Exhibit
10.19
 
 ACCOUNTS
RECEIVABLE AND BANK ACCOUNT PLEDGE AGREEMENT
 
 BY
AND BETWEEN
 
 QUALYTEXTIL
S/A,
 
 as
Pledgor,
 
 AND
 
 WACHOVIA
BANK, NATIONAL ASSOCIATION
 
 as
Pledgee
 
 
 May
13, 2008.
  
  ACCOUNTS
RECEIVABLE AND BANK ACCOUNT PLEDGE AGREEMENT
 
 This
Accounts Receivable and Bank Account Pledge Agreement (the “Agreement”), is made by and
between:
 
 (a)           QUALYTEXTIL S/A, a corporation
(sociedade por ações),
duly organized and existing in accordance with the laws of Brazil, with its head
office located at the City of Salvador, State of Bahia, at Rua Luxemburgo,
s/n.o, Loteamento Granjas Rurais, Presidente Vargas, Quadra O, Lotes 82 and 83,
São Caetano, enrolled with the Brazilian Taxpayers Roll of the Ministry of
Finance (CNPJ/MF) under no. 04.011.170/0001-22 (hereinafter referred to as
“Pledgor”), herein
represented in accordance with its corporate documents; and
 
 (b)           WACHOVIA BANK, NATIONAL
ASSOCIATION, duly organized and existing in accordance with the laws of
New York, with its registered office at 12 East 49th Street, 43rd
Floor, New York, New York 10017 (hereinafter referred to as “Pledgee”), herein represented
in accordance with its corporate documents.
 
 
 Pledgee
and Pledgor are hereby individually referred to as a "Party" and collectively as
"Parties",
 
 WHEREAS,
pursuant to the Loan Agreement, dated July 7, 2005, as amended by the Third
Modification Agreement and Reaffirmation of Guaranty dated of even date hereof
entered into by and between Lakeland Industries, Inc. (“Lakeland”) and the Bank
(the “Credit Agreement”), the Bank has agreed to loan to Lakeland a $ 30,000,000
revolving line of credit to be used for the purchase by Lakeland do Brasil
Empreendimentos e Participações Ltda. (“Lakeland do Brasil”) of the totality of
shares of Pledgor (as amended, supplemented, restated or otherwise modified
and in effect from time to time, the “Credit Agreement”);
 
 WHEREAS
after the execution of a Share Purchase Agreement by and among Lakeland,
Lakeland do Brasil, Pledgor, and its shareholders, Lakeland do Brasil shall be
the legal owner of 1,507,701  shares, being 1,492,624 shares of common
stock and 15,077 shares of Class A preferred stock, without par value,
representing in the aggregate, 100% of the capital stock
of  Pledgor;
  2
  WHEREAS,
the payment of all amounts owed to Pledgee pursuant to the Credit Agreement and
any of the other documents referred therein shall be secured by the pledge over
certain receivables of Pledgor, among other guaranties;
 
 NOW,
THEREFORE, in consideration of the foregoing premises and mutual covenants
contained herein, the parties hereto agree as follows:
 
 
 1.         
   Rules of
Construction.  (a)   Capitalized terms used and
not otherwise defined in this Agreement are used herein with the same meanings
ascribed to such terms in the Credit Agreement. All terms defined in this
Agreement in the singular shall have the same meaning when used in the plural
and vice versa. All terms defined in this Agreement shall have the defined
meanings contained herein when used in any other document made or delivered
pursuant hereto.
 
 
 (b)           Any
reference in this Agreement to “continuing” in relation to an Event of Default
shall be construed as meaning that the relevant Event of Default has not been
remedied (if capable of remedy), cured (if capable of cure), waived (if
constituting a breach of covenant) or otherwise terminated.
 
