Exhibit 10.2
 
 
 
 
 
 
 
 
 
 
SECURITY AGREEMENT
 
Dated January 5, 2009

 
From

 
The Grantors referred to herein

 
as Grantors

 
to

 
Wachovia Bank, National Association

 
as Administrative Agent
 
 
 
 
 
 
 
 
 
 

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T A B L E  O F  C O N T E N T S
 
Section
Page
Section 1. Grant of Security
1
Section 2. Security for Obligations
3
Section 3. Grantors Remain Liable
3
Section 4. Representations and Warranties
4
Section 5. Further Assurances
5
Section 6. As to Inventory
6
Section 7. Insurance
6
Section 8. Post-Closing Changes; Collections on Receivables and Related
Contracts
6
Section 9. Transfers and Other Liens
7
Section 10. Administrative Agent Appointed Attorney in Fact
7
Section 11. Administrative Agent May Perform
7
Section 12. The Administrative Agent’s Duties
8
Section 13. Remedies
8
Section 14. Indemnity and Expenses
9
Section 15. Amendments; Waivers; Additional Grantors; Etc.
10
Section 16. Notices, Etc.
10
Section 17. Continuing Security Interest; Assignments under the 2005 Credit
Agreement
11
Section 18. Release; Termination
11
Section 19. Security Interest Absolute
12
Section 20. Execution in Counterparts
13
Section 21. Governing Law; Consent to Jurisdiction
13

 
Schedules
 
Schedule I
–
Location, Chief Executive Office, Type of Organization, Jurisdiction of
Organization and Organizational Identification Number
Schedule II
–
Tradenames
Schedule III
–
Changes in Name, Location, Etc.
Schedule IV
–
Locations of Inventory

Exhibits
 
Exhibit A
–
Form of Security Agreement Supplement

 
 

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SECURITY AGREEMENT
 
SECURITY AGREEMENT dated January 5, 2009 made by Jones Apparel Group USA, Inc.,
a Delaware corporation (the “Borrower”), Jones Retail Corporation, Nine West
Footwear Corporation and certain subsidiaries of the Credit Parties (as defined
in the 2005 Credit Agreement referred to below) listed on the signature pages
hereof (the Credit Parties and the subsidiaries so listed being, collectively,
the “Grantors”), to Wachovia Bank, National Association, as agent (the
“Administrative Agent”) for the Secured Parties (as defined in the 2005 Credit
Agreement referred to below).
 
PRELIMINARY STATEMENTS.
 
(1)  Reference is made to the Amended and Restated Credit Agreement dated as of
May 16, 2005, as amended by Amendment No. 1 dated as of July 27, 2007, Amendment
No. 2 dated as of June 6, 2008 and as further amended and restated by Amendment
No. 3 dated as of January 5, 2009 (as amended and restated, the “2005 Credit
Agreement”) among Jones Apparel Group USA, Inc. (formerly known as Kasper,
Ltd.), a Delaware corporation, as the Borrower, the Additional Obligors, the
Lenders party thereto, and Wachovia Bank, National Association, as
Administrative Agent for the Lenders.
 
(2)  The Borrower has requested changes and modifications (the “Amendment”) to
the 2005 Credit Agreement.  It is a condition precedent to the effectiveness of
the Amendment that the Grantors shall have granted the security interest
contemplated by this Agreement.  Each Grantor will derive substantial direct and
indirect benefit from the transactions contemplated by the Loan Documents and
the Additional Secured Agreements.
 
(3)  Terms defined in the 2005 Credit Agreement and not otherwise defined in
this Agreement are used in this Agreement as defined in the 2005 Credit
Agreement.  Further, unless otherwise defined in this Agreement or in the 2005
Credit Agreement, terms defined in Article 8 or 9 of the UCC (as defined below)
are used in this Agreement as such terms are defined in such Article 8 or
9.  “UCC” means the Uniform Commercial Code as in effect from time to time in
the State of New York; provided that, if perfection or the effect of perfection
or non perfection or the priority of the security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of New York, “UCC” means the Uniform Commercial Code as in effect
from time to time in such other jurisdiction for purposes of the provisions
hereof relating to such perfection, effect of perfection or non perfection or
priority.
 
NOW, THEREFORE, in consideration of the premises and in order to induce the
Secured Parties to consent to the Amendment, to continue to perform under the
existing Additional Secured Agreements and to enter into the Additional Secured
Agreements, each Grantor hereby agrees with the Administrative Agent for the
ratable benefit of the Secured Parties as follows:
 
Section 1.  Grant of Security.  Subject to the proviso to this Section 1, each
Grantor hereby grants to the Administrative Agent, for the ratable benefit of
the Secured Parties, a security interest in such Grantor’s right, title and
interest in and to the following, in each case, as to each type of property
described below, whether now owned or hereafter acquired by such Grantor,
wherever located, and whether now or hereafter existing or arising
(collectively, the “Collateral”):
 
 

