year, he will be entitled to a
        proportional partial bonus.

        The yearly bonus will be paid no later than March 31st of each year,
        unless the approval of the shareholders of the Company is required in
        which event such bonus shall be paid no later than 30 days after the
        receipt of such shareholders approval (the "Payment Date"). However,
        during each year of this agreement, the Chief Executive Officer of the
        Company may authorize the payment of up to three (3) quarterly
        installments on account of said yearly bonus, based on the reviewed
        quarterly financial statements of the Company for each quarter of such
        year and in amounts of no more than 1.5% of the relevant periodic Net
        Profit of the Company. No later than the Payment Date of each year, the
        Company will calculate the accurate yearly bonus based on the audited
        yearly financial statements of the Company, and will pay the Employee
        the balance between such yearly bonus and the amounts pre-paid to the
        Employee during each of the said year's quarters. In case that the
        yearly bonus will be lower than the amounts pre-paid to the Employee
        during that year on account of the bonus, the Employee shall immediately
        and no later than 30 days from the Payment Date, re-pay the Company the
        said balance, linked to the higher between the US Dollar or the Israeli
        Consumer Index plus yearly interest of 4%.

        The Company shall have the right to set off, at it's descretion, any
        debt due to the Company from the employee in connection with this
        section 7, from any amount of any kind what so ever due to the employee
        from the Company.

        8.   TERMINATION

        The Employee's employment with the Company may be terminated under any
        of the following conditions:

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        8.1     DISABILITY. The Company may terminate the Employee's employment
                in the event that he becomes disabled. For purposes of this
                section 8, "disabled" and/or "disability" means any physical
                and/or mental condition which impairs the Employee's ability to
                perform his duties for a period of at least 6 months.

        8.2     FOR CAUSE. The Employee's employment with the Company will
                terminate upon the Company's 30 days prior written notice, in
                any and/or all of the following cases ("For Cause"):

                (i)     a fundamental breach by the Employee of this Agreement;
                        and

                (ii)    a breach by the Employee of his fiduciary or trust
                        duties towards the Company; and

                (iii)   the conviction of the Employee in respect of an offense
                        involving ignominy and/or a felony which effects the
                        management's capability; and

                (iv)    ownership of an interest in a business in direct
                        competition with the Company;

        8.3     WITHOUT CAUSE. The Employee's employment with the Company will
                terminate upon the Company's or the Employee's 90 days prior
                written notice. Each of the Parties may give such notice upon
                its sole discretion.

                Notwithstanding the above, if the Company terminates this
                Agreement according to this sub-section, the Employee will be
                entitled to an additional 180 days notice (a total of 270 days
                notice). The Employee will be entitled to the Base Salary
                (according to Section 3) and to all other benefits according to
                Sections 4, 5, 7 and 11 during the said notice period.

        8.4     COMPANY PROPERTY. Upon expiration or termination (or the date
                indicated in the Notice in the case of termination Without
                Cause) of the Employee's Employment, the Employee will transfer
                his position to his replacement in an orderly manner and will
                return to the Company all the documents, professional
                literature, vehicle, equipment and/or other property belonging
                to the Company.

        9.   CONFIDENTIALITY

        9.1     INFORMATION. The Employee recognizes and acknowledges that the
                business information, technical information, methods, data,
                developments, designs, inventions, improvements, trade secrets
                and works authorship, which the Company owns, plans, develops
                and/or produces and/or any other information obtained/received
                by him within the scope of his work and/or in connection with
                the Company and/or its business are confidential and the
                property of the Company ("Information"). The term "Information",
                as used in this Agreement, will not include information which is
                within the public domain, provided that the source of
                Information to the public domain is not the Employee or someone
                else who owns a confidentiality duty to the Company, and will
                not include information brought to the Company by the Employee.

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        9.2     NON-DISCLOSURE. Except as directed by the Company, and in the
                ordinary course of the Company's business, the Employee will
                not, other than for the sole benefit of the Company, disclose,
                disseminate, transfer and/or use the Information.