 2.         
   Pledge; Grant of Security
Interest.  In order to secure the payment of all amounts owed
to Pledgee under the Credit Agreement and any of the other credit documents,
with interest at the rates set forth therein and the full performance by Pledgor
of all of the other terms, covenants and obligations set forth in the Credit
Agreement or herein (the “Secured Obligations”), Pledgor
hereby unconditionally and irrevocably pledges, assigns, transfers and gives as
security interest to Pledgee, pursuant to the provisions of Article 1,419 to
1,437 and 1,451 et seq.
of the Brazilian Civil Code, all of its present and future credit rights against
Banco Itaú S.A. (“Itaú”)
with respect to account n. 21707 held by Pledgor with branch n. 1576 of Itaú and
against Banco do Brasil S.A (“Banco do Brasil” and together
with Itaú, the “Depositaries”) with respect to
account n. 000.027.881-5, held by Pledgor with branch n. 3429-0 of Banco do
Brasil (the “Accounts”),
in which Pledgor undertakes to deposit or to cause to be deposited all amounts
received by Pledgor in relation to: (i) all incomes, rents, revenues, profits,
proceeds, accounts receivable, security deposits and other benefits, present or
future, derived from its activities and trading business, (ii) all proceeds from
insurance payable to the Pledgor, whether or not such insurance coverage is
specifically required under the terms of the Credit Agreement, (iii) all
proceeds arising on account of condemnation of any of its properties, and
recoveries for any diminution in the value of its properties and (iv) to the
extent not included in the foregoing items, all proceeds and products of
the
  3
  property
referred to in items above and whatever is received upon any exchange, sale or
other disposition of any of such property, whether cash or non-cash proceeds,
and any and all other amounts paid or payable under or in connection with any of
the foregoing and any and all documents or instruments related thereto, (the
"Pledged
Rights").
 
 2.1.           For
purposes of Article 1,424 of the Brazilian Civil Code, it is expressly
covenanted by the Parties that the principal conditions and characteristics of
the Secured Obligations are those established in the Credit Agreement. The total
estimated principal amount of the Secured Obligations, the final maturity date
and the interest rates provided in the Credit Agreement for such Secured
Obligations are, on this date, those set forth in Exhibit A hereof.
 
 2.2.           In
order to clearly evidence the pledge being granted hereunder, and as per Article
1,452, sole paragraph of the Brazilian Civil Code, Pledgor symbolically delivers
(traditio ficta) the
Pledged Rights in pledge to Pledgee, by delivery to Pledgee of a duly certified
copy of the agreement between Pledgor and the Bank for the opening of the
Accounts, as well as certified copies of the documents evidencing the existence
of the Pledged Rights.
 
 3.      
      Restriction on Transfer and
Encumbrance.  During the term of this Agreement, Pledgor may
not dispose of, sell, assign, transfer, lend, swap, or convey to the capital
stock of companies, establish any usufruct or common trust, create any other
lien, encumbrance or collateral security in addition to the pledge contracted
herein, or otherwise dispose of, fully or partially, directly or indirectly,
free of charge or for remuneration, of the Pledged Rights, the Depositaries
undertaking not to give effect to any of such acts that have been performed
without the necessary previous written consent from Pledgee, according to the
terms of the Credit Agreement.
 
 4.          
  Registration of the Pledged
Rights.  Pledgor shall, within twenty (20) days after the
execution of this Agreement, cause this Agreement to be registered with the
competent Registries of Titles and Deeds (Cartórios de Registro de Títulos e
Documentos) in Brazil and deliver to Pledgee evidence of such
registration.
 