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(a) all inventory in all of its forms, 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 such Grantor has an interest in mass or a joint or other interest or right
of any kind (including, without limitation, goods in which such Grantor has an
interest or right as consignee) and (iii) goods that are returned to or
repossessed or stopped in transit by such Grantor, and all accessions thereto
and products thereof and documents therefor, including, without limitation,
computer programs and supporting information that constitute inventory within
the meaning of the UCC (any and all such property being the “Inventory”);
 
(b) all accounts, whether or not arising out of or in connection with the sale
or lease of goods or the rendering of services and whether or not earned by
performance, and all rights now or hereafter existing in and to all supporting
obligations and in and to all security agreements, Liens, leases, letters of
credit and other contracts securing or otherwise relating to the foregoing
property (any and all of such accounts, being the “Receivables,” and any and all
such supporting obligations, security agreements, Liens, leases, letters of
credit and other contracts being the “Related Contracts”);
 
(c) to the extent constituting proceeds of the Collateral described in clauses
(a) and (b) of this Section 1, chattel paper (including, without limitation,
tangible chattel paper and electronic chattel paper), instruments, documents,
deposit accounts, letter-of-credit rights, general intangibles and other
obligations of any kind, all investment property in which such Grantor has now,
or acquires from time to time hereafter, any right, title or interest in any
manner from the proceeds of Receivables or Related Contracts, and the
certificates or instruments, if any, representing or evidencing such investment
property, and all dividends, distributions, return of capital, interest, cash,
instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
investment property and all warrants, rights or options issued thereon or with
respect thereto;
 
(d) all books and records (including, without limitation, customer lists, credit
files, printouts and other computer output materials and records) of such
Grantor pertaining to any of the Collateral; and
 
(e) all proceeds of, collateral for, income, royalties and other payments now or
hereafter due and payable with respect to, and supporting obligations relating
to, any and all of the Collateral (including, without limitation, proceeds,
collateral and supporting obligations that constitute property of the types
described in clauses (a) through (d) of this Section 1) and, to the extent not
otherwise included, all payments under insurance (whether or not the
Administrative Agent is the loss payee thereof), or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing Collateral,
 
 
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Security Agreement

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provided, that, notwithstanding any of the foregoing to the contrary, for so
long as any notes or other debt securities are outstanding under the Indenture,
with respect to each Grantor that is a Restricted Party (as defined in the
Indenture), the Collateral shall not include any property of such Restricted
Party which, pursuant to the Indenture, would require such Grantor to grant
Liens in favor of the Trustee (as defined in the Indenture) to equally and
ratably secure any of the notes or other debt securities issued pursuant to the
Indenture.
 
Section 2.  Security for Obligations.  (a)  This Agreement secures, in the case
of each Grantor, the payment of all Obligations of such Grantor now or hereafter
existing under the Loan Documents and all obligations of such Grantor or any of
its Affiliates now or hereafter existing under the Additional Secured
Agreements, whether direct or indirect, absolute or contingent, and whether for
principal, reimbursement obligations, interest, fees, premiums, penalties,
indemnifications, contract causes of action, costs, expenses or otherwise,
provided, that, with respect to the Grantors that are Restricted Parties, in no
event shall the aggregate amount of obligations secured by the Collateral of
such Grantors exceed the amounts permitted to be secured by Liens granted by
such Grantors without the requirement to equally and ratably secure any of the
notes or other debt securities issued pursuant to the Indenture (all such
obligations being the “Secured Obligations”).  Without limiting the generality
of the foregoing, this Agreement secures, as to each Grantor, the payment of all
amounts that constitute part of the Secured Obligations and would be owed by
such Grantor to any Secured Party under the Loan Documents and the Additional
Secured Agreements but for the fact that they are unenforceable or not allowable
due to the existence of a bankruptcy, reorganization or similar proceeding
involving a Credit Party.
 
(b)  Each Grantor, and by its acceptance of this Agreement, the Administrative
Agent and each other Secured Party, hereby confirms that it is the intention of
all such Persons that this Agreement and the obligations of each Grantor
hereunder not constitute a fraudulent transfer or conveyance for purposes of
Bankruptcy Law (as hereinafter defined), the Uniform Fraudulent Conveyance Act,
the Uniform Fraudulent Transfer Act or any similar foreign, federal or state law
to the extent applicable to this Agreement and the obligations of each Grantor
hereunder.  To effectuate the foregoing intention, the Administrative Agent, the
other Secured Parties and the Grantors hereby irrevocably agree that the
obligations of each Grantor under this Agreement at any time shall be limited to
the maximum amount as will result in the Secured Obligations of such Grantor not
constituting a fraudulent transfer or conveyance.  For purposes hereof,
“Bankruptcy Law” means any proceeding of the type referred to in Section 6.01(f)
of the Credit Agreement or Title 11, U.S. Code, or any similar foreign, federal
or state law for the relief of debtors.
 