        9.3     OWNERSHIP OF CREATIONS. The Employee undertakes to maintain
                absolute confidentiality in respect of all information about any
                discoveries, designs, developments, inventions, improvements
                and/or ideas ("Creations") made or acquired by him while
                engaged/affiliated with the Company, which are within the
                Company's business, and which came to the Employee's awareness
                as a result of his employment with the Company. The Employee
                further recognizes and acknowledges that any and all Creations
                made and/or acquired by him while engaged/affiliated with the
                Company, whether or not made and/or acquired by him (i) during
                work hours (ii) at the premises of the Company (iii) with the
                assistance of information/material provided to him by the
                Company and/or (iv) at the request of the Company, are and will
                be the exclusive property of the Company and the Employee will
                have no right thereto. Upon request, the Employee will, at the
                request and expenses of the Company, execute any and all
                instruments required to vest complete title and ownership to the
                Creations in (or to clarify that complete title and ownership
                belongs to) the Company and/or necessary to legal protect the
                Creations in Israel and abroad. The Employee will perform all
                such actions without receiving any additional compensation
                therefor.

        9.4     DURATION/SURVIVABILITY. All of the undertakings and obligations
                of the Employee, set forth in this section 9, will commence on
                the date the Employee was first engaged by/became affiliated
                with the Company, will continue throughout his engagement
                by/affiliation with the Company, will survive the termination of
                this Agreement and his employment with the Company, and except
                as prohibited or limited by law, will be valid without
                limitation in time. In the event the duration of such
                undertakings and obligations is prohibited or limited by law,
                such undertakings and obligations will remain in effect
                throughout his engagement by the Company, and for two (2) years
                thereafter.

        10.   NON-COMPETITION

                Throughout the entire term of this Agreement, and for a period
                of two (2) years from the date of termination or expiry of this
                Agreement ("Non-Compete Period"), the Employee undertakes not to
                compete and/or place himself in a position of having an interest
                in and/or being engaged by/within a person which competes with
                the Company's business. Without prejudice to the generality of
                the foregoing, the Employee undertakes that during the
                Non-Compete Period he will not work, engage or advise, whether
                as a salaried employee and/or as a self-employed person, for
                remuneration or otherwise, in any subject and engagement if such
                constitutes a competition with the Company.

        11.   OPTIONS

                The Company shall provide to the Employee with a Share Option
                Plan (the "Plan"), pursuant to which the Employee will receive
                options (the "Options") for the purchase of 291,512 Ordinary
                Shares of the Company, according to the Option Agreement
                attached herein.

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        12.   GENERAL

        12.1    NOTICE. All notice or other communications provided for by this
                Agreement, will be given in writing, either by personal
                delivery, registered mail (registered air mail if sent
                internationally), postage prepaid, overnight courier service
                (which provides a receipt evidencing delivery), or by facsimile
                transmission to the person at their last known address or number
                (or as otherwise designated by the person in writing). All
                notices or communications given by courier service will be
                deemed delivered on the third (3rd) business day after the
                sending thereof; those given by personal delivery or by
                facsimile transmission will be deemed delivered on the next
                business day following transmission or delivery (the facsimile
                transmission receipt will act as prima facie proof of delivery);
                those given by mail will be deemed delivered on the seventh
                (7th) business day after posting.

        12.2    REMEDIES CUMULATIVE. Each right, powers, and remedy provided for
                under this Agreement or now or hereafter existing at law, in
                equity, by statute or otherwise, will be cumulative, and the
                exercise (whether single or partial), delay, or forbearance in
                exercising by any party of one or more of such rights, powers
                and remedies will not act as a waiver or preclude the
                simultaneous or later exercise by such party of any or all of
                such rights, powers or remedies.

        12.3    CONSTRUCTION. Except as specifically indicated, the section
                numbers and captions appearing in this Agreement are inserted
                only as a matter of convenience and are not in any way intended
                to define, limit, construe or describe the scope or intent of
                such sections or in any way affect the construction of the
                Agreement. Words in the singular will be read and construed as
                though in either gender and/or the plural and vice versa, where
                the context so requires. The term "person", as used in this
                Agreement, will be interpreted broadly to include, without
                limitation, any individual, corporation, company, partnership,
                joint venture, and/or entity.