 4.1.           Pledgor
shall pay all expenses incurred in connection with such
registrations.
 
 5.         
   Representations and
Warranties.  Pledgor hereby represents and warrants to Pledgee,
as follows:
  4
  (a)
              This
      Agreement constitutes a legal, valid and binding obligation of Pledgor,
      enforceable against Pledgor in accordance with its terms, and the security
      interest created hereby will, constitute a legal, valid and perfected
      first priority security interest in the Pledged Rights, enforceable in
      accordance with its terms against all creditors of  Pledgor, in
      each case as enforcement may be limited by bankruptcy, insolvency,
      reorganization, moratorium and other similar laws relating to creditors’
      rights generally; provided, however, that any security interest created
      hereby in any Pledged Right which has not been issued to, or received or
      acquired by, Pledgor on or before the date hereof shall be deemed to have
      been created, perfected and to be in full force only after such Pledged
      Right is issued to, or received or acquired by,
  Pledgor;
 
 (b)
              The
      execution, delivery, performance and grant of the security interest
      created hereby have been duly authorized by all necessary corporate
      actions on the part of Pledgor and do not and will not (i) violate any
      provision of any charter or other organizational documents of Pledgor,
      (ii) conflict with, result in a breach of, nor constitute  a
      default under, or, except for consents and approvals that have been
      obtained and are in full force and effect, require the approval or consent
      of any person pursuant to any material contractual obligation of Pledgor,
      nor violate any applicable law binding on Pledgor, or (iii) result in the
      creation or imposition of any lien upon any asset of Pledgor or any income
      or profits therefrom, except for the lien created under this
      Agreement;
 
 (c)
              Pledgor
      is the legal and record owner of the Pledged Rights, free from any liens
      other than those contemplated herein;
and
 
 (d)
              The
      Pledged Rights held by and pledged by Pledgor hereunder are within its
      disposition and control.
 
 6.           Covenants.  Pledgor
covenants and agrees with Pledgee, until termination of this Agreement and
release of the obligations hereunder, in accordance with Section 15 hereof, as
follows:
 
 (a)
              Pledgor
      will execute, acknowledge and deliver, at its sole cost and expense, all
      such further acts, deeds, or documents as Pledgee shall from time to time
      reasonably request, which may be necessary in the judgment of Pledgee to
      assure, perfect, and grant to Pledgee the security interests and other
      rights
  5
  conveyed
or assigned hereunder. All reasonable costs and expenses in connection with the
grant or continuation of any security interests hereunder, including reasonable
legal fees and other reasonable costs and expenses in connection with the grant,
registration, perfection, maintenance or continuation of any security interests
hereunder or the preparation, execution, delivery, recordation or filing of
documents and any other acts of Pledgee may reasonably request in connection
with the grant, registration, perfection, maintenance or continuation of such
security interests, shall be paid by Pledgor promptly upon demand. Pledgor will
not enter into or become subject to any agreement which would impair its ability
to comply, or which would purport to prohibit it from complying, with the
provisions hereof;
 
 (b)
              upon
      the occurrence and continuation of an Event of Default, as may be
      evidenced by written notice from Pledgee to Pledgor, pursuant to Section
      17 below (irrespective of any notice to the contrary), comply with all
      written instructions received from Pledgee in connection with the exercise
      by Pledgee of the remedies set forth in Section 11
  hereof;
 
 (c)
              promptly
      inform Pledgee by written notice of the occurrence of (i) any event which
      could be expected to cause material reduction of the Pledge created hereby
      or (ii) any other event within the knowledge of Pledgor that could be
      expected to cause a material reduction of the aggregate value of the
      Pledged Rights;
 
 (d)
              indemnify
      and hold Pledgee harmless against any and all claims, suits, liabilities,
      damages and costs of any nature, including reasonable and properly
      documented attorneys’ fees, arising out of or in any way connected with
      the title to the Pledged Rights, except to the extent such claims, suits,
      liabilities, damages and costs are caused by the negligence or willful
      misconduct of Pledgee, it being agreed and understood that such
      indemnification obligation shall remain valid notwithstanding the
      termination of this Agreement with respect to events taking place before
      termination, subject to the relevant statute of limitations under
      applicable law;
 
 (e)
              Pledgor
      shall, at all times, maintain the Accounts open and active until the
      termination of this Agreement in accordance with the provisions hereof;
      and
  6
  (f)
              Within
      90 (ninety) days as of the date hereof Pledgor shall deposit, or cause to
      be deposited, exclusively in the Accounts, all amounts received by Pledgor
      in relation to the Pledged Rights received by the Pledgor. For this
      purpose, Pledgor shall have instructed all persons or entities owing any
      of the Pledged Rights to Pledgor to make any and all payments due to
      Pledgor to the Accounts and Pledgor further undertakes to instruct any
      future parties to make any and all payments to the
    Accounts.
 