Section 3.  Grantors Remain Liable.  Anything herein to the contrary
notwithstanding, (a) each Grantor shall remain liable under the contracts and
agreements included in such Grantor’s Collateral to the extent set forth therein
to perform all of its duties and obligations thereunder to the same extent as if
this Agreement had not been executed, (b) the exercise by the Administrative
Agent of any of the rights hereunder shall not release any Grantor from any of
its duties or obligations under the contracts and agreements included in the
Collateral, including, without limitation, the Related Contracts and (c) no
Secured Party shall have any obligation or liability under the contracts and
agreements included in the Collateral by reason of this Agreement, any other
Loan Document or any Additional Secured Agreement, nor shall any Secured Party
be obligated to perform any of the obligations or duties of any Grantor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
 
 
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Security Agreement

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Section 4.  Representations and Warranties.  Each Grantor represents and
warrants as follows:
 
(a)  Such Grantor’s exact legal name, location, chief executive office, type of
organization, jurisdiction of organization and organizational identification
number is set forth in Schedule I hereto.  Such Grantor has no trade names other
than as listed on Schedule II hereto.  Within the five years preceding the date
hereof, such Grantor has not changed its name, location, chief executive office,
type of organization, jurisdiction of organization or organizational
identification number from those set forth in Schedule I hereto except as set
forth in Schedule III hereto.
 
(b)  Such Grantor is the legal and beneficial owner of the Collateral granted or
purported to be granted by it free and clear of any Lien, claim, option or right
of others, except for the security interest created under this Agreement and
those permitted under Section 11.3 of the Credit Agreement.  No effective
financing statement or other instrument similar in effect covering all or any
part of such Collateral or listing such Grantor or any trade name of such
Grantor as debtor is on file in any recording office, except such as may have
been filed in favor of the Administrative Agent relating to the Loan Documents
and the Additional Secured Agreements or in connection with Liens permitted
under Section 11.3 of the Credit Agreement.
 
(c)  All of the Inventory of such Grantor is located at the places specified
therefor in Schedule IV hereto or at another location as to which such Grantor
has complied with the requirements of Section 6(a).  Such Grantor has exclusive
possession and control of its Inventory, other than Inventory stored at any
leased premises or warehouse for which a landlord’s or warehouseman’s agreement,
in form and substance satisfactory to the Administrative Agent, is in effect.
 
(d)  None of the Receivables are evidenced by a promissory note or other
instrument that has not been delivered to the Administrative Agent.
 
(e)  This Agreement creates in favor of the Administrative Agent for the benefit
of the Secured Parties a valid security interest in the Collateral granted by
such Grantor, securing the payment of the Secured Obligations.  The Uniform
Commercial Code financing statements or other appropriate filings, recordings or
registrations prepared by the Administrative Agent based upon the information
provided to the Administrative Agent pursuant to clause (a) of this Section 4
(or specified by notice from the Borrower to the Administrative Agent after the
date hereof in the case of filings, recordings or registrations required in the
future), are all the filings, recordings and registrations that are necessary to
establish a legal, valid and perfected security interest in favor of the
Administrative Agent (for the ratable benefit of the Secured Parties) in respect
of all Collateral in which a security interest may be perfected by filing,
recording or registration in the United States (or any political subdivision
thereof) and its territories and possessions.
 
 
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Security Agreement

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(f)  No authorization or approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body or any other third party is
required for (i) the grant by such Grantor of the security interest granted
hereunder or for the execution, delivery or performance of this Agreement by
such Grantor, (ii) the perfection or maintenance of the security interest
created hereunder, except for the filing of financing and continuation
statements under the UCC described in clause (e) above, which financing
statements have been duly filed and are in full force and effect, or (iii) the
exercise by the Administrative Agent of its rights provided for in this
Agreement or the remedies in respect of the Collateral pursuant to this
Agreement.
 
(g)  The Inventory that has been produced or distributed by such Grantor has
been produced in compliance with all requirements of applicable law, including,
without limitation, the Fair Labor Standards Act.
 
Section 5.  Further Assurances.  (a)  Each Grantor agrees that from time to
time, at the expense of such Grantor, such Grantor will promptly execute and
deliver, or otherwise authenticate, all further instruments and documents, and
take all further action necessary or that the Administrative Agent may
reasonably request, in order to perfect and reasonably maintain any pledge or
security interest granted or purported to be granted by such Grantor hereunder
or to enable the Administrative Agent to exercise and enforce its rights and
remedies hereunder with respect to any Collateral of such Grantor.  Without
limiting the generality of the foregoing, each Grantor will promptly with
respect to Collateral of such Grantor:  (i) if any such Collateral shall be
evidenced by a promissory note or other instrument or chattel paper, deliver and
pledge to the Administrative Agent hereunder such note or instrument or chattel
paper duly indorsed and accompanied by duly executed instruments of transfer or
assignment, all in form and substance satisfactory to the Administrative Agent;
(ii) file such financing or continuation statements, or amendments thereto, and
such other instruments or notices, as may be necessary, or as the Administrative
Agent may reasonably request, in order to perfect and preserve the security
interest granted or purported to be granted by such Grantor hereunder; and (iii)
deliver to the Administrative Agent evidence that all other actions that the
Administrative Agent may deem reasonably necessary in order to perfect and
protect the security interest granted or purported to be granted by such Grantor
under this Agreement has been taken.
 
