Form 10-K

Long-Lived Assets
We review certain long-lived assets and identifiable intangibles (including goodwill) for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In that regard, we assess the recoverability of such assets based upon estimated non-discounted cash flow forecasts. If an asset impairment is identified, the asset is written down to fair value based on discounted cash flow or other fair value measures.

Cash Equivalents
We consider all highly liquid short-term investments to be cash equivalents.

Presentation of Prior Year Data
Certain reclassifications have been made to conform prior year data with the current presentation.

New Accounting Standards
In October 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets," which changes the accounting for goodwill and other intangible assets from an amortization method to an impairment-only approach. Under SFAS No. 142, amortization of our trademarks without determinable lives and our goodwill will cease beginning on January 1, 2002. Diluted earnings per share adjusted for the effects of SFAS No. 142 for 2001, 2000 and 1999 would have been $2.23, $2.84 and $1.82, respectively. As prescribed under SFAS No. 142, we are in the process of having our goodwill and trademarks tested for impairment. We do not anticipate any material impairment losses resulting from the adoption of SFAS No. 142.

In November 2001, the FASB Emerging Issues Task Force released Issue 01-9, "Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products)." The scope of Issue 01-9 includes vendor consideration to any purchasers of the vendor's products at any point along the distribution chain, regardless of whether the purchaser receiving the consideration is a direct customer of the vendor. Issue 01-9 is to be applied to annual or interim periods beginning after December 15, 2001. Our adoption, effective January 1, 2002, will require us to reclassify cooperative advertising expenses from a deduction against revenues to an SG&A expense. As a result, net sales, gross profit and SG&A expenses will all increase by $25.5 million, $26.9 million, and $22.6 million for 2001, 2000 and 1999, respectively.

On June 19, 2001, we acquired 100% of the common stock of McNaughton in a merger transaction. McNaughton designs, contracts for the manufacture of and markets a broad line of branded moderately-priced women's and juniors' career and casual clothing. We purchased all of the outstanding shares of McNaughton for a total purchase price of $117.5 million in cash and approximately 3.0 million shares of common stock, valued for financial reporting purposes at $36.55 per share (the average closing price for the period from two business days before to two business days after April 16, 2001, the date the definitive Agreement and Plan of Merger was signed). In addition, we assumed $271.8 million of McNaughton's outstanding debt, all of which has been refinanced.

The acquisition has been accounted for under the purchase method of accounting for business combinations. Accordingly, the consolidated financial statements include the results of operations of McNaughton from the acquisition date. The purchase price was allocated to McNaughton's assets and liabilities, tangible and intangible (as determined by an independent appraiser), with the excess of the purchase price over the fair value of the net assets acquired of approximately $303.5 million being amortized on a straight-line basis over 30 years. The excess purchase price over the underlying net assets was allocated to goodwill and property based on preliminary estimates of fair value and is subject to further adjustments.

On April 26, 2001, we acquired substantially all of the assets of Judith Jack. Judith Jack is a manufacturer and distributor of women's jewelry and accessories, including marcasite and sterling silver products. The total purchase price was $22.0 million in cash.

The acquisition has been accounted for under the purchase method of accounting for business combinations. Accordingly, the consolidated financial statements include the results of operations of Judith Jack from the acquisition date. The purchase price was allocated to the acquired assets and liabilities, tangible and intangible, with the excess of the purchase price over the fair value of the net assets acquired of approximately $11.1 million being amortized on a straight-line basis over 30 years. The excess purchase price over the fair market value of the underlying net assets was allocated to goodwill and property based on preliminary estimates of fair values and is subject to further adjustments.

On July 31, 2000, we purchased 100% of the outstanding securities of Victoria. Victoria is a leading designer and marketer of branded and private label costume jewelry. The total purchase price was $17.5 million in cash (of which $2.0 million was paid in February 2002). In addition, we assumed $77.0 million of

Victoria's funded debt and accrued interest, which we refinanced through our existing credit facilities. In addition, the former stockholders of Victoria are entitled to receive future payments in the form of cash and shares of our common stock if certain earnings targets are met in 2001, 2002 and 2003. During 2001, we paid $18.4 million in cash to the former Victoria stockholders, which was recorded as additional goodwill relating to the acquisition.

The acquisition has been accounted for under the purchase method of accounting for business combinations. Accordingly, the consolidated financial statements include the results of operations of Victoria from the acquisition date. The purchase price was allocated to Victoria's assets and liabilities, tangible and intangible (as determined by an independent appraiser), with the excess of the purchase price over the fair value of the net assets acquired of approximately $58.7 million being amortized on a straight-line basis over 30 years.

On June 15, 1999, we acquired Nine West, a leading designer, developer and marketer of women's footwear and accessories. We purchased all the outstanding shares of Nine West's common stock for a total purchase price of $466.1 million in cash and approximately 17.1 million shares of common stock, valued for financial reporting purposes at $24.35 per share (the average closing price for the week containing March 1, 1999, the date the definitive Agreement and Plan of Merger was signed). In addition, we assumed $493.7 million of Nine West's outstanding debt, a portion of which has been refinanced.

The acquisition has been accounted for under the purchase method of accounting for business combinations. Accordingly, the consolidated financial statements include the results of operations of Nine West from the acquisition date. The purchase price was allocated to Nine West's assets and liabilities, tangible and intangible (as determined by an independent appraiser), with the excess of the purchase price over the fair value of the net assets acquired of approximately $704.2 million being amortized on a straight-line basis over 30 years.

The following unaudited pro forma information presents a summary of our consolidated results of operations as if the Victoria, Judith Jack and McNaughton acquisitions and their related financing had taken place on January 1, 2000. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which actually would have resulted had the acquisitions occurred on January 1, 2000, or which may result in the future.

In connection with the acquisitions of Nine West, Sun, Judith Jack, and McNaughton we assessed and formulated plans to restructure certain operations of each company. These plans involved the closure of manufacturing facilities, certain offices, foreign subsidiaries, and selected domestic and international retail locations. The objectives of the plans were to eliminate unprofitable or marginally profitable lines of business and reduce overhead expenses. The accrual of these costs and liabilities, which are included in accrued expenses and other current liabilities, is as follows:

Estimated severance payments and other employee costs of $11.2 million accrued at December 31, 2001 relate to the remaining estimated severance for approximately 240 employees at locations to be closed. Employee groups affected (totaling an estimated 3,870 employees) include accounting, administrative, customer service, manufacturing, production, warehouse and management personnel at locations closed or to be closed and duplicate corporate headquarters management and administrative personnel. During 2001, $5.5 million of the reserve was utilized (relating to severance and related costs for approximately 225 employees).

The $4.2 million accrued at December 31, 2001 for the consolidation of facilities relates primarily to expected costs to be incurred, including lease obligations, for closing certain acquired facilities in connection with consolidating their operations into our other existing facilities.

The net addition of $1.0 million was recorded as an increase to goodwill. Our plans have not been finalized in all areas, and additional restructuring costs may result as we continue to evaluate and assess the impact of duplicate responsibilities, warehouses and office locations. Any additional costs relating to Judith Jack identified before April 26, 2002 and McNaughton identified before June 19, 2002 will be recorded as additional goodwill; after that date, additional costs will be charged to operations in the period in which they occur. Any additional costs relating to Nine West or Sun will be charged to operations in the period in which they occur.

Depreciation and amortization expense relating to property, plant and equipment was $48.5 million, $51.1 million and $38.0 million in 2001, 2000 and 1999, respectively.

In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," subsequently amended by SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities" (as amended, hereinafter referred to as "SFAS 133"), which we adopted effective January 1, 2001. SFAS 133 establishes accounting and reporting standards for derivative instruments. Specifically, SFAS 133 requires us to recognize all derivatives as either assets or liabilities on the balance sheet and to measure those instruments at fair value. Additionally, the fair value adjustments will affect either stockholders' equity or net income depending on whether the derivative instrument qualifies as a hedge for accounting purposes and, if so, the nature of the hedging activity.

During 2001, no material amounts were reclassified from other comprehensive income to earnings relating to cash flow hedges. If foreign currency exchange rates do not change from their December 31, 2001 amounts, we estimate that any reclassifications from other comprehensive income to earnings within the next 12 months also will not be material. The actual amounts that will be reclassified to earnings over the next 12 months could vary, however, as a result of changes in market conditions.

From June 1999 through January 2001, we had employed an interest rate hedging strategy utilizing swaps to effectively float a portion of our interest rate exposure on our fixed rate financing arrangements. The termination of these interest rate swaps generated a pre-tax gain of $8.3 million, which will be amortized as a reduction of interest expense over the remaining terms of the interest rate swap agreements, with approximately $1.9 million of pre-tax income to be reclassified into earnings within the next 12 months.

As a result of our global operating and financing activities, we are exposed to changes in interest rates and foreign currency exchange rates which may adversely affect results of operations and financial condition. In seeking to minimize the risks and/or costs associated with such activities, we manage exposure to changes in interest rates and foreign currency exchange rates through our regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. The instruments eligible for utilization include forward, option and swap agreements. We do not use financial instruments for trading or other speculative purposes.

At December 31, 2001 and 2000, the fair values of cash and cash equivalents, receivables and accounts payable approximated carrying values due to the short-term nature of these instruments. The estimated fair values of other financial instruments subject to fair value disclosures, determined based on broker quotes or quoted market prices or rates for the same or similar instruments, and the related carrying amounts are as follows:

Financial instruments expose us to counterparty credit risk for nonperformance and to market risk for changes in interest and currency rates. We manage exposure to counterparty credit risk through specific minimum credit standards, diversification of counterparties and procedures to monitor the amount of credit exposure. Our financial instrument counterparties are substantial investment or commercial banks with significant experience with such instruments. We also have procedures to monitor the impact of market risk on the fair value and costs of our financial instruments considering reasonably possible changes in interest and currency rates.

A significant portion of our sales are to retailers throughout the United States and Canada. We have two significant customers in our wholesale apparel and wholesale footwear and accessories operating segments. Sales to department stores owned by The May Department Stores Company ("May") accounted for 16%, 14% and 14% of consolidated total revenues for the years ended December 31, 2001, 2000 and 1999, respectively. Sales to department stores owned by Federated Department Stores, Inc. ("Federated") accounted for15%, 14% and 14% of consolidated total revenues for the years ended December 31, 2001, 2000 and 1999, respectively. May and Federated accounted for approximately 26% of accounts receivable at December 31, 2001.