 7.         
   Obligations with Respect to
Third Party Act.  As soon as Pledgor becomes aware of the
existence of any third party act which may lead to a threat of encumbrance
and/or effectively result in the encumbrance of the Pledged Rights (“Third Party Act”), Pledgor
shall inform Pledgee of such Third Party Act, providing it with the information
and documents available to it. Pledgor undertakes to adopt all applicable
judicial and/or extrajudicial measures to preserve and maintain the integrity
and validity of the pledge created pursuant to this Agreement, and/or fully
recompose or replace such pledge, by means of other bank accounts so that it
remains always in full force the pledge over the Pledged Assets.
 
 7.1.           In
the judicial execution actions brought against the Pledgor by third parties, the
Pledgor is required to make its best endeavors to enforce the pledge created
pursuant to this Agreement, undertaking for such: (a) not to indicate the
Pledged Rights for attachment, (b) to timely challenge any attachment of the
Pledged Rights, in all jurisdiction levels, by filing applicable appeals, (c) to
timely submit the applicable defenses in the execution, (d) not to hinder the
exercise of the rights by Pledgee, but to collaborate with Pledgee for such
rights to actually prevail, (e) to inform Pledgee of the existence of any
execution or collection action filed against it, the amount of which is equal to
or higher than US$ 500,000.00 (five hundred thousand United States dollars),
even if there is no attachment of the Pledged Rights immediately, but always
within at most 5 (five) business days after becoming aware, by any means, of the
existence of said executions or actions, and (f) to send, whenever
requested, reports to Pledgee with updated information on the status of the
execution or collection actions filed against Pledgor, involving an amount equal
to or higher than US$ 500,000.00 (five hundred thousand United States dollars).
For purposes of this clause, “collection action” means any procedural,
administrative or judicial means, including the arbitral means, in which a party
requests that the Pledgor be sentenced to pay any debt for an amount equal to or
higher than said amount.
 
 8.           
 Appointment and
Duties of Depositaries.  Pledgor shall cause the Depositaries
to execute and deliver to Pledgee a deposit account agreement substantially
in
  7
  the form
of Exhibit B (“Deposit Account
Agreement”), with respect to the Accounts whereby the Depositaries will
accept appointment as depositaries of the amounts deposited in the Accounts,
pursuant to Article 627 et
seq. of the Brazilian Civil Code, assuming full responsibility for the
safety, control, maintenance and preservation of the Accounts and the funds
deposited therein in accordance with the terms and conditions set forth therein.
Pledgor undertakes to endeavor its best efforts to cause the Depositaries to
execute the Deposit Accounts Agreement within 30 (thirty) days from the date
hereof. In case the Depositaries does not agree to the conditions of the Deposit
Account Agreement, the Parties shall negotiate alternatives that accomplish the
same goals herein, that is ensuring the existence and enforceability of the
Pledge created hereby that accomplish.
 
 9.          
  Undertakings With Respect to
the Depositaries.  During the term of this Agreement, Pledgor
shall cause the Depositaries to receive any and all amounts that shall be
deposited by or on behalf of Pledgor in the Accounts, effect the transfers set
forth herein and carry on its duties for the proper maintenance and preservation
of the funds existing in the Accounts with due regard to Section 6(f)
above.
 
