Document:

ex10-2.htm

    
       

      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

       

       

       

       

       

       

       

       

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

      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

              

      

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    
      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”):

       

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          2

        

      

       

       

      (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,

       

       

      
        
          
            	
                    

                      Jones
      Apparel

                      Security
      Agreement

                    

                  

          

        

        
          
          

          
            

          

        

        
          3

        

      

       

       

      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.

       

       

      
        
          
            	
                    

                      Jones
      Apparel

                      Security
      Agreement

                    

                  

          

        

        
          
          

          
            

          

        

        
          4

        

      

       

       

      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.

       

       

      
        
          
            	
                    

                      Jones
      Apparel

                      Security
      Agreement

                    

                  

          

        

        
          
          

          
            

          

        

        
          5

        

      

       

       

      (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.

       

       

      
        
          
            	
                    

                      Jones
      Apparel

                      Security
      Agreement

                    

                  

          

        

        
          
          

          
            

          

        

        
          6

        

      

       

       

      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.

       

       

      
        
          
            	
                    

                      Jones
      Apparel

                      Security
      Agreement

                    

                  

          

        

        
          
          

          
            

          

        

        
          7

        

      

       

       

      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.

       

       

      
        
          
            	
                    

                      Jones
      Apparel

                      Security
      Agreement

                    

                  

          

        

        
          
          

          
            

          

        

        
          8

        

      

       

       

      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]

                                  	
                                    Jones
      Apparel

                                    Security
      Agreement

                                  

                          

                           

                          
                            
                              
                                 

                              

                              
                              

                            

                            
                              
                              

                              
                                

                              

                            

                            
                              
                              

                            

                          

                           

                          

                          
                            
                              
                                
                                  
                                    	
                                            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]

              	
                Jones
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                Security
      Agreement

              

      

       

      
        
          
             

          

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

       

      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]

                	
                  Jones
      Apparel

                  Security
      AgreementEXHIBIT 10.1

NEITHER  THESE  SECURITIES  NOR THE  SECURITIES  ISSUABLE UPON EXERCISE OF THESE
SECURITIES HAVE BEEN  REGISTERED WITH THE SECURITIES AND EXCHANGE  COMMISSION OR
THE  SECURITIES  COMMISSION  OF ANY STATE IN  RELIANCE  UPON AN  EXEMPTION  FROM
REGISTRATION  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED  (THE  "SECURITIES
ACT"),  AND,  ACCORDINGLY,  MAY NOT BE OFFERED  OR SOLD  EXCEPT  PURSUANT  TO AN
EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE  SECURITIES  ACT OR PURSUANT TO AN
AVAILABLE  EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE  REGISTRATION
REQUIREMENTS  OF THE  SECURITIES  ACT AND IN ACCORDANCE  WITH  APPLICABLE  STATE
SECURITIES  LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH  EFFECT,  THE  SUBSTANCE  OF WHICH SHALL BE  REASONABLY  ACCEPTABLE  TO THE
COMPANY.  THESE  SECURITIES AND THE  SECURITIES  ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION  WITH A BONA FIDE MARGIN ACCOUNT SECURED
BY SUCH SECURITIES.

                           CHINA PHARMA HOLDINGS, INC.

                                     WARRANT

Warrant No. 23                            Original Issue Date: December 24, 2008

         China Pharma  Holdings,  Inc., a Delaware  corporation (the "Company"),
hereby  certifies  that,  as partial  compensation  for its  former  independent
consultant, Hayden Communications International,  Inc. or its registered assigns
(the "Holder"),  is entitled to purchase from the Company up to a total of 8,333
shares of Common Stock (each such share, a "Warrant  Share" and all such shares,
the "Warrant Shares"),  at any time and from time to time from and after January
2,  2009  (the  "Vesting  Date")  through  and  including  January  1, 2012 (the
"Expiration Date"), and subject to the following terms and conditions:

         1. Definitions. As used in this Warrant, the following terms shall have
the respective definitions set forth in this Section 1.

         "Business Day" means any day except Saturday,  Sunday and any day which
is a federal legal holiday or a day on which banking  institutions  in the State
of New York are  authorized or required by law or other  governmental  action to
close.