At December 31, 2001, we had credit agreements with several lending institutions to borrow an aggregate principal amount of up to $1.55 billion under Senior Credit Facilities. These facilities, of which the entire amount is available for letters of credit or cash borrowings, provide for an $850.0 million 364-Day Revolving Credit Facility (increased from $750.0 million in June 2001) and a $700.0 million Five-Year Revolving Credit Facility. At December 31, 2001, $224.0 million in letters of credit was outstanding under the 364-Day Revolving Credit Facility and no amounts were outstanding under our Five-Year Revolving Credit Facility. Borrowings under the Senior Credit Facilities may also be used for working capital and other

general corporate purposes, including permitted acquisitions and stock repurchases. The Senior Credit Facilities are unsecured and require us to satisfy both a coverage ratio of earnings before interest, taxes, depreciation, amortization and rent to interest expense plus rents and a net worth maintenance covenant, as well as other restrictions, including (subject to exceptions) limitations on our ability to incur additional indebtedness, prepay subordinated indebtedness, make acquisitions, enter into mergers, and pay dividends.

We also assumed joint and several liability with McNaughton on a $100 million unsecured line of credit for the purpose of issuing letters of credit for McNaughton. As of December 31, 2001, $74.8 million was outstanding under this line of credit.

We also have an unsecured foreign line of credit in Canada for C$20.0 million, under which no amounts were outstanding at December 31, 2001. The weighted-average interest rate of our credit facilities was 2.4% at December 31, 2001.

Long-term debt maturities for each of the next five years are $3.0 million in 2002, $3.0 million in 2003, $178.0 million in 2004, $136.5 million in 2005 and $226.5 million in 2006. All of our notes contain certain covenants, including, among others, restrictions on liens, sale-leaseback transactions, and additional secured debt and all except the zero coupon convertible senior debt securities pay interest semiannually. The weighted-average interest rate of our long-term debt was 5.9% at December 31, 2001.

In February 2001, we issued 20-year, zero coupon convertible senior debt securities. Net proceeds of the offering were $392.8 million. The securities carry a 3.5% yield to maturity with a face value of $805.6 million and are convertible into common stock at a conversion rate of 9.8105 shares per note. The proceeds were used to repay amounts then outstanding under our Senior Credit Facilities, repurchase a portion of our outstanding 6.25% Senior Notes at par, and for general corporate purposes. The securities may be redeemed for cash at any time on or after February 1, 2004 for a defined redemption price. The holders may require us to purchase their securities on the first day of February in 2004, 2009 and 2014 at defined purchase prices. We may choose to pay the purchase price in cash or in shares of our common stock valued at 95% of the average market price of our common stock for a defined period prior to the purchase date or in a combination of cash and our common stock.

We occupy warehouse and office facilities leased from the City of Lawrenceburg, Tennessee. Four ten-year net leases run until February 2004, July 2005, May 2006 and April 2007, respectively, and require minimum annual rent payments of $0.5 million, $0.5 million, $0.5 million, and $1.0 million, respectively, plus accrued interest. In connection with these leases, we guaranteed $25.0 million of Industrial Development Bonds issued in order to construct the facilities, $10.4 million of which remained unpaid as of December 31, 2001. The financing agreement with the issuing authority requires us to comply with the same financial covenants required by our Senior Credit Facilities (see "Credit Facilities").

We also lease warehouse and office facilities in Bristol, Pennsylvania. Two 15-year net leases run until March and October 2013, respectively, and require minimum annual rent payments of $1.2 million and $0.8 million, respectively.

We also lease various equipment under three to five-year leases at an aggregate annual rental of $1.5 million. The equipment has been capitalized at its fair market value of $6.5 million, which approximates the present value of the minimum lease payments.

The following is a schedule by year of future minimum lease payments under capital leases, together with the present value of the net minimum lease payments as of December 31, 2001:

(a) CONTINGENT LIABILITIES. We have been named as a defendant in various actions and proceedings, including actions brought by certain employees whose employment has been terminated arising from our ordinary business activities. Although the amount of any liability that could arise with respect to these actions cannot be accurately predicted, in our opinion, any such liability will not have a material adverse effect on our financial position or results of operations.

(b) ROYALTIES. Under exclusive licenses to manufacture certain items under the Lauren by Ralph Lauren and Ralph by Ralph Lauren trademarks pursuant to license and design service agreements with Polo Ralph

Lauren Corporation ("Polo"), we are obligated to pay Polo a percentage of net sales of Lauren by Ralph Lauren and Ralph by Ralph Lauren products. Minimum payments of $5.3 million are due for each of the years 2002 and 2003 under the Ralph by Ralph Lauren agreements. We are also obligated to spend on advertising a percentage of net sales of these licensed products. We exercised our option in January 2001 to renew the Lauren by Ralph Lauren agreements through December 31, 2006, with minimum payments for each of the years in this renewal period set at 90% of the actual payments due for 2001. The Ralph by Ralph Lauren agreements expire on December 31, 2003 and each provides for an additional renewal option through December 31, 2006 upon expiration, provided that certain sales levels have been met.

Under a similar exclusive license to manufacture certain items under the Polo Jeans Company trademark pursuant to license and design service agreements with Polo, we are obligated to pay Polo a percentage of net sales of Polo Jeans Company products. We are also obligated to spend on advertising a percentage of net sales of these licensed products. The agreements expire on December 31, 2005 and may be renewed by us in five-year increments for up to 25 additional years if certain sales requirements are met. Renewal of the Polo Jeans Company license after 2010 requires a one-time payment by us of $25.0 million or, at our option, a transfer of a 20% interest in its Polo Jeans Company business to Polo (with no fees required for subsequent renewals). Polo also has an option, exercisable on or before June 1, 2010, to purchase our Polo Jeans Company business at the end of 2010 for a purchase price, payable in cash, equal to 80% of the then fair market value of the business as a going concern, assuming continuation of the Polo Jeans license through 2030.

In June 2000, we acquired an exclusive license to manufacture and market in Canada certain products under the Polo Jeans Company and Polo Ralph Lauren trademarks pursuant to license and design service agreements with Polo. The agreements provide for payment by us of a percentage of net sales of the licensed products against guaranteed minimum royalty and design service payments of C$1.5 million in 2002, C$1.6 million in 2003, C$2.3 million in 2004 and C$2.5 million in 2005. We are also obligated to spend on advertising a percentage of net sales of these licensed products. The agreements expire on December 31, 2005 and are renewable for an additional five years provided that we achieve certain minimum sales levels.

As a result of the acquisition of Victoria, we obtained the exclusive license to produce and sell costume jewelry in the United States and Canada under the Tommy Hilfiger trademark, which expires on December 31, 2004. Upon expiration, we have the right to renew the license for an additional three-year period, provided that we meet certain minimum sales levels. The agreement provides for payment by us of a percentage of net sales against guaranteed minimum royalty and advertising payments as set forth in the agreement. We also obtained the exclusive, worldwide license to produce, market and distribute costume jewelry under the Givenchy mark, which expires on December 31, 2002. Minimum royalties under these agreements amount to $1.8 million in 2002, $1.5 million in 2003 and $1.9 million in 2004.

(c) LEASES. Total rent expense charged to operations for the years ended December 31, 2001, 2000 and 1999 was $100.8 million, $152.1 million and $106.5 million, respectively.

The following is a schedule of future minimum rental payments required under operating leases for the next five years:

Certain of the leases provide for renewal options and the payment of real estate taxes and other occupancy costs.

The Board of Directors has authorized several programs to repurchase our common stock from time to time in open market transactions totaling $500.0 million. As of December 31, 2001, 19.3 million shares had been acquired at a cost of $425.8 million. There is no time limit for the utilization of the amounts remaining under any uncompleted programs.

The domestic and foreign components of income before provision for income taxes are as follows:

The provision for income taxes on adjusted historical income differs from the amounts computed by applying the applicable Federal statutory rates due to the following:

We have not provided for U.S. Federal and foreign withholding taxes on $24.8 million of foreign subsidiaries' undistributed earnings as of December 31, 2001. Such earnings are intended to be reinvested indefinitely.

The following is a summary of the significant components of our deferred tax assets and liabilities:

As of December 31, 2001, we had federal and state net operating loss carryforwards of $13.2 million and $91.2 million, respectively, which fully expire by 2020. We also had capital loss carryforwards of $42.9 million, of which $16.4 million expires in 2005 and $26.5 million expires in 2006.

Under three stock option plans, we may grant stock options and other awards from time to time to key employees, officers, directors, advisors and independent consultants to us or to any of our subsidiaries. In general, options become exercisable over either a three-year or five-year period from the grant date and expire 10 years after the date of grant. In certain cases for non-employee directors, options become exercisable six months after the grant date and expire 10 years after date of grant. Shares available for future option grants at December 31, 2001, totaled 1.6 million. Total compensation cost recorded for stock-based employee compensation awards (including awards to non-employee directors) was $1.4 million, $1.1 million and $0.1 million for 2001, 2000 and 1999, respectively.

In connection with our acquisition of Nine West, out-of-the-money stock options for Nine West common stock held by Nine West employees and non-employee directors were converted into fully-vested options to purchase our common stock. Under the terms of the Agreement and Plan of Merger, each option to purchase one share of Nine West's common stock was converted into an option to purchase .5011 shares of our common stock, and each option was adjusted to reduce the exercise price by $13.00. Options to purchase 1.8 million shares of Nine West common stock were converted to options to purchase 0.9 million shares of our common stock at a weighted average value of $56.22 per share.

In connection with our acquisition of McNaughton, stock options for McNaughton common stock held by McNaughton employees and non-employee directors were converted into fully-vested options to purchase our common stock. Under the terms of the Agreement and Plan of Merger, each option to purchase one share of McNaughton's common stock was converted into an option to purchase .282 shares of our common stock and a cash payment averaging approximately $5.89. Options to purchase 5.1 million shares of McNaughton common stock were converted into options to purchase 1.4 million shares of our common stock at a weighted average value of $17.85 per share.