(b)  Each Grantor hereby authorizes the Administrative Agent to file one or more
financing or continuation statements, and amendments thereto, including, without
limitation, one or more financing statements indicating that such financing
statements cover all of the inventory and accounts receivable (or words of
similar effect) of such Grantor.  A photocopy or other reproduction of this
Agreement shall be sufficient as a financing statement where permitted by
law.  Each Grantor ratifies its authorization for the Administrative Agent to
have filed such financing statements, continuation statements or amendments
filed prior to the date hereof.
 
(c)  Each Grantor will furnish to the Administrative Agent from time to time
statements and schedules further identifying and describing the Collateral of
such Grantor and such other reports in connection with such Collateral as the
Administrative Agent may reasonably request, all in reasonable detail.
 
 
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Security Agreement

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Section 6.  As to Inventory.  (a)  Each Grantor will keep its Inventory (other
than Inventory sold in the ordinary course of business) at the places therefor
specified in Section 4(c) or, upon 30 days’ prior written notice to the
Administrative Agent, at such other places designated by such Grantor in such
notice.
 
(b)  Each Grantor will promptly furnish to the Administrative Agent a statement
respecting any loss or damage exceeding $5,000,000 per occurrence to any of its
Inventory.
 
(c)  Each Grantor will pay promptly when due all property and other taxes,
assessments and governmental charges or levies imposed upon, and all claims
(including, without limitation, claims for labor, materials and supplies)
against, its Inventory, except to the extent payment thereof is not required by
Section 9.5 of the 2005 Credit Agreement.  In producing its Inventory, each
Grantor will comply with all requirements of applicable law, including, without
limitation, the Fair Labor Standards Act.
 
Section 7.  Insurance.  Each Grantor will, at its own expense, maintain
insurance with respect to its Inventory in accordance with the requirements of
Section 9.3 of the Credit Agreement.
 
Section 8.  Post-Closing Changes; Collections on Receivables and Related
Contracts.  (a)  No Grantor will change its name, type of organization,
jurisdiction of organization, organizational identification number or location
from those set forth in Section 4(a) of this Agreement without first giving at
least 30 days’ prior written notice to the Administrative Agent and taking all
action required by the Administrative Agent for the purpose of perfecting or
protecting the security interest granted by this Agreement.  Each Grantor will
hold and preserve its records relating to the Collateral, including, without
limitation, the Related Contracts, and will permit representatives of the
Administrative Agent at any time during normal business hours to inspect and
make abstracts from such records and other documents.  If any Grantor does not
have an organizational identification number and later obtains one, it will
forthwith notify the Administrative Agent of such organizational identification
number.
 
(b)  Except as otherwise provided in this subsection (b), each Grantor will
continue to collect, at its own expense, all amounts due or to become due such
Grantor in respect of the Receivables and under the Related Contracts.  In
connection with such collections, such Grantor may take (and, at the
Administrative Agent’s direction, will take) such action as such Grantor or the
Administrative Agent may deem necessary to enforce collection of the Receivables
and Related Contracts; provided, however, that the Administrative Agent shall
have the right at any time upon the occurrence and during the continuance of an
Event of Default and upon written notice to such Grantor of its intention to do
so, to notify the obligors in respect of any Receivables and under any Related
Contracts of the assignment of such Receivables and Related Contracts to the
Administrative Agent and to direct such obligors to make payment of all amounts
due or to become due to such Grantor thereunder directly to the Administrative
Agent and, upon such notification and at the expense of such Grantor, to enforce
collection of any such Receivables and Related Contracts, to adjust, settle or
compromise the amount or payment thereof, in the same manner and to the same
extent as such Grantor might have done, and to otherwise exercise all rights
with respect to such Receivables and Related Contracts, including, without
limitation, those set forth set forth in Section 9-607 of the UCC.  After
receipt by any Grantor of the notice from the Administrative Agent referred to
in the proviso to the preceding sentence, (i) all amounts and proceeds
(including, without limitation, instruments) received by such Grantor in respect
of the Receivables and Related Contracts of such Grantor shall be received in
trust for the benefit of the Administrative Agent hereunder, shall be segregated
from other funds of such Grantor and shall be forthwith paid over to the
Administrative Agent in the same form as so received (with any necessary
indorsement) and if any Event of Default shall have occurred and be continuing,
applied as provided in Section 13(b) and (ii) such Grantor will not adjust,
settle or compromise the amount or payment of any Receivable or amount due on
any Related Contract, release wholly or partly any obligor thereof or allow any
credit or discount thereon.  No Grantor will permit or consent to the
subordination of its right to payment of any Receivables or amount due under any
Related Contracts to any other indebtedness or obligations of the obligor
thereof.
 
 
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Security Agreement

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Section 9.  Transfers and Other Liens.  Each Grantor agrees that it will not (i)
sell, assign or otherwise dispose of, or grant any option with respect to, any
of the Collateral, other than sales, assignments and other dispositions of
Collateral, and options relating to Collateral, permitted under the terms of the
2005 Credit Agreement, or (ii) create or suffer to exist any Lien upon or with
respect to any of the Collateral of such Grantor except for the pledge,
assignment and security interest created under this Agreement and Liens
permitted under the 2005 Credit Agreement.
 