 10.           Withdrawals and Transfers
from Accounts.
 
 (a)
              Upon
      the occurrence and continuance of an Event of Default, any and all
      transfers from the Accounts shall be made upon prior written express
      authorization of Pledgee.
 
 (b)
              Upon
      the occurrence and continuance of an Event of Default, the amounts to be
      transferred from the Accounts shall be calculated by Pledgor and
      communicated to the Depositaries and Pledgee by Pledgor in writing at
      least three (3) business days prior to each date on which a transfer is to
      be made, which writing shall state that (i) such transfer is being made in
      accordance with the provisions and requirements hereof, and (ii) no Event
      of Default then exists.
 
 (c)
              Not
      later than the 5th business day of each month, Pledgor shall provide
      Pledgee with a statements of the Accounts, describing: (i) the amounts
      deposited in the Accounts since the date of the last such report, so long
      as any amounts have been deposited in, withdrawn from or transferred to or
      from the Accounts, (ii) accrued amounts existing in the Accounts as from
      its opening, (iii) the investments of the funds of the Accounts made since
      the date of the last such report and any revenues and gains obtained
      therewith, and (iv) the balance existing in the Accounts, as well as the
      withdrawals
  8
  made
during the relevant period, so that Pledgee is fully informed and updated in
respect of the Accounts, as well as of the total amounts and investments subject
to the lien created hereunder. Pledgor shall maintain such reports reflecting
such amounts, investments and funds described in the preceding sentence held in
the Accounts.
 
 11.           Rights and Powers of Pledgee
Upon an Event of Default.
 
 (a)
              Pledgor
      hereby irrevocably appoints Pledgee as its true and lawful
      attorney-in-fact (the same being coupled with an interest) with full power
      of substitution to, upon the occurrence and continuation of an Event of
      Default, instruct the Depositaries to, without being required to give any
      notice, without limitation and in addition to any and all rights with
      respect to the Pledged Rights granted to Pledgee
  hereof:
 
 (i)          
 instruct the obligor or obligors on or any counterparties to any
agreement, instrument or other obligation in respect of or relating to Pledgor
or the Pledged Rights to make any payment required by the terms of such
instrument, agreement or obligation to Pledgee;
 
 (ii)           direct
Pledgor or the Depositaries in writing to deliver the Pledged Rights or any part
thereof to Pledgee at any place or places designated by Pledgee;
 
 (iii)           withdraw
or transfer any and all cash and apply such cash for the payment of the Secured
Obligations in accordance with the terms of the Credit Agreement;
and
 
 (iv)           sell,
assign or otherwise liquidate the Pledged Rights or any part thereof and apply
the same for the payment of the Secured Obligations in accordance with the terms
of the Credit Agreement,
 
 in each
case, returning to Pledgor any sums exceeding the Secured
Obligations.
 
 (b)
              Promptly
      after the cessation of an Event of Default, Pledgee shall send written
      notice of such cessation to the Depositaries, which shall immediately and
      conclusively rely on such notice to act pursuant to the instructions it
      receives from Pledgor with respect to the respective
    Accounts.
  9
  12.           Default and
Remedies.  Upon the occurrence and continuation of an Event of
Default, Pledgee is hereby irrevocably authorized and entitled to, dispose of,
collect, receive, appropriate and/or realize upon the Pledged Rights (or any
part thereof) and may forthwith sell, assign, give option or options to purchase
or otherwise dispose of and deliver the Pledged Rights or any part thereof at
such price and upon such terms and conditions as it may deem appropriate,
irrespective of any prior or subsequent notice to Pledgor, in accordance with
the provisions set forth in Article 1,433, Item IV and Article 1,435, Item V of
the Brazilian Civil Code, and apply the proceeds thus received for payment of
the Secured Obligations, returning to Pledgor any sums exceeding the Secured
Obligations.
 