         "Common Stock" means the common stock of the Company,  par value $0.001
per share,  and any  securities  into which such common  stock may  hereafter be
reclassified.

         "Exercise Price" means $3.0 per share.

<PAGE>

         "Original  Issue Date" means the Original Issue Date first set forth on
the first page of this Warrant.

         "New York  Courts"  means the state and federal  courts  sitting in the
City of New York, Borough of Manhattan.

          "Trading Day" means (i) a day on which the Common Stock is traded on a
Trading Market or (ii) if the Common Stock is not quoted on any Trading  Market,
a day on which the  Common  Stock is quoted  in the  over-the-counter  market as
reported  by the  Pink  Sheets  LLC  (or  any  similar  organization  or  agency
succeeding to its functions of reporting  prices);  provided,  that in the event
that the  Common  Stock is not  listed  or  quoted  as set  forth in (i) or (ii)
hereof, then Trading Day shall mean a Business Day.

         "Trading  Market" means whichever of the New York Stock  Exchange,  the
American  Stock  Exchange,  the NASDAQ Global Select  Market,  the NASDAQ Global
Market,  the NASDAQ  Capital  Market or OTC  Bulletin  Board on which the Common
Stock is listed or quoted for trading on the date in question.

         "Transfer Notice" shall have the meaning set forth in Section 7.2.

         2. Exercise and Duration of Warrants.
         -------------------------------------

         This Warrant  shall be  exercisable  by the Holder at any time and from
time to time on or after the Vesting Date through and including  the  Expiration
Date. At 6:30 p.m.,  New York City time on the  Expiration  Date, the portion of
this  Warrant not  exercised  prior  thereto  shall be and become void and of no
value.  The Company may not call or redeem any portion of this  Warrant  without
the prior written consent of the affected Holder.

         3. Delivery of Warrant Shares.
         ------------------------------

              (a) To effect exercises  hereunder,  subject to the request of the
transfer  agent of the Company,  the Holder shall not be required to  physically
surrender this Warrant unless the aggregate  Warrant Shares  represented by this
Warrant is being  exercised.  Upon delivery of the Warrant (if  necessary),  the
Exercise Notice (in the form attached  hereto) to the Company (with the attached
Warrant Shares Exercise Log) at its address for notice set forth herein and upon
payment of the Exercise  Price  multiplied by the number of Warrant  Shares that
the Holder intends to purchase  hereunder (if the Warrant is being  exercised in
accordance with Section 8(a)), the Company shall promptly (but in no event later
than five Trading Days after the Date of Exercise (as defined herein)) issue and
deliver to the Holder,  a certificate  for the Warrant Shares issuable upon such
exercise.  A "Date of  Exercise"  means the date on which the Holder  shall have
delivered to the Company:  (i) this  Warrant (if  necessary),  (ii) the Exercise
Notice (with the Warrant Exercise Log attached to it),  appropriately  completed
and duly  signed  and (iii)  payment  of the  Exercise  Price for the  number of
Warrant Shares so indicated by the Holder to be purchased.

              (b) If by the  fifth  Trading  Day  after a Date of  Exercise  the
Company  fails to deliver the  required  number of Warrant  Shares in the manner
required  pursuant  to  Section  3(a),  then the  Holder  will have the right to
rescind such exercise.

                                       2
<PAGE>

              (c) If by the  fifth  Trading  Day  after a Date of  Exercise  the
Company  fails to deliver the  required  number of Warrant  Shares in the manner
required pursuant to Section 3(a), and if after such fifth Trading Day and prior
to the receipt of such Warrant Shares,  the Holder  purchases (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of a
sale by the Holder of the Warrant Shares which the Holder anticipated  receiving
upon such exercise (a  "Buy-In"),  then the Company shall (1) pay in cash to the
Holder the amount by which (x) the  Holder's  total  purchase  price  (including
brokerage  commissions,  if any) for the  shares  of Common  Stock so  purchased
exceeds (y) the amount  obtained by multiplying (A) the number of Warrant Shares
that the Company was  required to deliver to the Holder in  connection  with the
exercise at issue by (B) the  closing bid price of the Common  Stock on the Date
of Exercise and (2) at the option of the Holder, either reinstate the portion of
the Warrant and equivalent  number of Warrant Shares for which such exercise was
not  honored or deliver to the Holder the number of shares of Common  Stock that
would have been issued had the Company  timely  complied  with its  exercise and
delivery  obligations  hereunder.  The Holder shall provide the Company  written
notice indicating the amounts payable to the Holder in respect of the Buy-In.

