Document:

Unassociated Document

    
      

    

    
      Exhibit
10.18

      

      INVENTORY
PLEDGE AND SECURITY AGREEMENT

      

      

      This
Pledge and Security Agreement (the “Agreement”) is made as of May 13, 2008 by
and among:

      

      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, represented in accordance with
its corporate documents,(the “Bank”);

      

      Qualytextil S/A, duly
organized and existing in accordance with the laws of Brazil, with its
registered office in the City of Salvador, State of Bahia, at Rua Luxemburgo,
s/no, Loteamento Granjas Rurais, Presidente Vargas, Quadra O, Lotes 82 and 83,
São Caetano, Brazil, enrolled with the Brazilian Taxpayers Roll of the Ministry
of Finance (CNPJ/MF) under no. 04.011.170/0001-22, herein duly represented in
accordance with its Charter Documents, together with its successors and
permitted assigns (the “Qualytextil”);
and

      

      As
Intervening and Consenting Parties:

      

      Lakeland do Brasil Empreendimentos
e Participações
Ltda., a company duly organized and existing in accordance with the laws
of Brazil, with its registered office at Avenida Bernardino de Campos, no 98,
sala 09, 14o andar, São Paulo – SP, Brazil, enrolled with the Brazilian
Taxpayers Roll of the Ministry of Finance (CNPJ/MF) under no.
09.484.003/0001-12, herein duly represented in accordance with its Articles of
Association, together with its successors and permitted assigns (the “Lakeland
Brazil”); and

      

      Lakeland Industries, Inc, duly
organized and existing in accordance with the laws of Delaware, with its
registered office at 701-07 Koehler Avenue, Ronkonkoma, 11779, herein duly
represented by its Chief Financial Officer, Mr. Christopher J. Ryan and Gary
Pokrassa (the “Lakeland”).

      

      

      W I T N E S S E T H:

      

      

      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 and the Bank (as amended, supplemented,
restated or otherwise modified and in effect from time to time 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 Brazil of the totality of
shares of Qualytextil;

      
        
           

        

        
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      WHEREAS,
after the execution of a Share Purchase Agreement by and among Lakeland,
Lakeland Brazil, Qualytextil, and its shareholders, Lakeland Brazil shall be the
legal owner of 1,507,701 shares representing, in the aggregate, 100% of the
capital stock of Qualytextil;

      

      WHEREAS,
it is a condition precedent of the Credit Agreement that Lakeland causes to be
created in favor of the Bank, a security interest over the inventory of
Qualytextil in all of its forms (as defined in Section 1.01.) to secure
Lakeland’s obligations arising from the Credit Agreement;

      

      WHEREAS
Qualytextil have agreed to pledge its inventory in all of its forms in favor of
the Bank;

      

      NOW,
THEREFORE, in consideration of the foregoing premises and mutual covenants
contained herein, the parties hereto agree as follows:

      

      

      ARTICLE
I - The Pledge

      

      1.01.     
   Pledge; Grant of Security
Interest. (a) In order to secure the full and prompt payment and
performance when due (whether at the stated maturity, by acceleration or
otherwise) of all the obligations under the Credit Agreement, (and which
Lakeland hereby acknowledges and recognizes for all legal purposes), Qualytextil
hereby unconditionally and irrevocably pledges to the Bank all its inventory in
all of its forms as described in Annex II, located at the places specified
therein (each, a “Location”) including,
without limitation, (i) all raw materials, work in process, finished goods and
materials used or consumed in the manufacture, production, preparation
or shipping thereof, (ii) goods in which Qualytextil has an interest in
mass or a joint or other interest or right of any kind (including, without
limitation, goods in which Qualytextil has an interest or right
as consignee) and (iii) goods that are returned to or repossessed or
stopped in transit by Qualytextil, and all accessions thereto and products
thereof and documents therefore (any and all such property being the "Inventory");

      

      (b)           Furthermore,
Qualytextil agrees with the creation of a security in favor of the Bank,
regarding other goods owned by Qualytextil, in substitution for any good that
belongs to the Inventory that had been sold during the term of this Agreement,
in whole or in part (the “Substitute Goods”),
as security for all present and future debts of Lakeland and all payments of any
nature due to the Bank. For this purpose, every six (6) months, Qualytextil
undertakes to send to the Bank a notice, substantially in the form of Annex III
hereto (the “Notice of
Pledge”), specifying  the  products in  the
Inventory which were sold during this period and that
were  substituted.