Section 10.  Administrative Agent Appointed Attorney in Fact.  Each Grantor
hereby irrevocably appoints the Administrative Agent such Grantor’s attorney in
fact, with full authority in the place and stead of such Grantor and in the name
of such Grantor or otherwise, from time to time upon the occurrence and during
the continuance of an Event of Default, in the Administrative Agent’s
discretion, to take any action and to execute any instrument that the
Administrative Agent may reasonably request to accomplish the purposes of this
Agreement, including, without limitation:
 
(a) to obtain and adjust insurance required to be paid to the Administrative
Agent pursuant to Section 7,
 
(b) to ask for, demand, collect, sue for, recover, compromise, receive and give
acquittance and receipts for moneys due and to become due under or in respect of
any of the Collateral,
 
(c) to receive, indorse and collect any drafts or other instruments, documents
and chattel paper, in connection with clause (a) or (b) above, and
 
(d) to file any claims or take any action or institute any proceedings that the
Administrative Agent may deem necessary for the collection of any of the
Collateral or otherwise to enforce compliance with the rights of the
Administrative Agent with respect to any of the Collateral.
 
Section 11.  Administrative Agent May Perform.  If any Grantor fails to perform
any agreement contained herein, the Administrative Agent may, but without any
obligation to do so and without notice, itself perform, or cause performance of,
such agreement, and the expenses of the Administrative Agent incurred in
connection therewith shall be payable by such Grantor under Section 14.
 
 
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Security Agreement

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Section 12.  The Administrative Agent’s Duties.  (a)  The powers conferred on
the Administrative Agent hereunder are solely to protect the Secured Parties’
interest in the Collateral and shall not impose any duty upon it to exercise any
such powers.  Except for the safe custody of any Collateral in its possession
and the accounting for moneys actually received by it hereunder, the
Administrative Agent shall have no duty as to any Collateral, as to ascertaining
or taking action with respect to calls, conversions, exchanges, maturities,
tenders or other matters relative to any Collateral, whether or not any Secured
Party has or is deemed to have knowledge of such matters, or as to the taking of
any necessary steps to preserve rights against any parties or any other rights
pertaining to any Collateral.  The Administrative Agent shall be deemed to have
exercised reasonable care in the custody and preservation of any Collateral in
its possession if such Collateral is accorded treatment substantially equal to
that which it accords its own property.
 
(b)  Anything contained herein to the contrary notwithstanding, the
Administrative Agent may from time to time, when the Administrative Agent deems
it to be necessary, appoint one or more subagents (each a “Subagent”) for the
Administrative Agent hereunder with respect to all or any part of the
Collateral.  In the event that the Administrative Agent so appoints any Subagent
with respect to any Collateral, (i) the assignment and pledge of such Collateral
and the security interest granted in such Collateral by each Grantor hereunder
shall be deemed for purposes of this Security Agreement to have been made to
such Subagent, in addition to the Administrative Agent, for the ratable benefit
of the Secured Parties, as security for the Secured Obligations of such Grantor,
(ii) such Subagent shall automatically be vested, in addition to the
Administrative Agent, with all rights, powers, privileges, interests and
remedies of the Administrative Agent hereunder with respect to such Collateral,
and (iii) the term “Administrative Agent,” when used herein in relation to any
rights, powers, privileges, interests and remedies of the Administrative Agent
with respect to such Collateral, shall include such Subagent; provided, however,
that no such Subagent shall be authorized to take any action with respect to any
such Collateral unless and except to the extent expressly authorized in writing
by the Administrative Agent.
 
Section 13.  Remedies.  If any Event of Default shall have occurred and be
continuing:
 
(a)  The Administrative Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party upon default under the UCC
and also may:  (i) require each Grantor to, and each Grantor hereby agrees that
it will at its expense and upon request of the Administrative Agent forthwith,
assemble all or part of the Collateral as directed by the Administrative Agent
and make it available to the Administrative Agent at a place and time to be
designated by the Administrative Agent that is reasonably convenient to both
parties; (ii) without notice except as specified below, sell the Collateral or
any part thereof in one or more parcels at public or private sale, at any of the
Administrative Agent’s offices or elsewhere, for cash, on credit or for future
delivery, and upon such other commercially reasonable terms; (iii) occupy any
premises owned or leased by any of the Grantors where the Collateral or any part
thereof is assembled or located for a reasonable period in order to effectuate
its rights and remedies hereunder or under law, without obligation to such
Grantor in respect of such occupation; and (iv) exercise any and all rights and
remedies of any of the Grantors under or in connection with the Collateral, or
otherwise in respect of the Collateral, including, without limitation, (A) any
and all rights of such Grantor to demand or otherwise require payment of any
amount under, or performance of any provision, in respect of the Receivables,
the Related Contracts and the other Collateral, and (B) exercise all other
rights and remedies with respect to the Receivables, the Related Contracts and
the other Collateral, including, without limitation, those set forth in Section
9-607 of the UCC.  Each Grantor agrees that, to the extent notice of sale shall
be required by law, at least ten days’ notice to such Grantor of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification.  The Administrative Agent shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given.  The Administrative Agent may adjourn any public or private sale
from time to time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to which it was
so adjourned.
 