              (d) The Company's  obligations to issue and deliver Warrant Shares
in accordance with the terms hereof are absolute and unconditional, irrespective
of any  action or  inaction  by the Holder to  enforce  the same,  any waiver or
consent  with  respect to any  provision  hereof,  the  recovery of any judgment
against  any  Person  or  any  action  to  enforce  the  same,  or  any  setoff,
counterclaim,  recoupment,  limitation or termination,  or any breach or alleged
breach by the Holder or any other Person of any obligation to the Company or any
violation  or alleged  violation of law by the Holder or any other  Person,  and
irrespective  of  any  other  circumstance  which  might  otherwise  limit  such
obligation  of the  Company to the Holder in  connection  with the  issuance  of
Warrant Shares.  Nothing herein shall limit a Holder's right to pursue any other
remedies  available  to it  hereunder,  at law or in equity  including,  without
limitation,  a decree of  specific  performance  and/or  injunctive  relief with
respect to the Company's  failure to timely  deliver  certificates  representing
Warrant  Shares upon  exercise of the Warrant as required  pursuant to the terms
hereof.

         4. Charges, Taxes and Expenses. Issuance and delivery of Warrant Shares
upon exercise of this Warrant shall be made without charge to the Holder for any
issue or transfer tax,  withholding tax,  transfer agent fee or other incidental
tax or expense in respect of the  issuance  of such  certificates,  all of which
taxes and expenses  shall be paid by the Company;  provided,  however,  that the
Company  shall not be required to pay any tax which may be payable in respect of
any transfer involved in the registration of any certificates for Warrant Shares
or  Warrants  in a name  other  than that of the  Holder.  The  Holder  shall be
responsible for all other tax liability that may arise as a result of holding or
transferring this Warrant or receiving Warrant Shares upon exercise hereof.

         5. Replacement of Warrant.  If this Warrant is mutilated,  lost, stolen
or  destroyed,  the Company  shall  issue or cause to be issued in exchange  and
substitution for and upon  cancellation  hereof,  or in lieu of and substitution
for this Warrant,  a new Warrant,  but only upon receipt of evidence  reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable  indemnity  (which shall not include a surety  bond),  if  requested.
Applicants  for a new Warrant  under such  circumstances  shall also comply with

                                       3
<PAGE>

such other  reasonable  regulations and procedures and pay such other reasonable
third-party costs as the Company may prescribe. If a new Warrant is requested as
a result of a mutilation  of this  Warrant,  then the Holder shall  deliver such
mutilated  Warrant to the  Company as a  condition  precedent  to the  Company's
obligation to issue the new Warrant.

         6. Reservation of Warrant Shares. The Company covenants that it will at
all times reserve and keep  available out of the aggregate of its authorized but
unissued  and  otherwise  unreserved  Common  Stock,  solely for the  purpose of
enabling  it to issue  Warrant  Shares upon  exercise of this  Warrant as herein
provided,  the number of Warrant Shares which are then issuable and  deliverable
upon the exercise of this entire  Warrant,  free from  preemptive  rights or any
other contingent  purchase rights of Persons other than the Holder.  The Company
covenants  that all  Warrant  Shares so issuable  and  deliverable  shall,  upon
issuance and the payment of the applicable Exercise Price in accordance with the
terms  hereof,  be duly  and  validly  authorized,  issued  and  fully  paid and
nonassessable.

         7.  Restrictions  on  Transferability.  The Warrant Shares shall not be
transferred,  hypothecated  or assigned  before  satisfaction  of the conditions
specified in this Section 7, which conditions are intended to ensure  compliance
with the  provisions of the  Securities  Act with respect to the transfer of any
Warrant Shares. Holder, by acceptance of this Warrant, agrees to be bound by the
provisions of this Section 7.