        12.4    SEVERABILITY. If any provision this Agreement, or application
                thereof to any person or circumstances, will for any reason or
                to any extent, be invalid or unenforceable, such invalidity or
                unenforceability will not in any manner affect or render invalid
                or unenforceable the remainder of this Agreement and the
                application of that provision to other persons or circumstances
                will not be affected, but rather will be enforced to the extent
                permitted by law. In the event of the invalidity or
                unenforceability of any provision of this Agreement or the
                application thereof to any person or circumstances, the parties
                will, at the request of any of the parties, negotiate in good
                faith to agree on changes or amendments to this Agreement which
                are required to effectuate the intent and purpose of this
                Agreement in the light of the invalidity or unenforceability.

        12.5    FURTHER ASSURANCES. Each party will cooperate, take such further
                reasonable action and execute and deliver such further documents
                as may be reasonably requested by any of the parties in order to
                effectuate the intent and purposes of this Agreement and the
                parties.

        12.6    SUCCESSORS AND ASSIGNS.

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                (a) The Company will be allowed to sell, assign, transfer and
                otherwise assign its rights and obligations under the Agreement
                to any entity in which it holds more than fifty-one percent
                (51%) of the control of the company as determined by
                shareholder's voting rights or representation on the decision
                making body of the entity.

                (b) As this Agreement is a personal engagement agreement, the
                Employee may not sell, assign, transfer or otherwise convey the
                rights or obligations under the Agreement

        12.7    ENTIRE AGREEMENT. This Agreement contains the complete statement
                of all of the agreements, understandings, representations and
                arrangements between the parties with respect to the subject
                matter hereof ("Prior Agreements"), and to the extent such Prior
                Agreements exist, such Prior Agreements are merged herein and
                will be considered superseded by this Agreement. Nothing in the
                aforesaid shall derogate from the Employee's rights for amounts
                of money already accrued for his benefit under social rights
                provisions of the said Prior Agreements refering to employment
                periods prior to the Effective Date. No provision of this
                Agreement may be modified, waived or discharged unless done so
                in writing and signed by both parties.

        12.8    GOVERNING LAW. This Agreement and all and the rights and
                obligations of the parties related to this Agreement will be
                governed by and construed in accordance with the laws of the
                State of Israel.

                      AS WITNESS THE HANDS OF THE PARTIES:

             /s/                                        /s/
------------------------------------        ------------------------------------
           Tefron Ltd.                                Sigi Rabinowicz

                                       8<PAGE>

                                                                     EXHIBIT 4.3

                  CONSULTING AND MANAGEMENT SERVICES AGREEMENT
                  --------------------------------------------

This Consulting and Management Services Agreement (this "AGREEMENT") is made as
of August 5, 2002, by and between Tefron Ltd. ("TEFRON") having its registered
offices in 28 Chida Street Bnei-Brak, Israel, New York Delight Ltd. (the
"MANAGEMENT COMPANY") having its registered offices in 14 Shenkar St. Hertzelia
Pituach 46725, Israel (number with Registarar of Companies: 51 - 295156 - 7) and
Mr. Arie Wolfson ("MR. WOLFSON") from 9 Bruria St. Bnei Brak, Israel
(collectively the "PARTIES"),

WHEREAS         Tefron is interested in receiving from the Management Company
                Consulting and Management Services to be provided solely through
                Mr. Wolfson who, through a wholly owned company, wholly owns the
                Management Company and also serves as its director, all as
                detailed in this Agreement; and

WHEREAS         The Management Company and Mr. Wolfson are interested in
                providing the Consulting and Management Services to Tefron, as
                detailed in this Agreement; and

WHEREAS         The Parties have agreed to settle their rights and obligations
                in accordance with the terms and conditions of this Agreement.