      

      (c)           Notwithstanding
the Notice of Pledge above stated, since the moment of sale of any product in
the Inventory as described in Annex II, the Substitute Goods shall forthwith be
subject to all of the clauses, terms and conditions of this Pledge
Agreement.

      

      (d)           In
case of Substitute Goods as stated in Section 1.01.(b) above, each three (3)
Notices of Pledge delivered by Qualytextil to the Bank , the Parties shall
promptly (i) execute an amendment to this Agreement (the “Amendment”) in order
to extend the lien created hereunder

      
        
           

        

        
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      to such
Substitute Goods, and (ii) provide the required filings and register the pledge
of such Substitute Goods in accordance with the provisions of Section 1.01.
hereof or take such other actions as may otherwise be required by applicable law
to extend such lien;

      

      (e)           The
Inventory pledged hereunder, including the Substitute Goods to be pledged shall
remain in the possession of Qualytextil until the sale of any of its
products.

      

      1.02.        
Definitions:
Interpretation. Capitalized terms used herein shall have the same
meanings ascribed to them in the Credit Agreement.

      

      

      ARTICLE
II – SECURED OBLIGATIONS

      

      2.01.        
The Debt: For
the purposes of Section 1,424 of the Brazilian Civil Code, this Agreement shall
cover, fully and without restrictions, any and all debts and monetary
liabilities of Lakeland to the Bank in relation to the Credit Agreement and
irrespective of whether of such debts or liabilities: (i) are present or future;
(ii) are actual, prospective, contingent or otherwise; (iii) are owed or
incurred as principal, interest, fees, charges, taxes, duties or other imposts,
damages (whether for breach of contract or tort or incurred on any other
ground), losses, costs or expenses (including judicial costs and attorney’s
fees) or on any account; (v) are owed at stated maturity, upon prepayment,
following acceleration or otherwise; or (vi) comprise any combination of the
above (the “Secured
Obligations”). 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 Annex I hereof.

      

      

      ARTICLE
III - REPRESENTATIONS AND WARRANTIES

      

      3.01.        Representations and
Warranties. Qualytextil represents and warrants to the Bank as of the
date hereof, as of the date of any Amendment and as of the date of any other
date that the following representations and warranties are required to be made
or are deemed to be made pursuant to this Agreement, to the Credit Agreement or
any other financing document, that:

      

      (a)           Qualytextil
is a corporation duly organized and validly existing and in good standing under
the laws of Brazil, and they have all requisite corporate power, authority and
legal right under the laws of such jurisdiction to enter into and perform their
obligations under this Agreement;

      

      (b)           Other
than the registration provided in Section 8.01. no consent, approval,
authorization or other action by, and no notice to or of, or declaration or
filing with, any governmental or other public body, or any other person, is
required for (i) the due authorization, execution, delivery, validly
enforceability of this Agreement and the performance by
Qualytextil  of its obligations hereunder or the consummation of the
transactions contemplated hereby; (ii) the creation, perfection or maintenance
of the first priority lien created hereby; and (iii) the

      
        
           

        

        
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      exercise
by the Bank of its rights under this Agreement or the remedies with respect of
the Inventory pledged herein;

      

      (c)           Annex
II hereto completely and accurately sets forth the number of goods of the
Inventory, as well as the corresponding value in Reais;

      

      (d)           Qualytextil
is the legal and record owner of, and has title to, its Inventory in which it
has granted to the Bank a first priority security interest, free of any and all
liens except for the lien created hereunder, and be the owner of any Substitute
Goods described in any of the Notices of Pledge and that the Inventory is and
any Substitute Goods will be free and unencumbered of all and any charges both
under the law and any agreements.