The following table summarizes information about stock option transactions (options in millions):

The following table summarizes information about stock options outstanding at December 31, 2001 (options in millions):

During 2001, restricted common stock was issued to an executive officer under the 1999 Stock Incentive Plan. The restrictions lapse on one-third of the number of restricted shares on each of the first three anniversary dates of issue. The value of this stock based on quoted market values was $3.7 million, which we are amortizing over the period in which the restrictions lapse. The restrictions do not affect voting and dividend rights.

Pursuant to a provision in SFAS No. 123, "Accounting for Stock-Based Compensation," we have elected to continue using the intrinsic-value method of accounting for stock options granted to employees in accordance with Accounting Principles Board Opinion 25, "Accounting for Stock Issued to Employees." Accordingly, we have only recognized compensation expense for stock-based awards to employees for options granted at below-market prices. Had we elected to adopt the fair value approach of SFAS No. 123, our net income would have decreased accordingly. Using the fair value approach, pro forma net income and earnings per share, the weighted average fair value of options granted and the related assumptions used in the Black-Scholes option pricing model are presented in the following table. These pro forma amounts may not be representative of future disclosures since the estimated fair value of stock options is amortized to expense over the vesting period, and additional options may be granted in future years.

We maintain the Jones Apparel Group, Inc. Retirement Plan (the "Jones Plan") under Section 401(k) of the Internal Revenue Code (the "Code"). Full-time employees not covered by a collective bargaining agreement and meeting certain other requirements are eligible to participate in the Jones Plan. Under the Jones Plan, participants may elect to have up to 15% of their salary deferred and deposited with a qualified trustee, who in turn invests the money in a variety of investment vehicles as selected by each participant. All employee contributions into the Jones Plan are 100% vested.

Effective January 1, 2000, we elected to make the Jones Plan a "Safe Harbor Plan" under Section 401(k)(12) of the Code. As a result of this election, we make a fully-vested safe harbor matching contribution for all eligible participants amounting to 100% of the first 3% of the participant's salary deferred and 50% of the next 2% of salary deferred, subject to maximums set by the Department of the Treasury. For the period January 1, 1998 through December 31, 1999, we matched 50% of each participant's contributions with our contribution limited to a maximum of 3.0% of the employee's total compensation for employees earnings less than $150,000 per year. For employees earning over $150,000 per year, we matched 35% of each participant's contributions with our contribution limited to a maximum of 2.1% of the employee's total compensation. Our matching contributions prior to 2000 vest over a five-year period.

Contributions and salary deferrals are subject to limitations imposed by the Code. We may, at our sole discretion, contribute additional amounts to all employees on a pro rata basis. We contributed approximately $3.7 million, $3.3 million and $1.5 million to the Jones Plan during 2001, 2000 and 1999, respectively.

In connection with the acquisition of Nine West, Victoria and McNaughton we assumed additional plans in which certain employees participate.

Nine West, Victoria and McNaughton maintain defined contribution plans primarily under Section 401(k) of the Code. Certain full-time employees not covered by a collective bargaining agreement and

meeting certain other requirements are eligible to participate in these plans. Participants may elect to have a portion (typically up to 15%) of their salary deferred and deposited with a qualified trustee, who in turn invests the money in a variety of investment vehicles as selected by each participant. All employee contributions into these plans are 100% vested. We match a portion of the employee's contributions subject to limitations imposed by the Code. Our contributions to plans operated by Nine West were approximately $1.3 million, $0.9 million and $0.9 million during 2001, 2000 and 1999, respectively. Our contributions to plans operated by Victoria were approximately $0.2 million and $0.1 million during 2001 and 2000, respectively. Our contributions to plans operated by McNaughton were approximately $0.2 million during 2001.

Nine West maintains the Pension Plan for Associates of Nine West Group Inc. (the "Cash Balance Plan"). The Cash Balance Plan expresses retirement benefits as an account balance which increases each year through interest credits and, for service prior to February 15, 1999, through service credits, as well. Our funding policy is to make the minimum annual contributions required by applicable regulations. The assets of the Cash Balance Plan have been invested in commingled funds which invest primarily in common stock and investment grade bonds. At December 31, 2001, the benefit obligation, fair value of plan assets and accrued benefit cost under the Cash Balance Plan were $23.5 million, $23.8 million and $0.2 million, respectively. The net periodic benefit (gain) costs to us for 2001, 2000 and 1999 were $(0.3) million, $1.2 million and $(0.3) million, respectively.

Victoria maintains The Napier Company Retirement Plan for certain associates of Victoria (the "Napier Plan"). All benefits under the Napier Plan are frozen at the amounts earned by the participants as of December 31, 1995. Our funding policy is to make no less than the minimum annual contributions required by applicable regulations. The assets of the Napier Plan have been invested in a diversified portfolio of equity and debt securities. At December 31, 2001, the benefit obligation, fair value of plan assets and accrued benefit cost under the Napier Plan were $8.0 million, $7.0 million and $1.0 million, respectively. For 2001, we had no periodic benefit cost; the net periodic benefit cost to us for 2000 was $0.1 million.

McNaughton maintains a profit sharing plan covering Miss Erika, Inc. employees with more than one year of continuous service. Vesting occurs at a rate of 25% per year and employees are fully vested after four years. Profit sharing plan assets consist primarily of stocks, bonds and U.S. Government securities. The plan provides for an accrual of up to 15% of each employee's gross compensation plus bonus, up to a maximum contribution of approximately $25,500 per employee. Our cost related to this plan was $0.6 million in 2001.

Our operations are comprised of three reportable segments: wholesale apparel, wholesale footwear and accessories, and retail. We identify operating segments based on, among other things, the way that our management organizes the components of our business for purposes of allocating resources and assessing performance. Segment revenues are generated from the sale of apparel, footwear and accessories through wholesale channels and our own retail locations. The wholesale segments include wholesale operations with third party department and other retail stores; the retail segment includes retail operations by our own retail stores. No individual country other than the United States accounted for more than 10% of consolidated net revenues in 2001, 2000 or 1999. We define segment profit as operating income before amortization of goodwill, interest expense and income taxes. Summarized below are our segment revenues and income (loss) by reportable segments for the years ended December 31, 2001, 2000 and 1999.

Revenues from external customers and long-lived assets excluding deferred taxes related to operations in the United States and foreign countries are as follows:

Certain of our subsidiaries function as co-issuers, obligors and co-obligors (fully and unconditionally guaranteed on a joint and several basis) of the outstanding debt of Jones Apparel Group, Inc. ("Jones"), including Jones Apparel Group USA, Inc. ("Jones USA"), Jones Apparel Group Holdings, Inc. ("Jones Holdings") and Nine West (collectively, including Jones, the "Issuers"). Jones and Jones Holdings function as either co-issuers or co-obligors with respect to the outstanding debt securities of Jones USA and certain of the outstanding debt securities of Nine West. In addition, Nine West functions as either a co-issuer or co-obligor with respect to all of Jones USA's outstanding debt securities, and Jones USA functions as a co-obligor with respect to the outstanding debt securities of Nine West as to which Jones and Jones Holdings function as co-obligors.

The following condensed consolidating balance sheets, condensed consolidating statements of income and condensed consolidating statements of cash flows for the Issuers and our other subsidiaries have been prepared using the equity method of accounting in accordance with the requirements for presentation of such information. Separate financial statements and other disclosures concerning Jones are not presented as Jones has no independent operations or assets. There are no contractual restrictions on distributions from Jones USA, Jones Holdings or Nine West to Jones.

                                                         December 31, 2001                            December 31, 2000
                                             ----------------------------------------     ---------------------------------------
                                                                     Elim-      Cons-                             Elim-     Cons-
                                              Issuers    Others   inations   olidated      Issuers    Others   inations  olidated
                                             ----------------------------------------     ---------------------------------------
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents                    $ 24.5    $ 52.0        $ -     $ 76.5       $ 45.5    $ 15.0        $ -    $ 60.5
  Accounts receivable - net                     251.9     143.9          -      395.8        288.2     109.8          -     398.0
  Inventories                                   351.9     230.4       (9.4)     572.9        404.4     159.7       (6.9)    557.2
  Prepaid and refundable income taxes             4.0         -       (4.0)         -          4.8         -       (4.8)        -
  Deferred taxes                                 35.6      26.6       (0.1)      62.1         58.7      11.9          -      70.6
  Prepaid expenses and other
    current assets                               20.8      12.9          -       33.7         86.2      10.3       (1.1)     95.4
                                             ----------------------------------------     ---------------------------------------
    TOTAL CURRENT ASSETS                        688.7     465.8      (13.5)   1,141.0        887.8     306.7      (12.8)  1,181.7

Property, plant and equipment - net             166.0      76.5          -      242.5        166.4      56.1          -     222.5
Due from affiliates                             595.9     349.7     (945.6)         -        844.4     558.0   (1,402.4)        -
Goodwill - net                                  646.3     722.1          -    1,368.4      1,067.2     408.6     (389.0)  1,086.8
Other intangibles - net                         267.1     266.2          -      533.3        277.4      94.2          -     371.6
Investments in subsidiaries                   2,521.2      24.4   (2,545.6)         -      2,396.0      21.4   (2,417.4)        -
Deferred taxes                                   10.7         -      (10.7)         -            -      15.5      (15.5)        -
Other assets                                     58.1      30.2          -       88.3         80.9      35.8       (0.1)    116.6
                                             ----------------------------------------     ---------------------------------------
                                             $4,954.0  $1,934.9  $(3,515.4)  $3,373.5     $5,720.1  $1,496.3  $(4,237.2) $2,979.2
                                             ========================================     =======================================

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Short-term debt and current portion
    of long-term debt and capital
    lease obligations                           $ 6.2     $ 1.5        $ -      $ 7.7      $ 499.1     $ 0.7        $ -   $ 499.8
  Accounts payable                              152.7      64.0          -      216.7        166.6      44.3          -     210.9
  Income taxes payable                            5.8       5.2       (4.0)       7.0         13.5       4.4       (4.8)     13.1
  Accrued expenses and other
    current liabilities                          85.9      61.0       (0.1)     146.8        126.1      37.9       (1.0)    163.0
                                             ----------------------------------------     ---------------------------------------
    TOTAL CURRENT LIABILITIES                   250.6     131.7       (4.1)     378.2        805.3      87.3       (5.8)    886.8
                                             ----------------------------------------     ---------------------------------------