NOW, THEREFORE, In consideration of the foregoing and of the promises,
agreements, representations, warranties, and covenants herein contained, the
Parties hereby agree as follows:

1.   DEFINITIONS

For the purpose of this Agreement, the term "Consulting and Management Services"
shall have the following meaning:

All services, duties, tasks and responsibilities that are usually exercised by
an operative Chairman of the Board of Directors of a public industrial company
with a scope of business similar to the one of Tefron, and as shall be required
by Tefron and determined from time to time by its Board of Directors. Without
derogating from the above, the Consulting and Management Services shall include,
inter alia, the following:

A.   Participating, advising and managing the strategic and periodic business
     plans of Tefron.
B.   Managerial, financial, marketing and strategic counselling to Tefron.
C.   Providing such Consulting and Management Services in connection with
     Tefron's activities in Israel and abroad, as required by Tefron.
D.   Providing such Consulting and Management Services to Tefron's subsidiaries
     or affiliates, as required by Tefron.

2.   REPRESENTATIONS AND WARRANTIES OF THE MANAGEMENT COMPANY AND OF MR. WOLFSON

     The Management Company and Mr. Wolfson hereby represent and warrant,
jointly and severally, as follows:

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2.1  The Management Company and Mr. Wolfson have the ability, expertise,
     experience and means to supply the Consulting and Management Services and
     they are not prohibited in any way from abiding to all of their commitments
     and obligations under this Agreement.

2.2  The Management Company is a private company and Mr. Wolfson (through a
     wholly owned company) is its sole shareholder and also serves as its
     director.

3.   PROVIDING THE CONSULTING AND MANAGEMENT SERVICES

3.1  The Management Company shall provide the Consulting and Management Services
     to Tefron only through Mr. Wolfson personally.

3.2  The Management Company and Mr. Wolfson undertake to devote as much time as
     shall be required for the adequate fulfillment of the duties included in
     the Consulting and Management Services, and as shall requested by Tefron
     from time to time.

3.3  The Management Company and Mr. Wolfson undertake to grant the Consulting
     and Management Services and perform their duties herein skillfully, in a
     responsible, faithful, competent and diligent manner, and to use the
     knowledge, experience and means at their disposal for the benefit of Tefron
     and to cooperate with Tefron.

3.4  The Management Company and Mr. Wolfson shall act in accordance with the
     policies and resolutions of the Board of Directors of Tefron as shall be
     determined from time to time, with regard to the manner they fulfil their
     functions.

3.5  Subject to the positions and activities listed on SCHEDULE 3.5 attached
     hereto, already disclosed to Tefron Ltd. and its Board of Directors, the
     Management Company and Mr. Wolfson undertake that during the entire
     duration of the Agreement, they shall refrain from working or engaging in
     any other manner in any other employment, function, business or occupation,
     which in any manner may constitute a conflict of interests with their
     position under this Agreement, either directly or indirectly and whether
     for consideration or otherwise, unless they fully disclose their new
     conflicting interest to the Board of Directors of Tefron at the first
     possible time and shall act according to the instructions of the Board of
     Directors and subject to any relevant rules of law.

3.6  Other than the consideration specified in section 4 hereunder, and fees
     paid by Tefron to Mr. Wolfson as chairman of it Board of Directors, the
     Management Company and Mr. Wolfson undertake not to accept any payment or
     other benefit from any third party, including Tefron and its subsidiaries,
     in any direct or indirect connection with their position in Tefron and/or
     in respect thereof. Should the Management Company or Mr Wolfson fail to
     abide by the forgoing undertaking, any payment or benefit any of them may
     receive shall be the sole and exclusive property of Tefron.

3.7  Subject to the foregoing, the Management Company and Mr. Wolfson shall be
     entitled to engage in their own affairs and businesses, provided that
     during the term of this Agreement, the Management Company's and Mr.
     Wolfson's engaging in any other business shall not detrimentally affect the
     affairs and business of Tefron, and further provided that they will, at all
     times, give full priority to the needs of Tefron and will fully comply with
     all the terms and conditions of this Agreement. Tefron is aware that the
     Management Company and Mr. Wolfson have other additional business and that
     they will be likely from time to time devote their time to these business
     affairs, subject to the condition that such other involvement shall in no
     way adversely affect the performance of their functions on behalf of Tefron
     and under this Agreement.