 
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(b)  Any cash held by or on behalf of the Administrative Agent and all cash
proceeds received by or on behalf of the Administrative Agent in respect of any
sale of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Administrative Agent, be held by the
Administrative Agent as collateral for, and/or then or at any time thereafter
applied (after payment of any amounts payable to the Administrative Agent
pursuant to Section 14) in whole or in part by the Administrative Agent for the
ratable benefit of the Secured Parties against, all or any part of the Secured
Obligations, in the following manner:
 
(i)          first, paid to the Administrative Agent for any amounts then owing
to the Administrative Agent pursuant to Section 14.2 of the 2005 Credit
Agreement or otherwise under the Loan Documents; and
 
(ii)        second, ratably paid to the other Secured Parties for the Secured
Obligations.
 
Any surplus of such cash or cash proceeds held by or on the behalf of the
Administrative Agent and remaining after payment in full of all the Secured
Obligations shall be promptly paid over to the applicable Grantor or to
whomsoever may be lawfully entitled to receive such surplus.
 
(c)  All payments received by any Grantor in respect of the Collateral shall be
received in trust for the benefit of the Administrative Agent, shall be
segregated from other funds of such Grantor and shall be forthwith paid over to
the Administrative Agent in the same form as so received (with any necessary
indorsement).
 
Section 14.  Indemnity and Expenses.  (a)  Each Grantor agrees to indemnify,
defend and save and hold harmless each Secured Party and each of their
Affiliates and their respective officers, directors, employees, agents and
advisors (each, an “Indemnified Party”) from and against, and shall pay on
demand, any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees and expenses of counsel) that
may be incurred by or asserted or awarded against any Indemnified Party, in each
case arising out of or in connection with or resulting from this Agreement
(including, without limitation, enforcement of this Agreement), except to the
extent such claim, damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party’s gross negligence or willful misconduct.
 
 
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(b)  Each Grantor will upon demand pay to the Administrative Agent the amount of
any and all reasonable expenses, including, without limitation, the reasonable
fees and expenses of its counsel and of any experts and agents, that the
Administrative Agent may incur in connection with (i) the administration of this
Agreement, (ii) the custody, preservation, use or operation of, or the sale of,
collection from or other realization upon, any of the Collateral of such
Grantor, (iii) the exercise or enforcement of any of the rights of the
Administrative Agent or the other Secured Parties hereunder or (iv) the failure
by such Grantor to perform or observe any of the provisions hereof.
 
Section 15.  Amendments; Waivers; Additional Grantors; Etc.  (a)  No amendment
or waiver of any provision of this Agreement, and no consent to any departure by
any Grantor herefrom, shall in any event be effective unless the same shall be
in writing and signed by the Administrative Agent, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.  No failure on the part of the Administrative Agent or
any other Secured Party to exercise, and no delay in exercising any right
hereunder, shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right.
 
(b)  Upon the execution and delivery by any Person of a security agreement
supplement in substantially the form of Exhibit A hereto (each a “Security
Agreement Supplement”), such Person shall be referred to as an “Additional
Grantor” and shall be and become a Grantor hereunder, and each reference in this
Agreement and the other Loan Documents to “Grantor” shall also mean and be a
reference to such Additional Grantor, each reference in this Agreement and the
other Loan Documents to the “Collateral” shall also mean and be a reference to
the Collateral granted by such Additional Grantor and each reference in this
Agreement to a Schedule shall also mean and be a reference to the schedules
attached to such Security Agreement Supplement.
 
Section 16.  Notices, Etc.  All notices and other communications provided for
hereunder shall be either (i) in writing (including telegraphic, telecopier or
telex communication) and mailed, telegraphed, telecopied, telexed or otherwise
delivered or (ii) by electronic mail (if electronic mail addresses are
designated as provided below) confirmed immediately in writing, in the case of
the Borrower or the Administrative Agent, addressed to it at its address
specified in the 2005 Credit Agreement and, in the case of each Grantor other
than the Borrower, addressed to it at its address set forth opposite such
Grantor’s name on the signature pages hereto or on the signature page to the
Security Agreement Supplement pursuant to which it became a party hereto; or, as
to any party, at such other address as shall be designated by such party in a
written notice to the other parties.  All such notices and other communications
shall, when mailed, telegraphed, telecopied, telexed, sent by electronic mail or
otherwise, be effective when deposited in the mails, delivered to the telegraph
company, telecopied, confirmed by telex answerback, sent by electronic mail and
confirmed in writing, or otherwise delivered (or confirmed by a signed receipt),
respectively, addressed as aforesaid; except that notices and other
communications to the Administrative Agent shall not be effective until received
by the Administrative Agent.  Delivery by telecopier of an executed counterpart
of any amendment or waiver of any provision of this Agreement or of any Security
Agreement Supplement or Schedule hereto shall be effective as delivery of an
original executed counterpart thereof.
 