              7.1.  Notice of Proposed  Transfers;  Requests  for  Registration.
Prior to any transfer or attempted transfer of any Warrant, in whole or in part,
or any shares of restricted  Common Stock, the holder of such restricted  Common
Stock shall give ten days' prior  written  notice (a  "Transfer  Notice") to the
Company in the form of assignment  attached  hereto,  and obtain from counsel to
such holder who shall be reasonably satisfactory to the Company, an opinion that
the proposed  transfer of such Warrant or restricted  Common Stock,  as the case
may be, may be effected  without  registration  under the Securities  Act. After
receipt of the Transfer Notice and opinion,  the Company shall, within five days
thereof,  notify the holder of such Warrant or restricted  Common Stock,  as the
case may be, as to whether such opinion is reasonably  satisfactory  and, if so,
such holder shall  thereupon be entitled to transfer  such Warrant or restricted
Common Stock, in accordance with the terms of the Transfer Notice. The holder of
the restricted  Common Stock giving the Transfer Notice shall not be entitled to
transfer  such Warrant or  restricted  Common Stock until receipt of notice from
the Company under this Section 7.1 that such opinion is reasonably satisfactory.

              7.2.  Registration Rights. (a) If at any time the Company proposes
to file a  registration  statement  under the  Securities Act with respect to an
offering of securities of the same type as the Warrant Shares pursuant to a firm
commitment  underwritten offering solely for cash for its own account or for the
account of any holder of  securities  (to the extent  that the  Company  has the
right to include Warrant Shares in any registration statement to be filed by the
Company on behalf of such holder), then the Company shall give written notice of
such proposed  filing to Holder at least 15 days before the  anticipated  filing
date.  Such notice shall offer Holder the opportunity to register such amount of
Warrant  Shares as Holder may request (a "Piggyback  Registration").  Subject to
Section 7.2, the Company shall include in each such Piggyback  Registration  all
shares of Warrant  Shares  with  respect  to which the  Company  has  received a
written request for inclusion therein within 10 days after notice has been given

                                       4
<PAGE>

to Holder.  Holder  shall be  permitted  to  withdraw  all or any portion of the
Warrant Shares from a Piggyback  Registration at any time prior to the effective
date of such Piggyback Registration.

              (b)  The  Company   shall  permit   Holder  to  include  all  such
registrable  securities  on  the  same  terms  and  conditions  as  any  similar
securities,  if  any,  of the  Company  included  therein.  Notwithstanding  the
foregoing,   if  the  Company  or  the  managing   underwriter  or  underwriters
participating  in such  offering  advise the  Holder in  writing  that the total
amount of  securities  requested to be included in such  Piggyback  Registration
exceeds  the amount  which can be sold in (or during the time of) such  offering
without  delaying or  jeopardizing  the success of the offering  (including  the
price per share of the securities to be sold), then, subject to the preferential
rights of any stockholder with respect to any Piggyback Registration, the amount
of  securities  to be offered  for the  account  of Holder and other  holders of
securities who have piggyback  registration rights with respect thereto shall be
reduced  (to zero if  necessary)  pro rata on the basis of the  number of Common
Stock equivalents  requested to be registered by each stockholder  participating
in such offering.

              (c) The Company shall pay all  registration  expenses  incurred in
connection   with  the   registration   statement   relating  to  any  Piggyback
Registration  and any  supplements  or amendments  thereto,  whether or not they
become  effective,  and whether all, none or some of the Warrant  Shares is sold
pursuant to such registration  statement.  Registration  Expenses shall mean all
costs, fees and expenses incident to the Company's  performance of or compliance
with Section 7.2 (c), including (i) the fees,  disbursements and expenses of the
Company's counsel and accountants;  (ii) all expenses, including filing fees, in
connection  with  the  preparation,  printing  and  filing  of any  registration
statement, any prospectus or preliminary prospectus, any other offering document
and amendments and supplements  thereto and the mailing and delivering of copies
thereof;  (iii)  all  expenses  in  connection  with  the  qualification  of the
securities to be disposed of for offering and sale under state  securities laws;
(iv)  transfer  agents  and  registrars'  fees and  expenses;  (v) all  security
engraving and security printing expenses; and (vi) all fees and expenses payable
in connection with the listing of the Common Stock on any securities exchange.