      

      (e)          
There are no options or other contractual arrangements for the pledge of the
Inventory, and there are no arrangements, preemptive rights or any other rights
or claims of any character relating to the purchase, repurchase, transfer, with
respect to the Inventory that restrict the transfer of or otherwise relate to
the Inventory, in either case that would affect the pledge hereunder;
and

      

      

      ARTICLE
IV – OBLIGATIONS OF QUALYTEXTIL

      

      4.01.       
At all times during such period as this pledge over the Inventory, is and
continues to be in full force and effect, Qualytextil undertakes:

      

      (a)           to
keep the Inventory at its own expense in good conditions of repair and in
perfect operating conditions, ensuring that the value thereof is not affected,
to perform any relevant maintenance therefore and to keep it free of any liens,
encumbrances or charges, as well as to defend it against all claims and legal
procedures brought by any person other than the Bank;

      

      (b)           to
maintain enough goods at its Inventory to accomplish with the lien created
herein.

      

      (c)           to
pay out of its own funds or for its own account any taxes, charges, license
fees, duties, contributions, assessments and/or any other amounts due or to
become due with regard to the Inventory, obtaining release and/or discharge
thereof;

      

      (d)           to
assume the liabilities for any and all damages caused by the Inventory to third
parties and/or to Qualytextil assets, holding the Bank harmless of the
liabilities for any and all damages caused by the Inventory to said third
parties or assets;

      

      (e)           
to keep the Inventory  at its own expense insured, in favor of the
Bank, against total risk, including, but not limited to damages caused by fire,
flood, earthquake, robbery, theft, embezzlement, vandalism and other reasonable
causes of damages, with reputable insurance companies and/or underwriters in a
manner, to an extent and on terms satisfactory to the Bank and customary for
such kind of assets in the Federative Republic of Brazil as well as to produce
to the Bank documentary evidence of compliance by Qualytextil with the
obligations contained

       

      
        
          
             

          

          
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      herein within 30 (thirty) days from the date of execution of this
Agreement and annually, within 30 (thirty) days from every anniversary of the
insurance policy;

       

      (f)           
 to appoint the Bank as loss payee under the insurance policy/ies relating
to the Inventory and to order the insurance company/ies to pay to the Bank
thereinafter any insurance proceeds and any premium
reimbursement;

      
        
           

        

        
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      (g)           to
inform the Bank and the insurance company(ies) promptly of the occurrence of any
insurance event relating to the Inventory and, as the case may be, to keep the
Bank advised as to the progress of any claim invoked against Qualytextil or any
of its property. In the event of any loss, Qualytextil shall not take any step
for the purpose of entering into a compromise, settlement or arrangement with
any of its insurance companies or creditors without prior written consent of the
Bank;

      

      (h)           to
immediately inform the Bank when any of the insurance policies related to the
Inventory or provided in this Agreement is terminated, revoked or
nullified;

      

      (i)          
 not to claim, ask or request, and not to file any lawsuit or judicial
proceeding against the Bank in order to compel it to take any measure in
relation to the Inventory or asking for any indemnification due to damages
occurred in the Inventory, independently of the cause and size of the
damage;

      

      (j)        
   not to  create or permit to exist any charge,
pledge, mortgage, hypothecation, lien or other encumbrance of any nature
whatsoever having the effect of creating a security interest over the Inventory
or to allow the Inventory to be used in violation of any law, regulation or
insurance policy applicable to the Inventory. Losses or damages caused to the
Inventory shall not exempt Qualytextil of any of the obligations assumed
hereunder;

      

      (k)           to
allow the representatives of the Bank or a third person on behalf of the Bank to
inspect the Inventory and the premises where the Inventory is installed at any
reasonable time and on reasonable notice;

      

      4.02.         Negative Covenants.
During the term of this Agreement, Qualytextil undertakes not to:

      

      (a)           create
any other encumbrances to the Inventory for so long as the Inventory are subject
to lien created hereunder without the prior written consent of the
Bank.