NONCURRENT LIABILITIES:
  Long-term debt                                941.5       8.0          -      949.5        537.9       9.3          -     547.2
  Obligations under capital leases               27.1         -          -       27.1         28.9       0.1          -      29.0
  Deferred taxes                                 23.9      67.6      (10.7)      80.8         22.5       1.8      (15.5)      8.8
  Due to affiliates                             337.2     608.4     (945.6)         -      1,129.7     272.7   (1,402.4)        -
  Other                                          28.5       4.0          -       32.5         30.3       0.1       (0.2)     30.2
                                             ----------------------------------------     ---------------------------------------
    TOTAL NONCURRENT LIABILITIES              1,358.2     688.0     (956.3)   1,089.9      1,749.3     284.0   (1,418.1)    615.2
                                             ----------------------------------------     ---------------------------------------
    TOTAL LIABILITIES                         1,608.8     819.7     (960.4)   1,468.1      2,554.6     371.3   (1,423.9)  1,502.0
                                             ----------------------------------------     ---------------------------------------

STOCKHOLDERS' EQUITY:
  Common stock and additional
    paid-in capital                           2,061.0     835.3   (1,920.6)     975.7      2,261.9     567.4   (2,075.9)    753.4
  Retained earnings                           1,665.7     286.8     (632.2)   1,320.3      1,262.3     561.9     (740.1)  1,084.1
  Accumulated other comprehensive
    income                                        9.6      (6.9)      (2.2)       0.5         (0.8)     (4.3)       2.7      (2.4)
                                             ----------------------------------------     ---------------------------------------
                                              3,736.3   1,115.2   (2,555.0)   2,296.5      3,523.4   1,125.0   (2,813.3)  1,835.1
  Less treasury stock                          (391.1)        -          -     (391.1)      (357.9)        -          -    (357.9)
                                             ----------------------------------------     ---------------------------------------
    TOTAL STOCKHOLDERS' EQUITY                3,345.2   1,115.2   (2,555.0)   1,905.4      3,165.5   1,125.0   (2,813.3)  1,477.2
                                             ----------------------------------------     ---------------------------------------
                                             $4,954.0  $1,934.9  $(3,515.4)  $3,373.5     $5,720.1 $ 1,496.3  $(4,237.2) $2,979.2
                                             ========================================     =======================================

Condensed Consolidating Statements of Income
(In millions)


                                Year Ended December 31, 2001            Year Ended December 31, 2000            Year Ended December 31, 1999
                           --------------------------------------  --------------------------------------  --------------------------------------
                                                  Elim-     Cons-                         Elim-     Cons-                         Elim-     Cons-
                            Issuers    Others  inations  olidated   Issuers    Others  inations  olidated   Issuers    Others  inations  olidated
                           --------------------------------------  --------------------------------------  --------------------------------------

Net sales                  $2,945.4  $1,205.0  $ (102.1) $4,048.3  $3,269.8   $ 951.5  $ (100.8) $4,120.5  $2,396.5   $ 837.9  $ (104.6) $3,129.8
Licensing income (net)         14.6      10.2         -      24.8      12.0      10.2         -      22.2       6.7      14.2         -      20.9
                           --------------------------------------  --------------------------------------  --------------------------------------
  Total revenues            2,960.0   1,215.2    (102.1)  4,073.1   3,281.8     961.7    (100.8)  4,142.7   2,403.2     852.1    (104.6)  3,150.7
Cost of goods sold          1,851.8     817.7     (99.1)  2,570.4   1,897.5     640.5    (101.5)  2,436.5   1,513.2     547.4     (99.1)  1,961.5
                           --------------------------------------  --------------------------------------  --------------------------------------
  Gross profit              1,108.2     397.5      (3.0)  1,502.7   1,384.3     321.2       0.7   1,706.2     890.0     304.7      (5.5)  1,189.2
Selling, general and
 administrative expenses      756.8     222.4      (0.6)    978.6     906.6     163.0      (4.9)  1,064.7     654.9     135.0      (1.2)    788.7
Amortization of goodwill       23.6      20.6         -      44.2      36.0      13.4     (12.5)     36.9      12.9      11.5      (2.1)     22.3
                           --------------------------------------  --------------------------------------  --------------------------------------
  Operating income            327.8     154.5      (2.4)    479.9     441.7     144.8      18.1     604.6     222.2     158.2      (2.2)    378.2
Net interest (income)
 expense and financing
 costs                         71.2       8.9         -      80.1     122.5     (21.0)        -     101.5      82.9     (19.3)        -      63.6
                           --------------------------------------  --------------------------------------  --------------------------------------
  Income before provision
   for income taxes and
   equity in earnings of
   subsidiaries               256.6     145.6      (2.4)    399.8     319.2     165.8      18.1     503.1     139.3     177.5      (2.2)    314.6
Provision for income taxes    114.4      49.2         -     163.6     135.4      64.2       1.6     201.2      59.8      68.0      (1.6)    126.2
Equity in earnings of
 subsidiaries                (405.1)     (4.3)    409.4         -    (439.7)     (2.6)    442.3         -    (218.0)     (3.5)    221.5         -
                           --------------------------------------  --------------------------------------  --------------------------------------
  Net income                $ 547.3   $ 100.7  $ (411.8)  $ 236.2   $ 623.5   $ 104.2  $ (425.8)  $ 301.9   $ 297.5   $ 113.0  $ (222.1)  $ 188.4
                           ======================================  ======================================  ======================================

Condensed Consolidating Statements of Cash Flows
(In millions)


                                Year Ended December 31, 2001            Year Ended December 31, 2000            Year Ended December 31, 1999
                           --------------------------------------  --------------------------------------  --------------------------------------
                                                  Elim-     Cons-                         Elim-     Cons-                         Elim-     Cons-
                            Issuers    Others  inations  olidated   Issuers    Others  inations  olidated   Issuers    Others  inations  olidated
                           --------------------------------------  --------------------------------------  --------------------------------------

Net cash provided by
 operating activities       $ 717.8   $ 233.0  $ (388.4)  $ 562.4   $ 269.5    $ 69.7       $ -   $ 339.2   $ 213.8    $ 34.0       $ -   $ 247.8
                           --------------------------------------  --------------------------------------  --------------------------------------

Cash flows from investing
 activities:
  Acquisitions, net of
    cash acquired            (112.8)    (21.2)        -    (134.0)    (14.9)    (14.2)        -     (29.1)   (436.2)        -         -    (436.2)
  Capital expenditures        (32.8)    (23.6)        -     (56.4)    (23.9)    (22.9)        -     (46.8)    (17.5)    (12.2)        -     (29.7)
  Proceeds from sale of
    U. S. Treasury bonds      321.6         -         -     321.6         -         -         -         -         -         -         -         -
  Repurchase/collateral
    required for repurchase
    of U. S. Treasury bonds  (318.5)        -         -    (318.5)        -         -         -         -         -         -         -         -
  Additional consideration
    paid for acquisition
    of Sun                     (1.0)        -         -      (1.0)    (26.6)        -         -     (26.6)    (20.1)        -         -     (20.1)
  Additional consideration
    paid for acquisition
    of Victoria               (18.4)        -         -     (18.4)        -         -         -         -         -         -         -         -
  Acquisition of intangibles      -      (1.0)        -      (1.0)     (1.0)     (1.0)        -      (2.0)        -     (29.6)        -     (29.6)
  Proceeds from sale of Nine
    West UK operations         28.0         -         -      28.0         -         -         -         -         -         -         -         -
  Repayments from (loans to)
    officers                   18.0         -         -      18.0     (20.0)        -         -     (20.0)        -         -         -         -
  Other                         0.4       1.0         -       1.4     (10.4)      0.2         -     (10.2)      9.1       0.1         -       9.2
                           --------------------------------------  --------------------------------------  --------------------------------------
    Net cash used in
      investing activities   (115.5)    (44.8)        -    (160.3)    (96.8)    (37.9)        -    (134.7)   (464.7)    (41.7)        -    (506.4)
                           --------------------------------------  --------------------------------------  --------------------------------------

Cash flows from
  financing activities:
    Issuance of Senior
      Notes, net              392.8         -         -     392.8         -         -         -         -     390.8         -         -     390.8
    Repurchase of Senior
      Notes                  (265.5)   (125.0)        -    (390.5)        -         -         -         -    (356.9)        -         -    (356.9)
    Premiums paid on
      repurchase of
      Senior Notes                -     (35.2)        -     (35.2)        -         -         -         -         -         -         -         -
    Refinancing of acquired
      long-term debt              -    (146.9)        -    (146.9)    (71.0)        -         -     (71.0)        -         -         -         -
    Net borrowings (payments)
      under long-term credit
      facilities             (227.7)      0.7         -    (227.0)    (30.4)      9.5         -     (20.9)    139.4      (3.1)        -     136.3
    Purchases of treasury
      stock                   (68.9)        -         -     (68.9)   (121.9)        -         -    (121.9)     (2.8)        -         -      (2.8)
    Proceeds from exercise
      of stock options         85.8         -         -      85.8      27.6         -         -      27.6      14.1         -         -      14.1
    Net intercompany
      borrowings (payments)  (544.0)    544.0         -         -      34.4     (34.4)        -         -      95.3     (95.3)        -         -
    Dividends to affiliates       -    (388.4)    388.4         -         -         -         -         -         -         -         -         -
    Other items                 3.4      (0.7)        -       2.7      (4.0)     (0.5)        -      (4.5)     (4.3)     (0.3)        -      (4.6)
                           --------------------------------------  --------------------------------------  --------------------------------------
      Net cash (used in)
        provided by
        financing
        activities           (624.1)   (151.5)    388.4    (387.2)   (165.3)    (25.4)        -    (190.7)    275.6     (98.7)        -     176.9
                           --------------------------------------  --------------------------------------  --------------------------------------

Effect of exchange rates
  on cash                       0.8       0.3         -       1.1      (0.8)      0.5         -      (0.3)        -      (0.3)        -      (0.3)
                           --------------------------------------  --------------------------------------  --------------------------------------

Net increase (decrease) in
  cash and cash equivalents   (21.0)     37.0         -      16.0       6.6       6.9         -      13.5      24.7    (106.7)        -     (82.0)
Cash and cash equivalents,
  beginning                    45.5      15.0         -      60.5      38.9       8.1         -      47.0      14.2     114.8         -     129.0
                           --------------------------------------  --------------------------------------  --------------------------------------

Cash and cash equivalents,
  ending                     $ 24.5    $ 52.0       $ -    $ 76.5    $ 45.5    $ 15.0       $ -    $ 60.5    $ 38.9     $ 8.1       $ -    $ 47.0
                           ======================================  ======================================  ======================================

RELATED PARTY TRANSACTIONS

During 2000, $20.0 million in loans were made to two of our officers. A total of $18.0 million was loaned to our Chairman and Chief Executive Officer for his purchase of a residence in New York City. This loan, repaid in full during 2001, replaced an arrangement under which the Chairman had been provided the use of an apartment we owned and was secured by the residence and bore interest at the applicable federal rate under IRS regulations. A total of $2.0 million was loaned to our former President, which also bears interest at the applicable federal rate under IRS regulations.