              (d) Nothing in this Section 7.2 shall create any  liability on the
part of the  Company  to Holder if the  Company  in its sole  discretion  should
decide not to file a  registration  statement  proposed to be filed  pursuant to
Section 7.2 (a) or to withdraw  such  registration  statement  subsequent to its
filing,  regardless of any action whatsoever that Holder may have taken, whether
as a result of the issuance by the Company of any notice hereunder or otherwise.

              7.3.  Termination of Restrictions.  Notwithstanding  the foregoing
provisions of this Section 7, the restrictions  imposed by this Section upon the
transferability  of the Warrant Shares and the  restricted  Common Stock and the
legend  requirements  shall  terminate  as to any  share of  Warrant  Shares  or
restricted  Common Stock (i) when and so long as such  security  shall have been
effectively registered under the Securities Act and disposed of pursuant thereto
or (ii) when the Company  shall have  received an opinion of counsel  reasonably
satisfactory  to it that such  shares may be  transferred  without  registration
thereof under the Securities Act.

                                       5
<PAGE>

         8. Payment of Exercise Price.  The Holder may pay the Exercise Price by
delivering  immediately available funds to the designated account of the Company
in one of the following manners:

              (a) Cash Exercise.  The Holder may deliver  immediately  available
funds; or

              (b)  Cashless  Exercise.  The Holder may notify the  Company in an
Exercise Notice of its election to utilize  cashless  exercise by rendering this
Warrant for  cancellation,  in which event the Company shall issue to the Holder
the number of Warrant Shares determined as follows:

                    X = Y [(A-B)/A]

           where:

                    X = the number of Warrant Shares to be issued to the Holder.

                    Y = the  number  of  Warrant  Shares  with respect to
                        which this Warrant is being exercised.

                    A = the  average of the  closing  prices for the five
                        Trading Days  immediately  prior to (but not including)
                        the Exercise Date.

                    B = the Exercise Price.

         9.  Limitations on Exercise.  Notwithstanding  anything to the contrary
contained  herein,  the number of Warrant  Shares  that may be  acquired  by the
Holder upon any exercise of this Warrant (or otherwise in respect  hereof) shall
be limited to the extent  necessary to insure that,  following such exercise (or
other  issuance),  the total number of shares of Common Stock then  beneficially
owned by such Holder and its Affiliates  and any other Persons whose  beneficial
ownership of Common Stock would be aggregated  with the Holder's for purposes of
Section  13(d) of the Exchange Act, does not exceed 9.99% of the total number of
issued and  outstanding  shares of Common Stock  (including for such purpose the
shares  of  Common  Stock  issuable  upon  such  exercise).  For such  purposes,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Exchange  Act  and  the  rules  and  regulations  promulgated  thereunder.  This
restriction  may  not  be  waived  or  amended  by  agreement  of  the  parties.
Notwithstanding  anything to the contrary contained in this Warrant, (a) no term
of this Section may be waived by any party,  nor amended such that the threshold
percentage  of  ownership  would be directly  or  indirectly  increased,  (b) no
amendment or modification  to any Transaction  Document may be made such that it
would  have the  effect of  modifying  or  waiving  any term of this  Section in
violation of this  restriction,  (c) this  restriction runs with the Warrant and
may not be  modified  or  waived by any  subsequent  holder  hereof  and (d) any
attempted  waiver,  modification  or  amendment  of this Section will be void ab
initio.

         10. No Fractional  Shares.  No fractional shares of Warrant Shares will
be  issued in  connection  with any  exercise  of this  Warrant.  In lieu of any
fractional shares which would, otherwise be issuable, the Company shall pay cash
equal to the product of such  fraction  multiplied  by the closing  price of one

                                       6
<PAGE>

Warrant  Share as  reported  by the  applicable  Trading  Market  on the date of
exercise.