      

      (b)           take
or participate in any action or enter into any agreement which results or may
result in the loss of ownership and/or possession of all or part
of  the Inventory, including the Substitute Goods, for so long as the
Inventory are subject to the lien created hereunder, or any other transaction
which could have the same result as a encumbrance of any of the goods which are
part of the Inventory or which would, for any reason, be inconsistent with the
security interest of the Bank hereunder or defeat, impair, amend, restrict or
circumvent any right of the Bank hereunder, except that Qualytextil is hereby
authorized to sell, use or move the Inventory, with due regard to Section
4.01(b).

      

      4.03.        
Transfer of
Inventory. (a) In the event of an act of God or force majeure,
Qualytextil may transfer the Inventory affected by such acts of God or force
majeure, even to another place with storing conditions reasonably acceptable to
the Bank, in order to preserve and maintain the Inventory (or any part thereof)
in good storage conditions. In this event, Qualytextil shall, as soon as
practicable, but no later than five (5) Business Days after any such event,
inform the Bank of the place to which the Inventory (or any part thereof) has
been transferred to (“New Location”), which
place may then be inspected by the Bank. If the Bank

      
        
           

        

        
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      has
reasonable grounds not to approve the New Location, the Bank may inform
Qualytextil of its objection and request Qualytextil to remove and/or transfer
the Inventory (or any part thereof) to another location reasonably acceptable to
the Bank, in which case Qualytextil shall remove the Inventory to another
location within the timeframes reasonably agreed upon between the parties, at
the expenses of Qualytextil.

      

      (b)           In
the event the Inventory are transferred to the New Location pursuant to his
Section 4.03 (a), Qualytextil agrees to, as soon as practicable, but no later
than ten (10) Business Days after any such transfer, execute and deliver to the
Bank an amendment to this Agreement to update the list of the Inventory
contained in Annex II with the new location for each Inventory.

      

      (c)          
Any amendments to this Agreements to be executed pursuant to this Section 4.03
shall be registered with the competent real estate registry(ies) and delivered
to the Bank as provided and within the timeframes established under Section
8.01.

      

      

      ARTICLE
V - RISK OF LOSS

      

      5.01.        Qualytextil shall bear all risk of
loss with respect to the Inventory. The injury to or loss of the Inventory,
either partial or total, shall not release Qualytextil from payment or other
performance hereof.

      

      5.02.        Qualytextil
shall bear the risk of loss to the extent of any deficiency in the effective
insurance coverage with respect to loss or damage to the Inventory. Qualytextil
hereby assigns to Bank the proceeds of all property insurance covering the
Inventory up to the amount of the Secured Obligations and directs any insurer to
make payments directly to Bank.  Qualytextil hereby appoints Bank its
attorney-in-fact, which appointment shall be irrevocable and coupled with an
interest for so long as Secured Obligations are unpaid, to file proof of loss
and/or any other forms required to collect from any insurer any amount due from
any damage or destruction of the Inventory, to agree to and bind Qualytextil as
to the amount of said recovery, to designate payee(s) of such recovery, to grant
releases to insurer, to grant subrogation rights to any insurer, and to endorse
any settlement check or draft. Qualytextil agrees not to exercise any of the
foregoing powers granted to Bank without Bank's prior written
consent.

      

      

      ARTICLE
VI - DEFAULT

      

      6.01.         Default. (a) Upon the
occurrence of an Event of Default (as defined in the Credit Agreement) which is
continuing, the Bank may, in its sole discretion, irrespective of any prior or
subsequent notice, sell, assign, transfer or in any other way dispose of all or
part of the Inventory pledged hereunder (the “Sale”), at market
price and upon market terms and conditions and subject to applicable law, in or
out of court, in a public or private transaction, and shall apply the proceeds
of such Sale thus received for the payment of the Secured Obligations then due
and unpaid, as well as for the payment or reimbursement of all other costs and
expenses incurred as a result of the Sale.