 
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Section 17.  Continuing Security Interest; Assignments under the 2005 Credit
Agreement.  This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until the latest of (i)
the payment in full in cash of the Secured Obligations, (ii) the Revolving
Credit Termination Date and (iii) the termination or expiration of all Letters
of Credit, (b) be binding upon each Grantor, its successors and assigns and (c)
inure, together with the rights and remedies of the Administrative Agent
hereunder, to the benefit of the Secured Parties and their respective
successors, transferees and assigns.  Without limiting the generality of the
foregoing clause (c), any Lender may assign or otherwise transfer all or any
portion of its rights and obligations under the 2005 Credit Agreement
(including, without limitation, all or any portion of its Revolving Credit
Commitment, the Revolving Credit Loans owing to it and the Revolving Credit Note
(or Notes), if any, held by it) to any other Person, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted to such
Lender herein or otherwise, in each case as provided in Section 14.10 of the
2005 Credit Agreement.
 
Section 18.  Release; Termination.  (a)  Upon any sale, lease, transfer or other
disposition of any item of Collateral of any Grantor in accordance with the
terms of the Loan Documents (other than sales of Inventory in the ordinary
course of business), the Administrative Agent will, at such Grantor’s expense,
execute and deliver to such Grantor such documents in form and substance
reasonably satisfactory to the Administrative Agent as such Grantor shall
reasonably request to evidence the release of such item of Collateral from the
assignment and security interest granted hereby; provided, however, that (i) at
the time of such request and such release no Event of Default shall have
occurred and be continuing, (ii) such Grantor shall have delivered to the
Administrative Agent, at least ten Business Days prior to the date of the
proposed release, a written request for release describing the item of
Collateral and the terms of the sale, lease, transfer or other disposition in
reasonable detail, including, without limitation, the price thereof and any
expenses in connection therewith, together with a form of release for execution
by the Administrative Agent and a certificate of such Grantor to the effect that
the transaction is in compliance with the Loan Documents and as to such other
matters as the Administrative Agent may request and (iii) the proceeds of any
such sale, lease, transfer or other disposition required to be applied, or any
payment to be made in connection therewith, in accordance with Section 2.3 of
the 2005 Credit Agreement shall, to the extent so required, be paid or made to,
or in accordance with the instructions of, the Administrative Agent when and as
required under Section 2.3 of the 2005 Credit Agreement.
 
(b)  Upon the latest of (i) the payment in full in cash of the Secured
Obligations, (ii) the Revolving Credit Termination Date and (iii) the
termination or expiration of all Letters of Credit, the pledge and security
interest granted hereby shall terminate and all rights to the Collateral shall
revert to the applicable Grantor.  Upon any such termination, the Administrative
Agent will, at the applicable Grantor’s expense, execute and deliver to such
Grantor such documents as such Grantor shall reasonably request to evidence such
termination.
 
 
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Section 19.  Security Interest Absolute.  The obligations of each Grantor under
this Agreement are independent of the Secured Obligations or any other
obligations of any other Grantor under or in respect of the Loan Documents and
the Additional Secured Agreements, and a separate action or actions may be
brought and prosecuted against each Grantor to enforce this Agreement,
irrespective of whether any action is brought against such Grantor or any other
Grantor or whether such Grantor or any other Grantor is joined in any such
action or actions.  All rights of the Administrative Agent and the other Secured
Parties and the pledge, assignment and security interest hereunder, and all
obligations of each Grantor hereunder, shall be irrevocable, absolute and
unconditional irrespective of, and each Grantor hereby irrevocably waives (to
the maximum extent permitted by applicable law) any defenses it may now have or
may hereafter acquire in any way relating to, any or all of the following:
 
(a) any lack of validity or enforceability of any Loan Document, any Additional
Secured Agreement or any other agreement or instrument relating thereto;
 
(b) any change in the time, manner or place of payment of, or in any other term
of, all or any of the Secured Obligations or any other obligations of any other
Credit Party under or in respect of the Loan Documents, the Additional Secured
Agreements or any other amendment or waiver of or any consent to any departure
from any Loan Document or Additional Secured Agreement including, without
limitation, any increase in the Secured Obligations resulting from the extension
of additional credit to any Credit Party or any of its Subsidiaries or
otherwise;
 
(c) any taking, exchange, release or non-perfection of any Collateral or any
other collateral, or any taking, release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Secured Obligations;
 
(d) any manner of application of any Collateral or any other collateral, or
proceeds thereof, to all or any of the Secured Obligations, or any manner of
sale or other disposition of any Collateral or any other collateral for all or
any of the Secured Obligations or any other obligations of any other Grantor
under or in respect of the Loan Documents, the Additional Secured Agreements or
any other assets of any Credit Party or any of its Subsidiaries;
 
(e) any change, restructuring or termination of the corporate structure or
existence of any Credit Party or any of its Subsidiaries;
 
(f) any failure of any Secured Party to disclose to any Grantor any information
relating to the business, condition (financial or otherwise), operations,
performance, assets, nature of assets, liabilities or prospects of any other
Grantor now or hereafter known to such Secured Party (each Grantor waiving any
duty on the part of the Secured Parties to disclose such information);
 
 
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(g) the failure of any other Person to execute this Agreement or any other
Collateral Document, guaranty or agreement or the release or reduction of
liability of any Grantor or other grantor or surety with respect to the Secured
Obligations; or
 
(h) any other circumstance (other than release of such Grantor pursuant to
Section 18, but including, without limitation, any statute of limitations) or
any existence of or reliance on any representation by any Secured Party that
might otherwise constitute a defense available to, or a discharge of, such
Grantor or any other Grantor or a third party grantor of a security interest.
 