         11. Notices.  Any and all notices or other communications or deliveries
hereunder  (including,  without  limitation,  any Exercise  Notice)  shall be in
writing and shall be deemed given and  effective on the earliest of (i) the date
of  transmission,  if such notice or communication is delivered via facsimile at
the facsimile number specified in this Section prior to 6:30 p.m. (New York City
time)  on  a  Trading  Day,  (ii)  the  next  Trading  Day  after  the  date  of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section on a day that is not a Trading Day or
later than 6:30 p.m. (New York City time) on any Trading Day,  (iii) the Trading
Day following the date of mailing,  if sent by nationally  recognized  overnight
courier service, or (iv) upon actual receipt by the party to whom such notice is
required to be given. The addresses for such communications  shall be: (i) if to
the Company,  to China Pharma  Holdings,  Inc., 2nd Floor,  No. 17, Jinpan Road,
Haikou,  Hainan  Province,  People's  Republic of China,  Attn:  Chief Executive
Officer  (or such other  address as the  Company  shall  indicate  in writing in
accordance  with this  Section),  or (ii) if to the  Holder,  to the  address or
facsimile  number  appearing  on the Warrant  Register or such other  address or
facsimile  number as the Holder may  provide to the Company in  accordance  with
this Section.

         12. Warrant Agent.  The Company shall serve as warrant agent under this
Warrant.  Upon 10 days'  notice to the  Holder,  the  Company  may appoint a new
warrant agent.  Any corporation  into which the Company or any new warrant agent
may be merged or any corporation  resulting from any  consolidation to which the
Company or any new warrant  agent shall be a party or any  corporation  to which
the  Company  or  any  new  warrant  agent  transfers  substantially  all of its
corporate trust or shareholders  services  business shall be a successor warrant
agent under this Warrant  without any further act.  Any such  successor  warrant
agent shall  promptly  cause  notice of its  succession  as warrant  agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder's last
address as shown on the Warrant Register.

         13. Miscellaneous.
         ------------------

              (a) This  Warrant  shall be binding on and inure to the benefit of
the parties hereto and their respective  successors and assigns.  Subject to the
preceding  sentence,  nothing in this Warrant  shall be construed to give to any
Person  other than the  Company  and the Holder  any legal or  equitable  right,
remedy or cause of action under this  Warrant.  This Warrant may be amended only
in  writing  signed by the  Company  and the  Holder  and their  successors  and
assigns.  The foregoing sentence shall be subject to the restrictions on waivers
and amendments set forth in Section 9 of this Warrant.

              (b)  All  questions   concerning   the   construction,   validity,
enforcement  and  interpretation  of  this  Warrant  shall  be  governed  by and
construed and enforced in accordance  with the internal laws of the State of New
York (except for matters  governed by corporate  law in the State of  Delaware),
without regard to the principles of conflicts of law thereof.  Each party agrees
that all legal  proceedings  concerning  the  interpretations,  enforcement  and
defense of this Warrant and the transactions herein contemplated ("Proceedings")
(whether brought against a party hereto or its respective Affiliates,  employees
or agents)  shall be commenced  exclusively  in the New York Courts.  Each party

                                       7
<PAGE>

hereto hereby irrevocably submits to the exclusive  jurisdiction of the New York
Courts for the adjudication of any dispute  hereunder or in connection  herewith
or with any  transaction  contemplated  hereby or discussed  herein,  and hereby
irrevocably  waives, and agrees not to assert in any Proceeding,  any claim that
it is not personally  subject to the jurisdiction of any New York Court, or that
such  Proceeding has been commenced in an improper or inconvenient  forum.  Each
party hereto hereby  irrevocably waives personal service of process and consents
to process  being  served in any such  Proceeding  by mailing a copy thereof via
registered or certified  mail or overnight  delivery (with evidence of delivery)
to such party at the address in effect for notices to it under this  Warrant and
agrees that such service shall constitute good and sufficient service of process
and notice thereof. Nothing contained herein shall be deemed to limit in any way
any right to serve  process in any manner  permitted  by law.  Each party hereto
hereby  irrevocably  waives,  to the fullest extent permitted by applicable law,
any and all right to trial by jury in any  legal  proceeding  arising  out of or
relating to this  Warrant or the  transactions  contemplated  hereby.  If either
party shall  commence a Proceeding  to enforce any  provisions  of this Warrant,
then the prevailing  party in such  Proceeding  shall be reimbursed by the other
party for its  attorney's  fees and other costs and expenses  incurred  with the
investigation, preparation and prosecution of such Proceeding.

