


<PAGE>

Head Office--Corporate Banking Division
41-45 Rothschild Boulevard
Tel-Aviv 65784, ISRAEL
Tel: 972-3-5675579
Fax: 972-3-5672995

                                                                November 1, 1999

To: Tefron Ltd.

Dear Sirs,

                           Re: Credits to Tefron Ltd.

     Whereas  Tefron Ltd. (hereinafter: "Tefron") has notified Bank Hapoalim
              B.M. (hereinafter: the "Bank") of its intention to purchase 100%
              of the share capital of Alba Waldensian, Inc. (hereinafter:
              "Alba"); and

     Whereas  Tefron has requested the Bank to grant it a loan for the purpose
              of financing the purchase of the said share capital of Alba
              (hereinafter: the "Purchased Shares");

     Therefore the Bank is willing to accede to Tefron's request and make a loan
               available to it upon the following terms and conditions
               (hereinafter: the "Loan").

1. The Loan

   Amount:
   US$65,000,000 (sixty five million US Dollars).

   Period:
   Up to 7 years.

   Interest, fees and other commercial conditions:
   To be agreed between Tefron and the Bank.

2. Conditions Precedent

     The granting of the Loan or any part thereof shall be subject, inter alia,
to the fulfilment of the following conditions to the Bank's full satisfaction:

          2.1 The conclusion and execution in due course and as shall be
     determined by our Bank, of all documentation in connection with the
     financing, the collaterals and such other terms and obligations as herein
     stipulated or as may be additionally required by our Bank.

          2.2 There being no legal or other impediment whatsoever to the
     granting of the Loan by the Bank to Tefron, including without limitation
     restrictions imposed by The Bank of Israel and/or any governmental or other
     authority as to the financing being made available to Tefron.

3. Collateral

     As security for the full repayment of the Loan, the Bank shall be furnished
with the following collateral:

          3.1 A first ranking floating and fixed pledge and charge, unlimited in
     amount, in favor of the Bank, over the Purchased Shares, which shares shall
     be deposited as instructed by the Bank.

          3.2 Tefron's undertaking to maintain certain financial covenants, as
     agreed with the Bank, so long as there are any outstanding amounts on
     account of the Loan.

4. General
<PAGE>
          4.1 The foregoing is intended to provide only an outline of the
     indicative terms of the possibilities for financing, rather than a complete
     statement of all terms conditions and documents which would be required.

          4.2 Kindly note that we are willing to provide Alba with a loan in the
     amount of up to US$20,000,000 (twenty million US Dollars) to be secured by
     Tefron's guarantee, in terms and conditions to be agreed and concluded
     between the bank and Alba in due time, subject only to the approval of
     Tefron's acquisition of Alba by the Board of Directors of Tefron (it being
     understood that such approval will not be granted unless Tefron's Board of
     Directors shall have first received a "fairness opinion" with respect to
     the Alba acquisition from its independent financial advisor, (Credit Suisse
     First Boston).

          If and when relevant we would be pleased to furnish you with a letter
     of intent, detailing indicative terms as to said additional financing.

          4.3 This Letter is issued solely to you, is not assignable and does
     not confer any rights on any party whatsoever, nor does it establish any
     privity between our Bank and any third party.

     It will be our pleasure to cooperate with you on this transaction and we
await to receive further details in order to proceed in this matter. Kindly let
us know until December 31st, 1999 if you are interested in proceeding in this
matter, as this letter shall be no longer valid after said date.

                                                    Yours faithfully,


                                                    BANK HAPOALIM B.M.
                                                       Head Office


------------------------------               ---------------------------------
A. Latir                                                           D. Ajanati

                                       2