      
        
           

        

        
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      (b)          
For the purposes hereof, it is hereby agreed and understood that (i) in the
event the amount obtained from the Sale, after the reimbursement to the Bank of
all costs and expenses incurred in connection with the Sale, including Bank’s
fees, attorney’s fees and court costs and expenses, exceeds the amounts due
under the Secured Obligations, the balance shall be promptly returned to
Qualytextil by the Bank, and (ii) in the event the amounts obtained from the
Sale are lower than the amounts due under the Secured Obligations, Qualytextil
shall remain liable for the payment of the outstanding balance.

      

      6.02.         Power of Attorney.
(a) For the purposes of this Article VI, Qualytextil hereby irrevocably and
irreversibly, as a condition to the pledge created hereunder, appoints the Bank
as its attorney-in-fact, pursuant to Article 684 and the sole paragraph of
Article 686 of the Brazilian Civil Code, to act solely, with broad powers to,
upon the occurrence of an Event of Default which is continuing carry out, in the
name and on behalf of Qualytextil, any acts necessary for the Sale, including
the execution of any documents required for the definitive transfer of the
Inventory pledge hereby, the Bank being authorized, at its sole discretion and
irrespective of Qualytextil’s consent, to delegate the powers granted herein to
any third party.

      

      (b)          
For such purpose Qualytextil has executed and delivered to the Bank on the date
hereof an irrevocable power-of-attorney, substantially in the form of Annex IV
and shall maintain such irrevocable power-of-attorney in full force and effect
until the Secured Obligations have been paid in full to the Bank to its
satisfaction.

      

      (c)           Any
notice by to the Bank that at such time an Event of Default has occurred or has
ceased shall be conclusive against Qualytextil and any other third
parties.

      

      

      ARTICLE
VII -TERM

      

      7.01.  
     Term. The pledge
hereunder and the power of attorneys granted herein will endure in their
entirety and will remain in full force and effect until the Secured Obligations
have been irrevocably and indefeasibly paid in full to the Bank has no further
commitment to lend under the Credit Agreement.

      

      

      ARTICLE
VIII - MISCELLANEOUS

      

      8.01.      
  Registration. (a)
Qualytextil undertakes to, within fifteen (15) days of the date of execution of
this Agreement, register it or any amendments hereto with the competent Real
Estate Registry (Cartório
de Registro de
Imóveis) of the city(ies) where the Inventory are located, provided that
Qualytextil shall pay any and all costs, expenses, fees and other charges
payable in connection thereto, necessary for the perfection of this Agreement or
any amendments thereto. Qualytextil shall provide the Bank with one original
counterpart of this Agreement or any amendment thereto duly registered with the
competent Real Estate Registry within five (5) Business Days after its
accomplishment.

      

      (b)         
  For registration purposes only, the amount of this Agreement is
R$3,512,416.57.

      
        
           

        

        
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      8.02.       
 Deposit of the
Inventory – Qualytextil hereby irrevocably undertakes to act as
depository, in accordance with the provisions of the Brazilian Civil Code, of
the Inventory and of any Substitute Goods.

      

      8.03.       
 Cumulative
Remedies. The rights, powers and remedies of the Parties under this
Agreement are cumulative and shall be in addition to all rights, powers and
remedies available to the Parties pursuant to the Credit Agreement and at law,
in equity or by statute and may be exercised successively or concurrently
without impairing the rights of the Parties hereunder.

      

      8.04.        
Waivers and
Amendments. This Agreement and its provisions shall only be modified,
amended, supplemented or waived with the express written consent of Qualytextil
and the Bank.