3.8  Notwithstanding anything of the forgoing, it is agreed that Mr. Wolfson's
     position in Macpell Industries Ltd (and its subsidiaries) ("MACPELL") shall
     not be considered as a breach of any of the sub-sections of this Section 3.

                                     - 2 -
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4.   CONSIDERATION AND SCALE OF SERVICES

4.1  In consideration for the Consulting and Management Services to be provided
     according to this Agreement and to all other obligations of the Management
     Company and of Mr. Wolfson, Tefron shall pay the Management Company
     US$15,000 (fifteen thousand US dollars) (the "Compensation") per month plus
     41% cost (equivalent to the cost Tefron would have paid for a similar
     senior management wage), plus VAT as applicable by law (the
     "Consideration"). Subject to Section 4.3 herein, this Consideration shall
     constitute the sole consideration to which the Management Company or Mr.
     Wolfson are entitled in return for the fulfillment of their obligations
     under this Agreement.

4.2  The Consideration for each month shall be paid at the beginning of the
     following month, and no later than the 10th day of such following month,
     but in any event only after the Management Company had issued Tefron an
     appropriate tax invoice. Tefron shall withhold from the Consideration any
     amounts which it is obligated to withhold under any tax or other applicable
     law.

4.3  Tefron will promptly reimburse the Management Company for any and all
     reasonable vehicle expenses and out-of-pocket expenses incurred by it
     directly and exclusively on behalf of Tefron (including, inter alia,
     telephone and business travel expenses), provided that it produces written
     receipts for such expenses, and that the reimbursement of said expenses
     shall be in accordance with Tefron's policy for its management personnel.

5.   RELATIONSHIP BETWEEN THE PARTIES

5.1  It is agreed upon and declared that the Management Company and Mr. Wolfson
     are providing the Consulting and Management Services as an independent
     contractor, and there shall not be any employer employee relations between
     Tefron and the Management Company or anyone on its behalf including Mr.
     Wolfson and / or anyone else on behalf of the Management Company.

5.2  It is further clarified that Mr. Wolfson chose the legal framework through
     which he would provide his services to Tefron, and chose not to be Tefron's
     employee but its independent contractor. Therefore, the Consideration Mr.
     Wolfson is entitled to (through his Management Company) is equal to the
     total consideration and benefits he would have been entitled to if he were
     to be Tefron's employee. It is therefore agreed that the Consideration paid
     to the Management Company has been calculated under the assumption that
     there shall not be employer employee relations between the Parties and / or
     anyone on their behalf, and that the Compensation embodies all the benefits
     that Mr. Wolfson would have been entitled to had he been Tefron's employee.

5.3  The Management Company shall allocate and pay (on its account) to Mr.
     Wolfson any and all allocations and payments required according to any
     applicable law with regard to the Consulting and Management Services to be
     provided according to this Agreement, including social benefits, severance
     pay etc., and the Management Company shall arrange all needed and customary
     insurance coverage with regard to the those services.

5.4  In the event that a competent court shall determine that there were
     employer employee relations between Tefron (or anyone on its behalf) and
     Mr. Wolfson (or anyone else on behalf of the Management Company) during the
     term of this Agreement, then Mr. Wolfson's rights and benefits (such as to
     severance pay and to any other applicable social benefit) shall be
     determined based on a base salary as high as 70.92% of the Compensation
     (the "Base Salary"). Furthermore, in this event the amounts due to Mr.
     Wolfson as severance pay or for other applicable social benefits, will be
     reduced in the amount in which the payments according to this Agreement
     (the Compensation paid throughout its term) exceeded the Base Salary that
     would have been paid throughout the same term.

                                     - 3 -
<PAGE>

5.5  The Management Company and Mr. Wolfson, jointly and severally, shall
     compensate Tefron and / or anyone on its behalf upon request in the event
     that Tefron shall suffer expenses or damages of any kind and / or any
     amount shall be rewarded as a result of a determination that there were
     employer employee relations between the Parties and / or anyone on their
     behalf.