SHORT-TERM BOND TRANSACTIONS

During 2001, we entered into two transactions relating to the short-sale of $296.9 million of U. S. Treasury Securities. The transactions were intended to address interest rate exposure and generate capital gains that could be used to offset previously incurred capital losses. As a result of these transactions, we recorded short-term capital gains of $5.4 million, interest income of $1.4 million and interest expense of $7.6 million during 2001. The net effect of $0.8 million is included in the statement of operations as interest expense. The first transaction, which represented $139.0 million of the securities, closed in November 2001. In the second transaction, we have an obligation to repurchase $157.9 million of U. S. Treasury Securities on or before November 15, 2002 that had a market value of $171.0 million at December 31, 2001. We have placed the proceeds from the short sale into an interest-bearing collateral account to provide for the repurchase. At December 31, 2001, the net excess of funds in the collateral account over the obligation to repurchase the securities is $1.8 million, which is included in prepaid expenses and other current assets.

EFFECTS OF SEPTEMBER 11, 2001

In September 2001, we recorded a pre-tax charge of $86.8 million to write down inventory and receivables resulting from the change in the economic climate in the aftermath of the events of September 11, 2001. Of the charge, $61.7 million was to write down to net realizable value goods that we either own or are committed for and need to dispose of through off-price channels. The charge to receivables of $24.1 million was to record an incremental provision for customer allowances, which we anticipated we needed to provide to our retail customers in order to effectively flow goods through the retail channels. At December 31, 2001, $25.5 million of the write down of goods (applicable to inventory either on-hand or in transit) and $1.5 million of the provision for customer allowances remained to be used.

SUBSEQUENT EVENT

On March 19, 2002, we announced that we had entered into an agreement to acquire 100% of the common stock of Gloria Vanderbilt Apparel Corp. and 100% of the assets of Gloria Vanderbilt Trademark B.V. Gloria Vanderbilt, a leading designer, marketer and distributor of women's moderately priced stretch and twill jeanswear, markets its products nationwide to national chains, department stores, mass merchants, and specialty retailers, including Kohl's Department Stores, J.C. Penney Company, Inc., Mervyns, Costco Wholesale Corporation and Federated Department Stores, Inc. Brands include Gloria Vanderbilt and junior product marketed under the GLO brand name.

The transaction is valued at $138 million, which includes $80 million in cash payments, $20 million in Jones common stock and the assumption of approximately $38 million of funded debt and accrued interest. Cash payments and debt, which we will refinance upon closing, will be funded through our existing credit facilities. The owners of Gloria Vanderbilt Apparel will be entitled to receive future payments in the form of cash or a combination of cash and our common stock if certain earnings targets are achieved. The transaction is expected to close early in the second quarter of 2002.

UNAUDITED CONSOLIDATED FINANCIAL INFORMATION

Unaudited interim consolidated financial information for the two years ended December 31, 2001 is summarized as follows:

(In millions except per share data)	First Quarter	Second Quarter	Third Quarter	Fourth Quarter
2001 Net sales Total revenues Gross profit Operating income Net income Basic earnings per share Diluted earnings per share	$ 1,065.1 1,070.5 440.1 180.4 96.4 $0.80 $0.75	$ 874.4 879.9 347.5 112.0 55.4 $0.46 $0.43	$ 1,227.9 1,235.6 393.1 116.5 53.1 $0.42 $0.41	$ 880.9 887.1 322.0 71.0 31.3 $0.25 $0.25
2000 Net sales Total revenues Gross profit Operating income Net income Basic earnings per share Diluted earnings per share	$ 1,077.5 1,082.4 437.8 143.8 70.6 $0.59 $0.58	$ 901.1 906.6 378.9 118.2 55.5 $0.47 $0.46	$ 1,185.6 1,191.5 488.8 212.8 112.3 $0.95 $0.93	$ 956.3 962.2 400.7 129.8 63.5 $0.53 $0.52

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not Applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Our directors and executive officers are as follows:

Name	Age	Office
Sidney Kimmel	74	Chairman, Chief Executive Officer and Director
Irwin Samelman	71	Vice Chairman and Director
Peter Boneparth	42	President, Chief Executive Officer of Women's Moderate Apparel Group and Director
Wesley R. Card	54	Chief Operating and Financial Officer
Patrick M. Farrell	52	Senior Vice President and Corporate Controller
Rhonda J. Brown	46	President and Chief Executive Officer of Footwear, Accessories and Retail Group and President and Chief Executive Officer of Nine West
Jackwyn Nemerov	50	Director
Geraldine Stutz	73	Director
Howard Gittis	68	Director
Anthony F. Scarpa	58	Director
Michael L. Tarnopol	65	Director
Matthew H. Kamens	50	Director
J. Robert Kerrey	58	Director

Mr. Kimmel founded the Jones Apparel Division of W.R. Grace & Co. in 1970. Mr. Kimmel has served as our Chairman and Chief Executive Officer since 1975.

Mr. Samelman was named Vice Chairman in 2001. He previously served as our Executive Vice President, Marketing from 1991 to 2001.

Mr. Boneparth was named President in March 2002 and will be named Chief Executive Officer in May 2002 at our Annual Meeting of Stockholders. He also serves as Chief Executive Officer of McNaughton and as Chief Executive Officer of our Women's Moderate Apparel Group. He has been Chief Executive Officer of McNaughton since June 1999, President of McNaughton from April 1997 until January 2002, and Chief Operating Officer of McNaughton from 1997 until its acquisition by us. Prior to that time, Mr. Boneparth was Executive Vice President and Senior Managing Director of Investment Banking for Rodman & Renshaw, Inc., an investment banking firm, from March 1995 to April 1997.

Mr. Card has been our Chief Financial Officer since 1990. He was also named Chief Operating Officer in March 2002.

Mr. Farrell was appointed Vice President and Corporate Controller in November 1997 and Senior Vice President in September 1999. He previously served as our Vice President, Finance and Administration of Retail Operations.

Ms. Brown joined us as President and Chief Executive Officer of Nine West and President and Chief Executive Officer of Footwear, Accessories and Retail Group in October 2001. Prior to joining us, Ms. Brown served as President of Steve Madden, Ltd. from February 2000 to September 2001. Ms. Brown also served as Chief Operating Officer of Steve Madden, Ltd. from July 1996 to January 2001 and as a director of that company from October 1996 to September 2001.

Ms. Nemerov served as President of our casual sportswear divisions and the Lauren by Ralph Lauren division from 1995 to 1997. She was our President from early 1997 until March 2002 and also served as the Chief Operating Officer and President and Chief Executive Officer of our Women's Better Apparel Group from October 2001 until March 2002.

Ms. Stutz has been a principal partner of GSG Group, a fashion and marketing service, since 1993. Prior to 1993, she was Publisher of Panache Press at Random House, a book publisher. From 1960 until 1986, Ms. Stutz was President of Henri Bendel. Ms. Stutz serves on the Board of Directors of Tiffany & Co., The Theatre Development Fund and The Actors' Fund.

Mr. Gittis' principal occupation during the past five years has been Vice Chairman and Chief Administrative Officer and a director of MacAndrews & Forbes Holdings Inc., a diversified holding company. In addition, Mr. Gittis is a director of Golden State Bancorp Inc., Golden State Holdings Inc., Loral Space and Communications Ltd., M&F Worldwide Corp., Revlon, Inc., Revlon Consumer Products Corporation, REV Holdings Inc. and Sunbeam Corporation.

Mr. Scarpa served as Senior Vice President and Division Executive of J.P. Morgan Chase Bank from 1985 until his retirement in December 2000.

Mr. Tarnopol is a Senior Managing Director, Chairman of Investment Banking Division and Vice Chairman of the Board of Directors of Bear, Stearns and Co. Inc. Mr. Tarnopol joined Bear Stearns in 1975 and held executive positions in its Mergers and Acquisitions and International departments prior to becoming Senior Managing Director in 1985.

Mr. Kamens is employed by Mr. Kimmel as a lawyer and personal advisor. He is also Of Counsel to the law firm of Wolf, Block, Schorr and Solis-Cohen LLP, where he served as its Chairman from 1995 to 2001.

Mr. Kerrey has served as the President of New School University in New York City since January 2001. From 1988 to 2000, he served as United States Senator from Nebraska. During that period, he was a member of numerous congressionally-chartered commissions and Senate committees, including the Senate Finance and Appropriations Committees and the Senate Select Committee on Intelligence. Prior to that time, he served as Governor of Nebraska from 1982-1987. Mr. Kerrey also serves on the Board of Directors of InfoUSA and Tenet Healthcare Corporation.