      

      8.05.       
 Severability. If any
provision of this Agreement shall be held to be invalid, illegal or
unenforceable under applicable law, 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.  To the extent permitted
by applicable law, the parties shall in good faith negotiate and execute an
Amendment to this Agreement to replace any such severed provision with a new
provision that (a) reflects their original intent and (b) is valid and
binding.  The first priority security interest created thereby shall,
to the extent permitted by applicable law, constitute a continuing first
priority Lien on and perfected first priority security interest in the
Inventory, in each case enforceable against Qualytextil in accordance with its
terms.

      

      8.06.        
Complete Agreement;
Successors and Assigns. This Agreement is intended by the parties as the
final expression of their agreement regarding the subject matter hereof and as a
complete and exclusive statement of the terms and conditions of such
agreement.  This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
assigns.

      

      8.07.         Counterparts. This
Agreement may be executed in several counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and the further
exercise of such right or remedy.

       

      8.08.         Language. This
Agreement is being executed in English and a sworn translation of this Agreement
shall be provided by Qualytextil for purposes of registry, pursuant to Section
8.01. above.

      

      8.09.         No Novation. It is
the express intent of the parties hereto that this Agreement is in no way
intended to constitute a novation of any of the terms of the Lon
Agreement.

      

      8.10.         Intervening and Consenting
Parties. The
Intervening and Consenting Parties hereby expressly consents to and agrees with
all of the terms and conditions of this Agreement and undertakes to faithfully
observe and fulfill any and all of its obligations arising
hereunder.

      

      8.11          Notices. All notices
and other communications provided for hereunder shall be provided in accordance
with the Credit Agreement.

      
        
           

        

        
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      8.12.        Clearance
Certificates. Qualytextil hereby delivers to the Bank the following
clearance certificates which copies are attached hereto as Annex V
I:

      

      
        	
                 
      

              	
                (i)

              	
                Clearance
      Certificate (Certidão
      Positiva com Efeitos de Negativa de Débitos relativos às Contribuições
      Previdenciárias e às de Terceiros) issued by the Federal Revenue
      Service (Secretaria da
      Receita Federal); and

              

      

      

      
        	
                 
      

              	
                (ii)

              	
                Clearance
      Certificate (Certidão
      Conjunta Positiva com Efeitos de Negativa de Débitos relativos aos
      Tributos Federais e à Dívida Ativa da União), joinly issued by the
      Office of the Attorney-General of the National Treasury (Procuradoria da Fazenda
      Nacional) and the Federal Revenue Service (Secretaria da Receita
      Federal).

              

      

      

      8.13.         Governing Law;
Jurisdiction.  This Agreement shall be governed by and
construed and interpreted in accordance with the laws of Brazil.  The
parties irrevocably submit to the jurisdiction of the courts sitting in the City
of São Paulo, State of São Paulo, Brazil, any action or proceeding to resolve
any dispute or controversy related to or arising from this Agreement and the
parties irrevocably agree that all claims in respect of such action or
proceeding may be heard and determined in such courts, with the express waiver
of the jurisdiction of any other court, however privileged it may
be.

      

      [SIGNATURE
PAGE TO FOLLOW]

       

      
        
          
          

        

        
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      IN
WITNESS WHEREOF, the parties have caused this Agreement to be duly executed in
the presence of the undersigned witnesses.

      

      

      WACHOVIA
BANK

      

      

      
        	
                By:

              	
                /s/ Roger
      Grossman

              	
                By:

              	 
      
	
                Name:

              	
                Roger
      Grossman

              	
                Name:

              	 
      
	
                Title:

              	
                Vice
      President

              	
                Title:

              	 
      

      

      

      QUALYTEXTIL
S.A.

      

      

      
        	
                By:

              	
                /s/ Miguel G.
      Bastos

              	
                By:

              	
                /s/ Elder Marcos
      Vieira da Conceicao

              
	
                Name:

              	
                Miguel
      G. Bastos

              	
                Name:

              	
                Elder
      Marcos Vieira da Conceicao

              
	
                Title:

              	
                CFO

              	
                Title:

              	
                CEO

              

      

      

      

      LAKELAND
INDUSTRIES, INC.