 13.           Amendments with Respect to
the Secured Obligations.  Pledgor shall remain obligated
hereunder, and the Pledged Rights shall remain subject to the security interests
granted hereby, at all times until the termination of this Agreement pursuant to
Section 15below,
notwithstanding  the occurrence of any of the events below, without
notice to Pledgor:
 
 (a)
              the
      liability by Pledgor or any person to any part of the Secured Obligations,
      or any security or guarantee with respect thereto, is, at any time, in
      whole or in part, renewed, extended, amended, modified, accelerated,
      reimbursed or released by Pledgee;
 
 (b)
              the
      Credit Agreement is amended, modified or supplemented, in whole or in
      part; and
 
 (c)
              any
      guaranty or rights at any time held by Pledgee for the payment of the
      Secured Obligations are sold, exchanged, waived, surrendered or
      released.
 
 14.           Rights and Remedies.
When pursuing its rights and remedies hereunder, Pledgee may, but shall be under
no obligation to, pursue such rights and remedies as it may have against any
third party or against any security for or guaranty of the Secured Obligations.
The failure by Pledgee to pursue such rights or remedies or to collect any
payments from such third party or to realize upon any such security or guaranty,
or any release of such third party or of any such security or guaranty shall not
relieve Pledgor of any liability hereunder, and shall not impair or affect the
rights and remedies of Pledgee.
 
 15.           Termination and
Release. When the Secured Obligations have been indefeasibly satisfied in
full and all obligations under the Credit Agreement have been terminated, and no
other amount is then outstanding  or owing to Pledgee under the
Credit
  10
  Agreement,
then this Agreement shall be considered terminated and the security interests
created hereby be released, at the Pledgor's expense, without notice to or
consent by Pledgee; otherwise, this Agreement and the security interests created
hereby shall remain in full force and effect.  Pledgee, upon the
Pledgor's request, in accordance with this Section, shall promptly execute and
deliver to Pledgor, at the Pledgor’s expense, all documents reasonably necessary
to evidence the release of such guarantee.
  16.           Costs and
Expenses.  Pledgor hereby agrees to immediately reimburse
Pledgee for all reasonable, actual and documented costs and expenses incurred in
connection with and necessary for the perfection of the pledge granted hereby,
as well as any amendments to and/or enforcement of this Agreement.
 
 17.           Notices.  Any
and all notices, requests, authorizations and demands to be effective or
transmitted under this Agreement shall be in writing (or by fax or similar
electronic transfer confirmed in writing) and shall be deemed to have been duly
given or made (a) when delivered by courier or registered letter or (b) if by
fax or similar electronic transfer, when sent and receipt has been
confirmed.  If to Pledgor or to Pledgee, such notices, requests,
authorizations and demands shall be addressed to the following addresses or
transmission numbers:
 
 Pledgee:
 Wachovia Bank, National
Association
 Law
Department
 12 East
49th Street, 43rd
Floor
 New York,
New York 10017
 U.S.A.
 Attention:
Chief Counsel
 Tel:
___________________
 Fax:
____________________
 
 
 Pledgor:
              QUALYTEXTIL
      S/A
 Rua
Luxemburgo, s/no
 Loteamento
Granjas Rurais, Presidente Vargas, Quadra O, Lotes 82 and 83, São
Caetano
 Salvador,
Bahia
 Brazil
 Attention:
Mr. Miguel Antonio dos Guimarães Bastos
 Fax: (55
71) 3390-3001
  11
  18.           Clearance
Certificates.  In accordance with and for the purposes of
Decree n. 3,048, of May 6, 1999, Pledgor herein delivered to Pledgee the
Debt Clearance Certificates (Certidão Negativa de Débito)
issued by the Social Security Agency (Instituto Nacional de Seguridade
Social) under n. 223942008-04001010, stating that all its obligations
with social security are duly complied with up to the date specified therein and
Pledgor herein delivered the Clearance Certificate of Federal Debt (Certidão Conjunta Negativa de
Débitos Relativos a Tributos Federais e à Dívida Ativa da União) issued
by the Brazilian Federal Revenue (Receita Federal do Brasil)
under n. C412.4111.1061.3B97.
 