6.   THE TERM OF THE AGREEMENT

6.1  The terms and conditions of this Agreement shall apply as of August 5th,
     2002 (the "EFFECTIVE DAY").

6.2  Each party shall be entitled to terminate this Agreement by giving the
     other party a written notice ninety (90) days in advance without the need
     for an explanation.

6.3  The termination of this Agreement as stated in Sections 6.1 and 6.2 is
     without any remedy, indemnification, compensation or reward. This Section
     shall not prevent any of the Parties from seeking any remedy from the other
     party due to a breach of this Agreement.

6.4  Notwithstanding anything herein, Tefron shall be entitled to terminate this
     Agreement by a written notice of at least 30 days in advance, in any and/or
     all of the following cases ("For Cause"):

     6.4.1 The Management Company and/or Mr. Wolfson breached this Agreement in
           a material fashion and did not remedy such material breach within a
           reasonable period after receipt of a written demand to do so.

     6.4.2 The Management Company and/or Mr. Wolfson have been convicted
           (peremptory rule) in respect of an offense involving ignominy and/or
           a felony which effects the management's capability.

     6.4.3 The Management Company and/or Mr. Wolfson have ownership of an
           interest in a business in competition with Tefron not disclosed to
           the Board of Tefron.

     6.4.4 Should Mr. Wolfson be unavailable to render the Consulting and
           Management Services on behalf of the Management Company for any
           reason whatsoever for a continuous period in excess of 5 consecutive
           weeks or in the event of termination of his employment relationship
           with the Management Company, unless such termination is in accordance
           with section 10.6 (b) below.

6.5  Tefron is entitled at its own exclusive discretion to pay the Consideration
     for part or the entire notice period as determined in this Article 6 above,
     and accordingly to end the provision of the Consulting and Management
     Services earlier than at the end of the relevant notice period.

6.6  In the event the Agreement is terminated for any reason whatsoever, the
     Management Company shall ensure the orderly transfer to Tefron of any
     document, copies or recorded information in any other form or any other
     material which came to its possession in connection with the Consulting and
     Management Services (For the sake of avoiding any doubt, It is hereby
     clarified that such orderly transfer of information shall not apply to any
     information that came into the attention of Mr. Wolfson through his
     capacity as shareholder in Tefron, or through his capacities in Macpell).

                                     - 4 -
<PAGE>

7.   TAXES

     Each party shall bear all the taxes that any applicable law cast upon it in
     connection with this Agreement. Tefron shall not bear any tax which is
     applicable to the Management Company or to Mr. Wolfson.

8.   CONFIDENTIALITY AND INTELLECTUAL PROPERTY

8.1  The Management Company and Mr. Wolfson recognize and acknowledge that the
     business information, financial data, commercial data, technical
     information, trade secrets, methods, data, developments, designs,
     inventions, improvements and works authorship, which Tefron owns including
     Tefron's plans, developments and/or products are all confidential details
     concerning the activities of the Tefron group and its business in Israel
     and abroad, whether existing today or planned for the future, including its
     property, proprietary rights, including patents, title, installations,
     obligations, transactions, financial condition, plans, business operations
     and relationship with its employees, suppliers, customers and authorities
     and/or any other information obtained/received by either of them within the
     scope of the Consulting and Management Services and/or in connection with
     Tefron and/or its business are confidential and the property of Tefron
     ("Information"). The term "Information", as used in this Agreement, will
     not include information which is within the public domain, provided that
     the source of Information to the public domain is not the Management
     Company or Mr. Wolfson or someone else who owns a confidentiality duty to
     the Company, and will not include information brought to Tefron by the
     Management Company or by Mr. Wolfson.

8.2  Except as directed by Tefron, and in the ordinary course of Tefron's
     business, the Management Company and Mr. Wolfson will not, other than for
     the sole benefit of the Tefron, disclose, disseminate, transfer and/or use
     the Information. Further, the Management Company and Mr. Wolfson will
     maintain the confidentiality of the contents of this Agreement, unless
     otherwise is required by applicable law.