              (c)  The  headings  herein  are  for  convenience   only,  do  not
constitute a part of this Warrant and shall not be deemed to limit or affect any
of the provisions hereof.

              (d) In case  any one or more  of the  provisions  of this  Warrant
shall  be  invalid  or   unenforceable   in  any   respect,   the  validity  and
enforceability  of the remaining  terms and provisions of this Warrant shall not
in any way be affected or impaired  thereby and the parties will attempt in good
faith  to  agree  upon a  valid  and  enforceable  provision  which  shall  be a
commercially  reasonable  substitute  therefor,  and  upon  so  agreeing,  shall
incorporate such substitute provision in this Warrant.

              (e) Prior to exercise of this  Warrant,  the Holder  hereof  shall
not, by reason of being a Holder,  be  entitled  to any rights of a  stockholder
with respect to the Warrant Shares.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
                             SIGNATURE PAGE FOLLOWS]

                                       8
<PAGE>

         IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed by its authorized officer as of the date first indicated above.

                                   CHINA PHARMA HOLDINGS, INC.

                                   By:
                                      ------------------------------------------
                                      Name:
                                      Title:

                                       9
<PAGE>

                                 EXERCISE NOTICE
                           CHINA PHARMA HOLDINGS, INC.
                   WARRANT ORIGINALLY ISSUED DECEMBER 24, 2008

The  undersigned  Holder  hereby  irrevocably  elects to purchase  _____________
shares of Common Stock  pursuant to the above  referenced  Warrant.  Capitalized
terms used herein and not  otherwise  defined have the  respective  meanings set
forth in the Warrant.

(1)  The   undersigned   Holder   hereby   exercises   its  right  to   purchase
_________________ Warrant Shares pursuant to the Warrant.

(2) The Holder  intends  that  payment of the  Exercise  Price  shall be made as
(check one):

                       ______   "Cash Exercise" under Section 8.

                       ______   "Cashless Exercise" under Section 8.

(3) If the Holder has elected a Cash  Exercise,  the Holder shall pay the sum of
$____________ to the Company in accordance with the terms of the Warrant.

(4) Pursuant to this  Exercise  Notice,  the Company shall deliver to the holder
_______________ Warrant Shares in accordance with the terms of the Warrant.

(5) By its delivery of this Exercise  Notice,  the  undersigned  represents  and
warrants to the Company that in giving effect to the exercise  evidenced  hereby
the Holder will not beneficially own in excess of the number of shares of Common
Stock  (determined in accordance  with Section 13(d) of the Securities  Exchange
Act of 1934) permitted to be owned under Section 9 of this Warrant to which this
notice relates.

Dated: ____________________,_________          Name of Holder:

                                               (Print)_________________________

                                               By:_____________________________
                                               Name:___________________________
                                               Title:__________________________

                                               (Signature  must  conform in all
                                               respects  to name of  holder  as
                                               specified  on  the  face  of the
                                               Warrant)

                                       10
<PAGE>

                           Warrant Shares Exercise Log

-------- -------------------------- ------------------------ -------------------
Date     Number of Warrant Shares   Number of Warrant Shares Number of Warrant
         Available to be Exercised  Exercised                Shares Remaining to
                                                             be Exercised
-------- -------------------------- ------------------------ -------------------

--------------------------------------------------------------------------------

                                       11
<PAGE>

                           CHINA PHARMA HOLDINGS, INC.
                   WARRANT ORIGINALLY ISSUED DECEMBER 24, 2008
                                 WARRANT NO. 23

                               FORM OF ASSIGNMENT

         [To be completed and signed only upon transfer of Warrant]

         FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto    ________________________________    the   right   represented   by   the
above-captioned Warrant to purchase ____________ shares of Common Stock to which
such Warrant  relates and appoints  ________________  attorney to transfer  said
right on the  books of the  Company  with  full  power  of  substitution  in the
premises.

Dated:   _______________, ____

                                                ________________________________
                                                (Signature  must  conform in all
                                                respects  to name of  holder  as
                                                specified  on  the  face  of the
                                                Warrant)

                                                ________________________________
                                                Address of Transferee

                                                ________________________________

                                                ________________________________

In the presence of:

_______________________

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