ITEM 11. EXECUTIVE COMPENSATION

The information appearing in the Proxy Statement under the captions "EXECUTIVE COMPENSATION" and "EMPLOYMENT AND COMPENSATION ARRANGEMENTS" is incorporated herein by this reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information appearing in the Proxy Statement under the caption "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS" is incorporated herein by this reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information appearing in the Proxy Statement under the captions "CERTAIN TRANSACTIONS" and "COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION" is incorporated herein by this reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this report:
	1.	Financial Statements.
		The following financial statements are included in Item 8 of this report:
		Report of Independent Certified Public Accountants
		Consolidated Balance Sheets - December 31, 2001 and 2000
		Consolidated Statements of Income - Years ended December 31, 2001, 2000 and 1999
		Consolidated Statements of Stockholders' Equity - Years ended December 31, 2001, 2000 and 1999
		Consolidated Statements of Cash Flows - Years ended December 31, 2001, 2000 and 1999
		Notes to Consolidated Financial Statements (includes certain supplemental financial information required by Item 8 of Form 10-K)
	2.	The schedule and report of independent certified public accountants thereon, listed in the Index to Financial Statement Schedules attached hereto.
	3.	The exhibits listed in the Exhibit Index attached hereto.
(b) Reports on Form 8-K
	During the quarter ended December 31, 2001, we filed a Current Report on Form 8-K with the SEC, dated October 11, 2001, announcing revised expectations for fiscal year 2001 and 2002 revenues and earnings.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

March 25, 2002		JONES APPAREL GROUP, INC. (Registrant)
	By:	/s/ Sidney Kimmel Sidney Kimmel, Chairman

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears on this page to this Annual Report on Form 10-K for the year ended December 31, 2001 (the "Form 10-K") constitutes and appoints Sidney Kimmel, Wesley R. Card and Patrick M. Farrell and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to the Form 10-K, and file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, and grants unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might and could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Sidney Kimmel Sidney Kimmel	Chairman and Director (Principal Executive Officer)	March 25, 2002
/s/ Irwin Samelman Irwin Samelman	Vice Chairman and Director	March 25, 2002
/s/ Peter Boneparth Peter Boneparth	President and Director	March 25, 2002
/s/ Wesley R. Card Wesley R. Card	Chief Operating and Financial Officer (Principal Financial Officer)	March 25, 2002
/s/ Patrick M. Farrell Patrick M. Farrell	Senior Vice President and Corporate Controller (Principal Accounting Officer)	March 25, 2002
/s/ Jackwyn Nemerov Jackwyn Nemerov	Director	March 25, 2002
/s/ Geraldine Stutz Geraldine Stutz	Director	March 25, 2002
/s/ Howard Gittis Howard Gittis	Director	March 25, 2002
/s/ Anthony F. Scarpa Anthony F. Scarpa	Director	March 25, 2002
/s/ Michael L. Tarnopol Michael L. Tarnopol	Director	March 25, 2002
/s/ Matthew H. Kamens Matthew H. Kamens	Director	March 25, 2002
/s/ J. Robert Kerrey J. Robert Kerrey	Director	March 25, 2002

JONES APPAREL GROUP, INC.
INDEX TO FINANCIAL STATEMENT SCHEDULES

Report of Independent Certified Public Accountants on Schedule II.

Schedule II. Valuation and qualifying accounts

Schedules other than those listed above have been omitted since the information is not applicable, not required or is included in the respective financial statements or notes thereto.

EXHIBIT INDEX

Exhibit No.	Description of Exhibit
2.1	Agreement and Plan of Merger dated September 10, 1998, among Jones Apparel Group, Inc., SAI Acquisition Corp., Sun Apparel, Inc. and the selling shareholders (incorporated by reference to Exhibit 2.1 of our Current Report on Form 8-K dated September 24, 1998).
2.2	Agreement and Plan of Merger dated as of March 1, 1999, among Jones Apparel Group, Inc., Jill Acquisition Sub Inc. and Nine West Group Inc. (incorporated by reference to Exhibit 2.1 of our Current Report on Form 8-K dated March 2, 1999).
2.3	Securities Purchase and Sale Agreement dated as of July 31, 2000, among Jones Apparel Group, Inc., Jones Apparel Group Holdings, Inc., Victoria + Co Ltd. and the Shareholders and Warrantholders of Victoria + Co Ltd (incorporated by reference to Exhibit 2.1 of our Quarterly Report on Form 10-Q for the three months ended April 2, 2000).
2.4	Agreement and Plan of Merger dated as of April 13, 2001, among Jones Apparel Group, Inc., MCN Acquisition Corp. and McNaughton Apparel Group Inc. (incorporated by reference to Exhibit 2.1 of our Current Report on Form 8-K dated April 13, 2001).
3.1	Articles of Incorporation, as amended (incorporated by reference to Exhibit 3.1 of our Annual Report on Form 10-K for the fiscal year ended December 31, 1998).
3.2*	Amended and Restated By-Laws.
4.1	Form of Certificate evidencing shares of common stock of Jones Apparel Group, Inc. (incorporated by reference to Exhibit 4.1 of our Shelf Registration Statement on Form S-3, filed on October 28, 1998 (Registration No. 333-66223)).
4.2	Exchange and Registration Rights Agreement dated October 2, 1998, among Jones Apparel Group, Inc. and Chase Securities Inc., Merrill Lynch, Pierce Fenner & Smith Incorporated and Bear, Stearns & Co. Inc. (incorporated by reference to Exhibit 4.1 of our Form S-4, filed on December 9, 1998 (Registration No. 333-68587)).
4.3	Indenture dated as of October 2, 1998, between Jones Apparel Group, Inc. and The Chase Manhattan Bank, as trustee, including form of 6.25% Senior Notes Due 2001 (incorporated by reference to Exhibit 10.1 of our Shelf Registration Statement on Form S-3, filed on October 28, 1998 (Registration No. 333-66223)).
4.4	Supplemental Indenture dated as of January 1, 1999, between Jones Apparel Group, Inc., Jones Apparel Group Holdings, Inc., Jones Apparel Group USA, Inc. and The Chase Manhattan Bank, as trustee (incorporated by reference to Exhibit 4.3 of our Form S-4/A, filed on January 25, 1999 (Registration No. 333-68587)).
4.5	Second Supplemental Indenture for 8-3/8% Series B Senior Notes due 2005 dated as of June 15, 1999, among Jack Asset Sub Inc., Jones Apparel Group, Inc., Jones Apparel Group Holdings, Inc., Jones Apparel Group USA, Inc. and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.1 of our Quarterly Report on Form 10-Q for the six months ended July 4, 1999).
4.6	Second Supplemental Indenture for 9% Series B Senior Notes due 2005 dated as of June 2, 1999, among Nine West Group Inc., Jack Asset Sub Inc., Jill Acquisition Sub Inc. and The Bank of New York, as trustee (incorporated by reference to Exhibit 4.2 of our Quarterly Report on Form 10-Q for the six months ended July 4, 1999).
4.7	Second Supplemental Indenture for 6.25% Senior Notes Due 2001 dated as of June 15, 1999, among Jones Apparel Group, Inc., Jones Apparel Group Holdings, Inc., Jones Apparel Group USA, Inc., Jack Asset Sub Inc. and The Chase Manhattan Bank, as trustee (incorporated by reference to Exhibit 4.3 of our Quarterly Report on Form 10-Q for the six months ended July 4, 1999).

Exhibit No.	Description of Exhibit
4.8	Second Supplemental Indenture for 5-1/2% Convertible Subordinated Notes Due 2003 dated as of June 15, 1999, among Jack Asset Sub Inc., Jill Acquisition Sub Inc. and Chase Manhattan Bank, as trustee (incorporated by reference to Exhibit 4.4 of our Quarterly Report on Form 10-Q for the six months ended July 4, 1999).
4.9	Exchange and Note Registration Rights Agreement dated June 15, 1999, among Jones Apparel Group, Inc., Bear, Stearns & Co. Inc., Chase Securities Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Salomon Smith Barney Inc., BancBoston Robertson Stephens Inc., Banc of America Securities LLC, ING Baring Furman Selz LLC, Lazard Freres & Co. LLC, Tucker Anthony Cleary Gull, Brean Murray & Co., Inc. and The Buckingham Research Group Incorporated (incorporated by reference to Exhibit 4.5 of our Quarterly Report on Form 10-Q for the six months ended July 4, 1999).
4.10	Senior Note Indenture dated as of June 15, 1999, among Jones Apparel Group, Inc., Jones Apparel Group Holdings, Inc., Jones Apparel Group USA, Inc., Nine West Group Inc. and The Bank of New York, as trustee, including Form of 7.50% Senior Notes due 2004 and Form of 7.875% Senior Notes due 2006 (incorporated by reference to Exhibit 4.6 of our Quarterly Report on Form 10-Q for the six months ended July 4, 1999).
4.11	Form of Nine West Group Inc. Definitive 5-1/2% Convertible Subordinated Note Due 2003 (incorporated by reference to Exhibit 4.2 of the Nine West Group Inc. Annual Report on Form 10-K for the 52 weeks ended January 30, 1999).
4.12	Form of Nine West Group Inc. Restricted Global 5-1/2% Convertible Subordinated Note Due 2003 (incorporated by reference to Exhibit 4.3 of the Nine West Group Inc. Annual Report on Form 10-K for the 52 weeks ended January 30, 1999).
4.13	Form of Nine West Group Inc. Regulation S Global 5-1/2% Convertible Subordinated Note Due 2003 (incorporated by reference to Exhibit 4.4 of the Nine West Group Inc. Annual Report on Form 10-K for the 52 weeks ended January 30, 1999).
4.14	Indenture dated as of June 26, 1996, between Nine West Group Inc., as issuer, and Chemical Bank, as trustee, relating to Nine West's 5-1/2% Convertible Subordinated Notes Due 2003 (incorporated by reference to Exhibit 4.5 of the Nine West Group Inc. Annual Report on Form 10-K for the 52 weeks ended January 30, 1999).
4.15	Senior Note Indenture dated as of July 9, 1997, among Nine West Group Inc. and Nine West Development Corporation, Nine West Distribution Corporation, Nine West Footwear Corporation and Nine West Manufacturing Corporation, as Guarantors, and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.1 of the Nine West Group Inc. Registration Statement on Form S-4, filed on August 21, 1997 (Registration No. 333-34085)).
4.16	Supplemental Indenture, dated as of September 15, 1998, among Nine West Group Inc. and Nine West Manufacturing II Corporation, Nine West Development Corporation, Nine West Distribution Corporation, Nine West Footwear Corporation and Nine West Manufacturing Corporation, as Guarantors, and The Bank of New York, as Trustee under the Senior Note Indenture dated as of July 9, 1997 (incorporated by reference to Exhibit 4.7.1 of the Nine West Group Inc. Quarterly Report on Form 10-Q for the nine months ended October 31,1998).
4.17	Senior Subordinated Note Indenture dated as of July 9, 1997, among Nine West Group Inc. and Nine West Development Corporation, Nine West Distribution Corporation, Nine West Footwear Corporation and Nine West Manufacturing Corporation, as Guarantors, and The Bank of New York, as Trustee (incorporated by reference to Exhibit 4.2 of the Nine West Group Inc. Registration Statement on Form S-4, filed on August 21, 1997 (Registration No. 333-34085)).
4.18	Supplemental Indenture dated as of September 15, 1998, among Nine West Group Inc. and Nine West Manufacturing II Corporation, the Existing Guarantors and The Bank of New York, as Trustee under the Senior Subordinated Note Indenture dated as of July 9, 1997 (incorporated by reference to Exhibit 4.8.1 of the Nine West Group Inc. Quarterly Report on Form 10-Q for the nine months ended October 31,1998).
4.19	Form of Nine West Group Inc. 8-3/8% Series B Senior Notes due 2005 (incorporated by reference to Exhibit 4.6 of the Nine West Group Inc. Registration Statement on Form S-4, filed on August 21, 1997 (Registration No. 333-34085)).
4.20	Form of Nine West Group Inc. 9% Series B Senior Subordinated Notes due 2007 (incorporated by reference to Exhibit 4.8 of the Nine West Group Inc. Registration Statement on Form S-4, filed on August 21, 1997 (Registration No. 333-34085)).
4.21	Form of Nine West Group Inc. Unrestricted Global 5-1/2% Convertible Subordinated Note Due 2003 (incorporated by reference to Amendment No. 1 to the Nine West Group Inc. Registration Statement on Form S-3/A, filed on August 21, 1997 (Registration No. 333-12545)).
4.22	Indenture dated as of February 1, 2001, among Jones Apparel Group, Inc., Jones Apparel Group Holdings, Inc., Jones Apparel Group USA, Inc. and Nine West Group Inc., as Issuers and The Bank of New York, as Trustee, including Form of Zero Coupon Convertible Senior Notes due 2021 (incorporated by reference to Exhibit 4.22 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2000).