8.3  Without derogating from the above, the Management Company and Mr. Wolfson
     undertake to maintain absolute confidentiality in respect of all
     Information about any discoveries, designs, developments, inventions,
     improvements and/or ideas ("Creations") made or acquired by either of them
     while engaged/affiliated with Tefron, which are within Tefron's business,
     and which came to the their awareness as a result of them providing the
     Consulting and Management Services under this Agreement or as a result of
     Mr. Wolfson's prior engagements with Tefron (either as employee,
     consultant, board member or manager). The Management Company and Mr.
     Wolfson further recognize and acknowledge that any and all Creations made
     and/or acquired by either of them while engaged/affiliated with Tefron,
     whether or not made and/or acquired by him (i) during work hours (ii) at
     the premises of Tefron (iii) with the assistance of information/material
     provided to him by Tefron and/or (iv) at the request of Tefron, are and
     will be the exclusive property of Tefron and the Management Company and Mr.
     Wolfson will have no right thereto. The Management Company and Mr. Wolfson
     will, at the request and expenses of Tefron, execute any and all
     instruments required to vest complete title and ownership to the Creations
     in (or to clarify that complete title and ownership belongs to) Tefron
     and/or as necessary to legally protect the Creations in Israel and abroad.
     The Management Company and Mr. Wolfson will perform all such actions
     without receiving any additional compensation therefor.

8.4  A breach of Article 8 by the Management Company or Mr. Wolfson shall be
     considered a material breach of this Agreement.

8.5  All of the undertakings and obligations of the Management Company and Mr.
     Wolfson set forth in this section 8, will commence on the date Mr. Wolfson
     was first engaged by or became affiliated with Tefron, will continue
     throughout his engagement by and affiliation with Tefron, will survive the
     termination of this Agreement, and except as prohibited or limited by law,
     will be valid without limitation in time.

                                     - 5 -
<PAGE>

8.6  For the sake of avoiding any doubt, It is hereby clarified that this
     Article 8 shall not apply to Information that came into the attention of
     Mr. Wolfson through its capacity as shareholder in Tefron, or through its
     capacities in Macpell, and shall not apply to Creations made or acquired
     through such capacities.

9.   NON COMPETITION

9.1  Throughout the entire term of this Agreement ("Non-Compete Period"), the
     Management Company and Mr. Wolfson undertake not to compete and/or place
     themselves in a position of having an interest in and/or being engaged
     by/within a person which competes with the Tefron's business. Without
     prejudice to the generality of the foregoing, Mr. Wolfson undertakes that
     during the Non-Compete Period he will not work, engage or advise, whether
     as a salaried employee and/or as a self-employed person, for remuneration
     or otherwise, in any subject and engagement if such constitutes a
     competition with Tefron..

9.2  A breach of this Article 9 shall be considered a material breach of this
     Agreement.

9.3  This Section shall be valid after the termination and/or expiration of the
     Agreement for any reason.

9.4  Notwithstanding anything of the forgoing, it is agreed that Mr. Wolfson's
     position in Macpell shall not be considered as a breach of any of the
     sub-sections of this Section 9.

10.  MISCELLANEOUS

10.1 NOTICE. All notice or other communications provided for by this Agreement,
     will be given in writing, either by personal delivery, registered mail,
     postage prepaid, or by facsimile transmission to the person at their last
     known address or number (or as otherwise designated by the person in
     writing). All notices or communications given by personal delivery or by
     facsimile transmission will be deemed delivered on the next business day
     following transmission or delivery (the facsimile transmission receipt will
     act as PRIMA FACIE proof of delivery); those given by mail will be deemed
     delivered on the seventh (7th) business day after posting. A notice given
     by Tefron to Mr. Wolfson shall be deemed as given to the Management Company
     as well. A notice given by Tefron to the Management Company shall be deemed
     as given to Mr. Wolfson as well.