      

      

      
        	 	
                By:

              	
                /s/
      Gary A. Pokrassa

              	 
	 	
                Name:

              	
                Gary
      Pokrassa

              	 
	 	
                Title:

              	
                CFO

              	 

      

      

      LAKELAND
DO BRASIL EMPREENDIMENTOS E PARTICIPAÇÕES LTDA.

      

      

      

      
        	
                By:

              	
                 /s/
      Jose Tavares Lucena

              	
                By:

              	 
      
	
                Name:

              	
                 Jose
      Tavares Lucena

              	
                Name:

              	 
      
	
                Title:

              	
                 Administrator

              	
                Title:

              	 
      
	 
      	 
      	 
      	 
      

      

       

      
        	
                WITNESSES:

              	 	 
      	 
      
	 
      	 
      	 	 
      	 
      
	 
      	 
      	 	 
      	 
      
	
                Name:

              	 
      	 	
                Name:

              	 
      
	
                ID:

              	 
      	 	
                ID:

              	 
      

      

      
        
           

        

        
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      ANNEX
I

      

      

      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 Annex I(a)

      

      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%

      
        
           

        

        
          12

          
            

          

        

        
           

        

      

      ANNEX
I.(a)

      

      SECOND
AMENDED AND RESTATED PROMISSORY NOTE

      
        
           

        

        
          13

          
            

          

        

        
           

        

      

      ANNEX
II

      

      

      DESCRIPTION
AND LOCATION OF THE INVENTORY AS OF APRIL 30, 2008

      

      
        	
                Quantity

              	
                Quality

              	
                Description

              	
                Location

              

      

      
        
           

        

        
          14

          
            

          

        

        
           

        

      

      ANNEX
III

      

      NOTICE
OF PLEDGE

      

      

      Pursuant
to the Inventory Pledge and Security Agreement, dated as of May 13, 2008 by and
among (i) WACHOVIA BANK (the “Bank”); and QUALYTEXTIL S/A (the
“Qualytextil”), and as Intervening and Consenting Parties; LAKELAND DO BRASIL
EMPREENDIMENTOS E PARTICIPAÇÕES LTDA., and LAKELAND INDUSTRIES, INC; we
hereby give in pledge and transfer to the Bank, under the terms and conditions
of the above referred Inventory Pledge and Security Agreement and for the
purposes specified therein, the following Substitute Goods:

      

      
        	
                Quantity

              	
                Quality

              	
                Description

              	
                Location

              

      

      

      May 13,
2008

      

      QUALYTEXTIL S/A

      

      

      By: /s/ Miguel G.
Bastos

      Name:
Miguel G. Bastos

      Title:
CFO

      

      

      Accepted
by:  /s/
Roger Grossman

      

      WACHOVIA
BANK

      
        
           

        

        
          15

          
            

          

        

        
           

        

      

      ANNEX
IV

      

      POWER
OF ATTORNEY

      

      QUALYTEXTIL S/A, A company
duly organized and existing in accordance with the laws of Brazil, with its
registered office in the City of Salvador, State of Bahia, at Rua Luxemburgo,
s/no, Loteamento Granjas Rurais, Presidente Vargas, Quadra O, Lotes 82 and 83,
São Caetano, Brazil, enrolled with the Brazilian Taxpayers Roll of the Ministry
of Finance (CNPJ/MF) under no. 04.011.170/0001-22, herein duly represented in
accordance with its Charter Documents, together with its successors and
permitted assigns (the “Qualytextil”) hereby irrevocably and irreversibly
appoints WACHOVIA BANK,
duly organized and existing in accordance with the laws of New York, with its
registered office at 12 East 49th Street, 20th Floor, New York, New
York  10017, represented in accordance with its corporate documents
(the “Bank”), as its attorney-in-fact to act in its name and place, with the
following powers:

      

      

      
        	
                (a)

              	
                upon
      the occurrence of an Event of Default which is continuing (as defined in
      the Credit Agreement), to sell, assign, transfer or in any other way
      dispose of all or part of the Inventory pledged to the Bank pursuant to
      the Inventory Pledge and Security Agreement entered into between the Bank
      and Qualytextil on May 13, 2008 (as from time to time amended, the “Inventory Pledge and
      Security Agreement”), at market prices and upon market terms and
      conditions and subject to applicable law irrespective of any prior or
      subsequent notice to Qualytextil with respect thereto, in accordance with
      the provisions set forth in the Inventory Pledge and Security Agreement
      and in Article 1,433, Item IV, and Article 1,435, Item V, of the Brazilian
      Civil Code, and apply the proceeds thus received for the payment of the
      Secured Obligations the due and unpaid as well for the payment or
      reimbursement of all other costs and expenses incurred as a result of such
      sale, being vested with all necessary powers incidental thereto,
      including, without limitation, the power and authority to execute transfer
      documents, including discharge documentation with respect to the
      Inventory, to purchase foreign currency and make all remittances abroad,
      to sign any necessary foreign exchange contract with financial
      institutions in Brazil that may be required to such remittances and to
      represent the Grantor before the Central Bank of Brazil, financial
      institutions, private and public law legal entities and any Brazilian
      governmental authority when necessary to accomplish the purpose of the
      Inventory Pledge and Security Agreement;
and

              

      

      

      
        	
                (b)

              	
                upon
      the occurrence of an Event of Default which is continuing, to take any
      action and to execute and deliver any instrument consistent with the terms
      of the as deemed

              

      

      
        
           

        

        
          16

          
            

          

        

        
           

        

      

      necessary
or advisable to accomplish the purpose of the Inventory Pledge and Security
Agreement.

      

      Any
notice by the Bank that at such time an Event of Default has occurred and is
continuing shall be conclusive against Qualytextil and all other third parties.
Capitalized terms used, but not defined herein, shall have the meaning ascribed
to them in the Credit Agreement and/or in the Inventory Pledge and Security
Agreement. The powers granted herein are in addition to the powers granted by
the Bank in the Inventory Pledge and Security Agreement and not to cancel or
revoke any of such powers. This power of attorney is irrevocable and is granted
as a condition to the Inventory Pledge and Security Agreement and as a means to
comply with the obligations set forth therein, in accordance with the Article
684 and the sole paragraph of Article 686 of the Brazilian Civil Code, and shall
be valid and effective until The Bank has receives full payment of the
obligations secured by the Inventory Pledge and Security Agreement to its
satisfaction. The Bank may delegate the power granted through this power of
attorney.

      

      Qualytextil
has caused its duly authorizes representatives to execute this power of attorney
on May 13, 2008.

      

      

      QUALYTEXTIL
S/A

      

       

      By: /s/ Miguel G.
Bastos

      Name:
Miguel G. Bastos

      Title:
CFO

      
        
           

        

        
          17

          
            

          

        

        
           

        

      

      ANNEX
V

      

      CLEARANCE
CERTIFICATES

    

     

     

     18Unassociated Document

    
      

    

    
      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 15 below,
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 Conceicao

              
	
                Name:

              	
                Miguel
      G. Bastos

              	
                Name:

              	
                Elder
      Marcos Vieira da Conceicao

              
	
                Title:

              	
                CFO

              	
                Title:

              	
                CEO

              

      

      

      

      WACHOVIA
BANK, NATIONAL ASSOCIATION

       

      

      
        
          	 	
                  By:

                	
                   /s/ Roger
      Grossman

                	 
	 	
                  Name:

                	
                   Roger
      Grossman

                	 
	 	
                  Title:

                	
                  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.
      Bastos

              
	
                Name:

              	
                Miguel
      G. Bastos

              
	
                Title:

              	
                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

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