Exhibit No.	Description of Exhibit
4.23	Registration Rights Agreement dated February 1, 2001 among Jones Apparel Group, Inc., Jones Apparel Group Holdings, Inc., Jones Apparel Group USA, Inc., Nine West Group Inc., Salomon Smith Barney Inc. and Bear, Stearns & Co. Inc. (incorporated by reference to Exhibit 4.23 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2000).
4.24	Third Supplemental Indenture dated as of June 5, 2001, among McNaughton Apparel Group Inc., Norton McNaughton of Squire, Inc., Miss Erika, Inc., McNaughton Apparel Holdings Inc., and Jeri-Jo Knitwear, Inc., as Guarantors, and United States Trust Company of New York, as trustee (incorporated by reference to Exhibit 4.1 of our Quarterly Report on Form 10-Q for the six months ended July 7, 2001).
4.25	Fourth Supplemental Indenture dated as of June 19, 2001, among McNaughton Apparel Group Inc., Norton McNaughton of Squire, Inc., Miss Erika, Inc., McNaughton Apparel Holdings Inc., and Jeri-Jo Knitwear, Inc., as Guarantors, MCN Acquisition Corp., and United States Trust Company of New York, as trustee (incorporated by reference to Exhibit 4.2 of our Quarterly Report on Form 10-Q for the six months ended July 7, 2001).
4.26*	Fifth Supplemental Indenture dated as of December 5, 2001, among McNaughton Apparel Group Inc., Norton McNaughton of Squire, Inc., Miss Erika, Inc., McNaughton Apparel Holdings Inc. and Jeri-Jo Knitwear, Inc., as Guarantors, and United States Trust Company of New York, as trustee.
10.1	Form of 1991 Stock Option Plan (incorporated by reference to Exhibit 10.5 of our Registration Statement on Form S-1 filed on April 3, 1991 (Registration No. 33-39742).⁺
10.2	Form of 1996 Stock Option Plan (incorporated by reference to Exhibit 10.33 of our Annual Report on Form 10-K for the fiscal year ended December 31, 1996).⁺
10.3	Form of 1999 Stock Incentive Plan (incorporated by reference to Annex A of our Proxy Statement for our 2000 Annual Meeting of Stockholders).⁺
10.4	License Agreement dated October 18, 1995, between Jones Apparel Group, Inc. and Polo Ralph Lauren, L.P. (incorporated by reference to Exhibit 10.40 of our Annual Report on Form 10-K for the fiscal year ended December 31, 1996).^#
10.5	Design Services Agreement dated October 18, 1995, between Jones Apparel Group, Inc. and Polo Ralph Lauren, L.P. (incorporated by reference to Exhibit 10.41 of our Annual Report on Form 10-K for the fiscal year ended December 31, 1996).^#
10.6	License Agreement dated as of August 1, 1995, between PRL USA, Inc., as assignee of Polo Ralph Lauren Corporation, successor to Polo Ralph Lauren, L.P., and Sun Apparel, Inc., as amended (incorporated by reference to Exhibit 10.53 of our Quarterly Report on Form 10-Q for the nine months ended September 27, 1998).^#
10.7	Design Services Agreement dated as of August 1, 1995, between Polo Ralph Lauren Corporation, successor to Polo Ralph Lauren, L.P., and Sun Apparel, Inc., as amended (incorporated by reference to Exhibit 10.54 of our Quarterly Report on Form 10-Q for the nine months ended September 27, 1998).^#
10.8	Employment Agreement dated September 10, 1998, between SAI Acquisition Corp. and Eric A. Rothfeld (Incorporated by reference to Exhibit 10.1 of our Current Report on Form 8-K dated September 24, 1998).⁺
10.9	License Agreement dated May 11, 1998, between Jones Apparel Group, Inc. and Polo Ralph Lauren, L.P. (incorporated by reference to Exhibit 10.53 of our Quarterly Report on Form 10-Q for the fiscal nine months ended September 27, 1998).^#
10.10	Design Services Agreement dated May 11, 1998, between Jones Apparel Group, Inc. and Polo Ralph Lauren, L.P. (incorporated by reference to Exhibit 10.54 of our Quarterly Report on Form 10-Q for the fiscal nine months ended September 27, 1998).^#
10.11	Five-Year Credit Agreement dated as of June 15, 1999, among Jones Apparel Group USA, Inc. and the Additional Obligors referred to therein, the Lenders referred to therein, and First Union National Bank, as Administrative Agent (incorporated by reference to Exhibit 10.2 of our Quarterly Report on Form 10-Q for the six months ended July 4, 1999).
10.12	Jones Apparel Group, Inc. 1999 Stock Option Plan (incorporated by reference to Exhibit 4.5 of our Registration Statement on Form S-8, filed on August 23, 1999 (Registration No. 333-85795)).⁺
10.13	Jones Apparel Group, Inc. Executive Annual Incentive Plan (incorporated by reference to Annex B of our Proxy Statement for our 1999 Annual Meeting of Stockholders).⁺
10.14	Third Amended and Restated 364-Day Credit Agreement dated as of June 13, 2000, among Jones Apparel Group USA, Inc., the Additional Obligors referred to therein, the Lenders referred to therein, Chase Securities Inc. and Salomon Smith Barney Inc., as Joint Lead Arrangers, First Union National Bank, as Administrative Agent, and The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents (incorporated by reference to Exhibit 10.1 of our Quarterly Report on Form 10-Q for the six months ended July 2, 2000).

Exhibit No.	Description of Exhibit
10.15	Employment Agreement dated as of July 1, 2000, between Jones Apparel Group, Inc. and Sidney Kimmel (incorporated by reference to Exhibit 10.1 of our Quarterly Report on Form 10-Q for the nine months ended October 1, 2000).⁺
10.16	Employment Agreement dated as of July 1, 2000, between Jones Apparel Group, Inc. and Jackwyn Nemerov (incorporated by reference to Exhibit 10.2 of our Quarterly Report on Form 10-Q for the nine months ended October 1, 2000).⁺
10.17	Employment Agreement dated as of July 1, 2000, between Jones Apparel Group, Inc. and Wesley R. Card (incorporated by reference to Exhibit 10.3 of our Quarterly Report on Form 10-Q for the nine months ended October 1, 2000).⁺
10.18	Fourth Amended and Restated 364-Day Credit Agreement dated as of June 12, 2001, among Jones Apparel Group USA, Inc., the Additional Obligors referred to therein, the Lenders referred to therein, J.P. Morgan Securities Inc. and Salomon Smith Barney Inc., as Co-Lead Arrangers and Joint Bookrunners, First Union National Bank, as Administrative Agent, The Chase Manhattan Bank and Citibank, N.A., as Syndication Agents and Fleet National Bank and Bank of America, N.A., as Documentation Agents (incorporated by reference to Exhibit 10.1 of our Quarterly Report on Form 10-Q for the six months ended July 7, 2001).
10.19	Employment Agreement dated as of July 1, 2001, between Jones Apparel Group, Inc. and Irwin Samelman (incorporated by reference to Exhibit 10.2 of our Quarterly Report on Form 10-Q for the six months ended July 7, 2001).⁺
10.20*	Amended and Restated Employment Agreement dated March 11, 2002, between Jones Apparel Group, Inc. and Peter Boneparth.⁺
10.21	Buying Agency Agreement dated August 31, 2001, between Nine West Group Inc. and Bentley HSTE Far East Services Limited (incorporated by reference to Exhibit 10.2 of our Quarterly Report on Form 10-Q for the nine months ended October 6, 2001).
10.22*	Buying Agency Agreement dated November 30, 2001, between Nine West Group Inc. and Bentley HSTE Far East Services, Limited.
10.23*	Employment Agreement dated as of October 1, 2001, between Jones Apparel Group, Inc. and Rhonda Brown.⁺
99.1	Decision and Order of the Federal Trade Commission In the Matter of Nine West Group Inc., Docket No. C-3937, dated April 11, 2000 (incorporated by reference to Exhibit 99.1 of our Quarterly Report on Form 10-Q for the three months ended April 2, 2000).
11*	Computation of Earnings per Share.
12*	Computation of Ratio of Earnings to Fixed Charges.
21*	List of Subsidiaries.
23*	Consent of BDO Seidman, LLP.

____________________

* Filed herewith.^# Portions deleted pursuant to application for confidential treatment under Rule 24b-2 of the Securities Exchange Act of 1934.⁺ Management contract or compensatory plan or arrangement.