10.2 REMEDIES CUMULATIVE. Each right, power, and remedy provided for under this
     Agreement or now or hereafter existing at law, in equity, by statute or
     otherwise, will be cumulative, and the exercise (whether single or
     partial), delay, or forbearance in exercising by any party of one or more
     of such rights, powers and remedies will not act as a waiver or preclude
     the simultaneous or later exercise by such party of any or all of such
     rights, powers or remedies.

10.3 CONSTRUCTION. Except as specifically indicated, the section numbers and
     captions appearing in this Agreement are inserted only as a matter of
     convenience and are not in any way intended to define, limit, construe or
     describe the scope or intent of such sections or in any way affect the
     construction of the Agreement. The term "person", as used in this
     Agreement, will be interpreted broadly to include, without limitation, any
     individual, corporation, company, partnership, joint venture, and/or
     entity.

10.4 SEVERABILITY. If any provision this Agreement, or application thereof to
     any person or circumstances, will for any reason or to any extent, be
     invalid or unenforceable, such invalidity or unenforceability will not in
     any manner affect or render invalid or unenforceable the remainder of this
     Agreement and the application of that provision to other persons or
     circumstances will not be affected, but rather will be enforced to the
     extent permitted by law. In the event of the invalidity or unenforceability
     of any provision of this

                                     - 6 -
<PAGE>

     Agreement or the application thereof to any person or circumstances, the
     parties will, at the request of any of the parties, negotiate in good faith
     to agree on changes or amendments to this Agreement which are required to
     effectuate the intent and purpose of this Agreement in the light of the
     invalidity or unenforceability.

10.5 FURTHER ASSURANCES. Each party will cooperate, take such further reasonable
     action and execute and deliver such further documents as may be reasonably
     requested by any of the parties in order to effectuate the intent and
     purposes of this Agreement and the parties.

10.6 SUCCESSORS AND ASSIGNS.

(a)  Tefron will be allowed to assign, transfer and otherwise convey its rights
and obligations under the Agreement to any entity in which it holds more than
fifty-one percent (51%) of shareholder's (or equivalent) voting rights.

(b)  The Management Company and Mr. Wolfson may not assign, transfer or
otherwise convey the rights or obligations under the Agreement. Notwithstanding
the above, the Management Company may assign or transfer all (but not part of)
its rights and obligations under the Agreement to Mr. Wolfson himself or to a
company which is, (directly or indirectly), wholly owned by Mr. Wolfson or,
subject to the receipt of the prior approval of Tefron's Audit Committee, to a
company which is, (directly or indirectly), controlled by Mr. Wolfson.

10.7 ENTIRE AGREEMENT. This Agreement contains the complete statement of all of
     the agreements, understandings, representations and arrangements between
     the Parties with respect to the subject matter hereof ("Prior Agreements"),
     and to the extent such Prior Agreements exist, such Prior Agreements are
     merged herein and will be considered superseded by this Agreement. Nothing
     in the above shall be deemed to derogate from the effect of the Option
     Agreement between Tefron and Mr. Wolfson entered as of the same date. No
     provision of this Agreement may be modified, waived or discharged unless
     done so in writing and signed by all Parties.

10.8 SET-OFF. Eiither party to this agreement may set off any amount due to such
     party from the other party from any sum owed to the other party.

10.9 GOVERNING LAW. This Agreement and all and the rights and obligations of the
     parties related to this Agreement will be exclusively governed by and
     construed in accordance with the laws of the State of Israel.

IN WITNESS WHEREOF, the undersigned authorized representatives of the parties
affixed their signatures:

         /s/                          /s/                          /s/
---------------------        ---------------------        ----------------------
Tefron Ltd.                    Mr. Arie Wolfson           New York Delight Ltd.

                                     - 7 -
<PAGE>

SCHEDULE 3.5

LIST OF POSITIONS AND ACTIVITIES

Arie Wolfson serves as:

     1.   Chairman of the Board of Directors of Tefron Ltd.

     2.   President and Chairman of Macpell Industries Ltd.

     3.   Director in New Net Assets (94) Ltd.

     4.   Director in Macpell Holdings Ltd.

     5.   Director in New Net Holdings Ltd.

     6.   Director in New York Delights Ltd.

                                     - 8 -

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