 19.           Waivers and
Amendments. Notwithstanding any provisions of this Agreement, no
amendment to any provision of this Agreement shall be effective unless the same
shall have been signed by all Parties.
 
 20.           Severability. If any
provision of this Agreement shall be held to be invalid, illegal or
unenforceable under applicable law in any jurisdiction, such provision shall be
ineffective only to the extent of such invalidity, illegality or
unenforceability, and shall not affect any other provisions hereof or the
validity, legality or enforceability of such provision in any other
jurisdiction. Where provisions of any applicable law resulting in such
prohibition or unenforceability may be waived, they are hereby waived by Pledgor
and Pledgee to the full extent permitted by applicable law so that this
Agreement shall be deemed a valid and binding agreement, and the security
interest created hereby shall constitute a continuing and perfected first
priority lien on the Pledged Rights, in each case enforceable against Pledgor in
accordance with its terms.
 
 21.           Complete Agreement;
Successors and Assigns. This Agreement constitutes the final agreement
among the Parties regarding the subject matter hereof. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. At any time during the term of this Agreement,
Pledgee may assign or transfer all or part of its rights and obligations
hereunder. However, Pledgor may not assign or transfer any of its rights or
obligations under this Agreement.
 
 22.           Waiver of Immunity.
To the extent that Pledgor has or hereafter may be entitled to claim or may
acquire, for itself or any of the Pledged Rights pledged by it pursuant to this
Agreement, any immunity from suit, jurisdiction of any court or from any legal
process (whether through service of notice, attachment prior to judgment,
attachment in aid of execution, or otherwise) with respect to itself or its
property, Pledgor hereby irrevocably waives such immunity in respect of its
obligations hereunder to the extent permitted by applicable law.
  12
  23.           Governing Law;
Jurisdiction. This Agreement shall be governed by and construed and
interpreted in accordance with the laws of Brazil. The parties hereto
irrevocably submit to the exclusive jurisdiction of the courts sitting in the
City of São Paulo, State of São Paulo, Brazil, in any action or proceeding to
resolve any dispute or controversy related to or arising from this
Agreement.
 
 24.           Specific Performance.
The Parties acknowledge for all purposes and effects of the law, that this
Agreement, individually, and/or together with the Credit Agreement, and/or
together with Promissory Notes, constitutes an extra-judicial title, pursuant to
the terms of Article 585 of the Brazilian Civil Procedure Code and, for the
purposes hereof, Pledgee, may seek the specific performance of the obligations
undertaken herein by Pledgor, as provided in Articles 461, 461-A, 621, 632 and
639 of the Brazilian Civil Procedure Code.
 
 [SIGNATURE
PAGE TO FOLLOW]
  13
  IN
WITNESS WHEREOF, the parties have caused this Agreement, in 03 (three)
counterparts of equal content, to be duly executed in the presence of the
undersigned witnesses.
 
 São
Paulo, May 13, 2008.
 
 
 QUALYTEXTIL
S/A
 
 
 By:
              /s/ Miguel G.
      Bastos
              By:
              /s/ Elder Marcos
      Vieira da ConceicaoName:
              Miguel
      G. Bastos
              Name:
              Elder
      Marcos Vieira da ConceicaoTitle:
              CFO
              Title:
              CEO
 
 
 WACHOVIA
BANK, NATIONAL ASSOCIATION
  
 By:
                /s/ Roger
      GrossmanName:
                Roger
      GrossmanTitle:
                Vice
      President
 Witnesses:
 
 
 Name:
              
              Name:ID:
              
              ID:
  14
  EXHIBIT
A
 
 
 CONDITIONS
AND CHARACTERISTICS OF THE SECURED OBLIGATIONS
 
 
 1)
              TOTAL
      PRINCIPAL AMOUNT OF THE SECURED
OBLIGATIONS
 
 A sum not
to exceed US$ 30,000,000.00 (thirty million United States dollars).
 