This Agreement shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Secured Obligations is rescinded or
must otherwise be returned by any Secured Party or by any other Person upon the
insolvency, bankruptcy or reorganization of any Credit Party or otherwise, all
as though such payment had not been made.
 
Section 20.  Execution in Counterparts.  This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.  Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of an original executed
counterpart of this Agreement.
 
Section 21.  Governing Law; Consent to Jurisdiction.  (a) This Agreement shall
be governed by, and construed in accordance with, the laws of the State of New
York.
 
(b)  Each of the parties hereby irrevocably consents to the personal
jurisdiction of the state and federal courts located in New York County, New
York, in any action, claim or other proceeding arising out of any dispute in
connection with this Agreement, any rights or obligations hereunder or
thereunder, or the performance of such rights and obligations.  Each of the
parties hereby irrevocably consents to the service of a summons and complaint
and other process in any action, claim or proceeding brought by any other party
hereto in connection with this Agreement, any rights or obligations hereunder,
or the performance of such rights and obligations, on behalf of itself or its
property, in the manner specified in Section 16.  Nothing in this Section 21
shall affect the right of any of the parties hereto to serve legal process in
any other manner permitted by Applicable Law or affect the right of any of the
parties hereto to bring any action or proceeding against any other party hereto
or its properties in the courts of any other jurisdictions.
 
(c)  EACH OF THE PARTIES HERETO HEREBY ACKNOWLEDGES IT IRREVOCABLY WAIVES ITS
RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING
ARISING OUT OF ANY JUDICIAL PROCEEDING, ANY DISPUTE, CLAIM OR CONTROVERSY
ARISING OUT OF, CONNECTED WITH OR RELATING TO THIS AGREEMENT, ANY RIGHTS OR
OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
 
[signatures appear on the following pages]
 
 
 
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IN WITNESS WHEREOF, each Grantor has caused this Agreement to be duly executed
and delivered by its officer thereunto duly authorized as of the date first
above written.
 
 
Address for Notices:
 
1441 Broadway
New York, New York  10018
 
ENERGIE KNITWEAR, INC.
 
 
By____/s/ Joseph T. Donnalley____________
Name:    Joseph T. Donnalley
Title:      Vice President & Assistant Secretary
 
Address for Notices:
 
180 Rittenhouse Circle
Bristol, Pennsylvania  19007
 
JONES APPAREL GROUP USA, INC.
 
 
By____/s/ Joseph T. Donnalley____________
Name:     Joseph T. Donnalley
Title:       Treasurer
 
Address for Notices:
 
1007 Orange Street, Suite 225
Wilmington, Delaware 19801
 
JONES INVESTMENT CO. INC.
 
 
By____/s/ Joseph T. Donnalley____________
Name:     Joseph T. Donnalley
Title:       Vice President/Finance,
                Treasurer and Assistant Secretary
 
Address for Notices:
 
1441 Broadway
New York, New York  10018
 
JONES JEANSWEAR GROUP, INC.
 
 
By____/s/ Joseph T. Donnalley____________
Name:     Joseph T. Donnalley
Title:       Vice President & Assistant Secretary
 
Address for Notices:
 
180 Rittenhouse Circle
Bristol, Pennsylvania  19007
 
JONES RETAIL CORPORATION
 
 
By____/s/ Joseph T. Donnalley____________
Name:     Joseph T. Donnalley
Title:       Vice President & Treasurer
 

 

 

 
[Signature Page]
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Address for Notices:
 
1441 Broadway
New York, New York  10018
 
L.E.I. GROUP, INC.
 
 
By____/s/ Joseph T. Donnalley____________
Name:     Joseph T. Donnalley
Title:       Vice President & Assistant Secretary
 
Address for Notices:
 
1007 Orange Street, Suite 225
Wilmington, Delaware 19801
 
NINE WEST DEVELOPMENT CORPORATION
 
 
By____/s/ Joseph T. Donnalley____________
Name:     Joseph T. Donnalley
Title:       Vice President/Finance,
                Treasurer and Assistant Secretary
 
Address for Notices:
 
1129 Westchester Avenue
White Plains, New York 10604
 
NINE WEST FOOTWEAR CORPORATION
 
 
By____/s/ Joseph T. Donnalley____________
Name:     Joseph T. Donnalley
Title:       Treasurer
 
Address for Notices:
 
10 New Road
East Providence, RI  02916
 
VICTORIA + CO LTD.
 
 
By____/s/ Joseph T. Donnalley____________
Name:     Joseph T. Donnalley
Title:       Assistant Secretary
 

 
 
 

 
[Signature Page]
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Accepted and agreed as of the date first above written:
 
 

WACHOVIA BANK, NATIONAL ASSOCIATION        
By:
/s/  Susan T. Gallagher     Name:    Susan T. Gallagher     Title:      Director
       

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
[Signature Page]
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Security Agreement