 2)
              INTEREST
      RATE OVER THE AMOUNT EFFECTIVELY
DISBURSED:
 
 Based on
either LIBOR or LIBOR Market Index Rate, plus the Applicable Margin (equal to
the percentage set forth in the table based on Borrower’s Funded Debt to EBITDA
Ratio), more particularly described in the Second Amended and Restated
Promissory Note attached hereto as Exhibit A.1
 
 3)
              MATURITY
      DATE OF INTEREST:
 
 Monthly
payments of interest only commencing June 2, 2008, final payment of all accrued
interest on July 7, 2010
 
 4)
              REPAYMENT
      OF THE PRINCIPAL AMOUNT:
 
 Final
payment of principal on July 7, 2010
 
 5)
              PENALTY
      IN AN EVENT OF DEFAULT:
 
 Interest
rate plus 3%.
  1
  EXHIBIT
A.1
 
 
 SECOND
AMENDED AND RESTATED PROMISSORY NOTE
  2
  EXHIBIT
B
 
 
 FORM
OF DEPOSIT ACCOUNT AGREEMENT
 
 To:
_________________________________
 Delivered
personally
 
 Re:
              Account
      n. _________________
 Branch
_____________________
 and
 
 Accounts
Receivable and Bank Account Pledge Agreement, dated as of [●] (as amended or
supplemented from time to time, the “Agreement”), entered into by
and between Qualytextil S/A (the “Pledgor”) and Wachovia Bank,
National Association (the “Pledgee”).
 
 Dear
Sirs:
 
 Please be
advised that, pursuant to the Agreement referenced above, all credit rights of
Pledgor for any and all amounts (the “Pledged Rights”) from time to
time held in or deposited in our account n. ________________, with branch
n. ___________ with this institution (the “Account”) have been pledged in
favor of the Pledgee. Capitalized terms used but not defined herein shall have
the same meanings set forth in the Agreement.
 
 Pledgor
hereby irrevocably instructs you to observe all provisions of the Agreement and,
upon the occurrence of an Event of Default under the Credit Agreement, as
evidenced to you by a written notice from Pledgee (regardless of any notice to
contrary by Pledgor), (i) pay over and transfer upon a written request from
Pledgee any and all Pledged Rights to or to the order of Pledgee pursuant to the
instructions contained in such written request, and (ii) act as a “Depositary”
(as defined in the Agreement) pursuant to the instructions of Pledgee with
respect to any and all matters relating to the Account, including, without
limitation, the segregation of the Pledged Rights in other separate account(s)
in accordance with the terms and conditions of the Agreement.  For
such purposes, please find attached a copy of the Agreement, executed both in
English and Portuguese languages. Promptly after the cessation of an Event of
Default, Pledgee shall send written notice of such cessation to you and you
shall immediately and conclusively rely on such notice in determining whether to
act pursuant to the instructions you receive from Pledgor with respect to the
Account. This
  3
  Deposit
Account Agreement and the instructions contained herein may not be revoked,
amended or modified without the written consent of Pledgee.
 
 Notwithstanding
anything herein to the contrary, the Depositary shall be permitted to act in
accordance with the determinations of any court order or judicial decision
binding on the Depositary and/or the Pledged Rights without being required to
dispute such court order or judicial decision.
 
 Yours
truly,
 
 
 QUALYTEXTIL
S/A
 
 
 By:
              /s/ Miguel G.
      BastosName:
              Miguel
      G. BastosTitle:
              CFO
 
 By: /s/
Elder Marcos Vieira da
Conceicao
 Name:
Elder Marcos Vieira da Conceicao
 Title:
CEO
 
 Agreed
and acknowledged:
 
 By:
              
              
              By:Name:
              
              
              Name:Title:
              
              
              Title:


4