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Jones Apparel Group, Inc.
New York, New York

The audits referred to in our report dated February 1, 2002, except as to "Subsequent Event" which is as of March 19, 2002, relating to the consolidated financial statements of Jones Apparel Group, Inc. and subsidiaries which is contained in Item 8 of Form 10-K, included the audits of the financial statements schedule listed in the accompanying index for each of the three years ended December 31, 2001. The financial statement schedule is the responsibility of management. Our responsibility is to express an opinion on the financial statements schedule based upon our audits.

In our opinion, such financial statements schedule presents fairly, in all material respects, the information set forth therein.

/s/ BDO Seidman, LLP

BDO Seidman, LLP

New York, New York
February 1, 2002
Except as to "Subsequent Event"
which is as of March 19, 2002

SCHEDULE II

                                     JONES APPAREL GROUP, INC.
                                 VALUATION AND QUALIFYING ACCOUNTS
                           YEARS ENDED DECEMBER 31, 1999, 2000 AND 2001
                                           (In Millions)


           Column A                   Column B             Column C            Column D     Column E
- -------------------------------      ----------   -------------------------   ----------   ---------
                                                         Additions
                                                  -------------------------
                                     Balance at   Charged to    Charged to                 Balance
                                     beginning    costs and     other         Deductions   at end of
Description                          of period    expenses      accounts          (1)      period
- ------------                         ----------   ----------    -----------   ----------   ---------

For the year ended
  December 31, 1999:
    Allowance for doubtful accounts      $ 3.3        $5.4       $20.5 (2)       $ 2.6      $26.6

For the year ended
  December 31, 2000:
    Allowance for doubtful accounts      $26.6        $  -       $   -           $14.2      $12.4

For the year ended
  December 31, 2001:
    Allowance for doubtful accounts      $12.4        $3.3       $ 0.9 (3)       $ 4.9      $11.7





(1)  Doubtful accounts written off against accounts receivable.
(2)  Addition due to the acquisition of Nine West Group Inc. on June 15, 1999.
(3)  Addition due to the acquisition of McNaughton Apparel Group, Inc. on June 19, 2001.

EX-3 4 exhibit3_2.htm EXHIBIT 3.2 Exhibit 3.2
EXHIBIT 3.2

JONES APPAREL GROUP, INC.

AMENDED AND RESTATED
BY-LAWS

(as of March 1, 2002)

ARTICLE I - OFFICES

1.1 Registered Office. The registered office of the corporation shall be at such place within the Commonwealth of Pennsylvania as the Board of Directors may from time to time determine.

1.2 Other Offices. The corporation may also have offices at such other places as the Board of Directors may from time to time appoint or the activities of the corporation may require.

ARTICLE II - SEAL

2.1 Seal. The corporate seal shall have inscribed thereon the name of the corporation, the year of its incorporation, and the words "Corporate Seal, Pennsylvania".

ARTICLE III - SHAREHOLDERS' MEETINGS

3.1 Annual Meeting. A meeting of shareholders of the corporation shall be held annually for the election of directors and the transaction of such other business as may properly be brought before the meeting, on a day to be determined each year by the Board of Directors.

3.2 Special Meetings. Special meetings of the shareholders may be called at any time for any purpose not prohibited by law or the Articles of Incorporation by the President, the Board of Directors, or the holders of at least 20% of the shares outstanding and entitled to vote at the

meeting, by submitting a written request therefor, stating the object of the meeting, to the Secretary. The Secretary shall fix the time and place of the meeting, which shall be not later than 60 days after the receipt of the request. If the Secretary shall neglect or fail so to set the time and place of the meeting, the persons or entities calling the meeting may do so. Business transacted at all special meetings shall be confined to the object stated in the request therefor, and matters directly related and germane thereto.

3.3 Notice. Written notice of every meeting of the shareholders, stating the place, time and hour thereof, shall be given to each shareholder not later than five days prior to the date of the meeting. Notice of a special meeting shall state the nature of the business to be transacted.

3.4 Quorum. At all meetings of the shareholders, the holders of a majority of the issued and outstanding shares entitled to vote, present in person or by proxy, shall constitute a quorum. If a meeting of shareholders cannot be organized because of the absence of a quorum, the shareholders present in person or by proxy may adjourn the meeting to such time and place as they may determine, and in the case of a meeting called to the election of Directors, those who attend the second such adjourned meeting shall constitute a quorum for the purpose of electing Directors. Except as otherwise provided in these By-Laws, the Articles of Incorporation, or applicable law, the acts of the holders of a majority of shares entitled to vote, present in person or by proxy, and voting at a meeting having a quorum shall be the acts of the shareholders.

3.5 Voting. Each shareholder shall be entitled to one vote in person or by proxy for each share he or she holds having voting power. Proxies shall remain in effect in accordance with their terms and applicable law.

3.6 Voting List. The officer having charge of the transfer books for shares of the corporation shall prepare, at least five days before each meeting of shareholders, an alphabetical

list of the names and addresses of and shares held by the shareholders entitled to vote at the meeting. The list shall be kept on file at the registered office of the corporation, be subject to inspection by any shareholder at any time during usual business hours, and be produced and kept open for inspection by shareholders at the time and place of the meeting.

3.7 Judges of Elections. The Board of Directors may, before a meeting of shareholders, appoint one or three Judges (who need not be shareholders) for such meeting. If no such Judges of Election are appointed, the chairman of the meeting may, and on the request of any shareholder or his proxy shall, make such appointment. If Judges are appointed at the request of one or more shareholders or proxies, the shareholders present and entitled to vote shall determine whether there will be one or three Judges. The Judges of Election shall take such action as may be necessary or proper fairly to conduct the election or vote and shall report in writing on any matter they determine, executing a certificate of any fact they find, if requested by the chairman of the meeting or any shareholder. No person who is a candidate for office shall act as a Judge.

ARTICLE IV - SHARE CERTIFICATES

4.1 Form of Certificate. The certificates of shares of the corporation shall state the name of the registered holder; the number, class, and series (if any) of the shares represented; and the par value of each share or the absence of par value, as appropriate. Each certificate shall be numbered and registered in a share register in the order issued.

4.2 Signature. Each share certificate shall be signed, by the President or a Vice President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and sealed with the corporate seal. When a certificate is signed by a transfer agent or registrar,

the signature of an authorized officer may be facsimile. If an officer who has signed a certificate, personally or by facsimile, ceases to be an officer before the certificate is delivered, the certificate may be issued as if the signatory remained in office.

4.3 Lost Certificates. The Board of Directors shall cause the issuance of a new certificate as a replacement for a certificate claimed to have been lost, destroyed or wrongfully taken, upon submission of an affidavit of the person making the claim of the loss, destruction, or wrongful taking. The Board of Directors may, in its discretion, require as a condition to the issuance of a replacement certificate that the owner of the certificate advertise the loss in such manner as the Board may determine and/or give the corporation a bond in such sum and with such sureties as the Board may direct as indemnity against any claim that may be made against the corporation with respect to the certificate claimed to have been lost, destroyed or wrongfully taken.

4.4 Transfer of Shares. Upon surrender to the corporation or its transfer agent of a share certificate duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, the corporation shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction in its books.

4.5 Closing Transfer Books. The Board of Directors may fix a record date for the determination of the shareholders entitled to notice of and to vote at a meeting, to receive payment of a dividend or distribution, to receive an allotment of rights, or to exercise rights in respect to a change, conversion or exchange of shares. In such case, only the shareholders of record on the record date shall be entitled to notice of or to vote at or participate in such meeting or activity or event, notwithstanding any transfer of any shares on the books of the corporation after the record date. If the Board of Directors closes the transfer books during such period, it

shall so notify each shareholder in writing. The record date may not be more than ^that number of days prior to the meeting, activity^ or event to which it relates which is permitted under the Pennsylvania Business Corporation Law.

4.6 Registered Shareholders. The corporation shall be entitled to treat the holder of record of any shares as the holder in fact for all purposes and shall not be bound to recognize any claim to or interest in such share on the part of any other person. The corporation shall not be liable for any improper or impermissible registration or transfer of shares which are or to be registered in the name of a fiduciary or its nominee unless the corporation had actual knowledge that the fiduciary or nominee are committing a breach of trust in requesting such registration or transfer, or the corporation had knowledge of such facts that its participation in the registration or transfer amounts to bad faith.

ARTICLE V - BOARD OF DIRECTORS

5.1 General Powers. The business and affairs of the corporation shall be managed by the Board of Directors, and all powers of the corporation are hereby granted to and vested in the Board of Directors, except as otherwise expressly provided in these By-Laws, the Articles of Incorporation, or by law.

5.2 Composition. The number of Directors of the corporation shall be one, or such larger number as the Board of Directors may fix from time to time.

5.3 Term. Directors shall ^be elected at the annual meeting of shareholders of the corporation and shall serve until the ^next annual meeting of the ^shareholders of ^the corporation or until their successors are duly elected and qualified^, or until their earlier death, resignation or removal.

5.4 Regular Meetings. The Board may hold regular meetings at such times and places as it may determine.

5.5 Special Meetings. Special meetings of the Board of Directors may be called, at any time, by the President or by a director, by submitting a written request therefor, stating the object of the meeting, to the Secretary. The Secretary shall set the time and place of the meeting, which shall be held not later than 30 days after the receipt of the request. If the Secretary shall neglect or refuse to set the time and place of the meeting, the person or persons calling the meeting may do so. Business transacted at all special meetings shall be confined to the objects stated in the request therefor and matters directly related and germane thereto.

5.6 Annual Meeting. There shall be an annual meeting of the Board of Directors following each annual meeting of the shareholders. At the annual meeting, the Board of Directors shall elect officers and transact such other business as may be properly brought before the meeting.

5.7 Notices. Written notice of regular and annual meetings of the Board of Directors, stating the time and place thereof shall be given to all directors at least five days prior to the date of the meeting. Written notice of special meetings of the Board of Directors shall be given to each director at least 48 hours prior to the time of the meeting and shall state the business to be transacted at the meeting.

5.8 Quorum. A majority of the members of the Board of Directors shall constitute a quorum for the transaction of business, and the acts of a majority of directors present and voting at a meeting at which a quorum is present shall be the acts of the Board of Directors. In the event that a quorum is not present at any meeting of the Board of Directors, the directors present

may adjourn the meeting without any notice of the time and place of the adjourned meeting except for announcement at the meeting at which adjournment is taken.

5.9 Vacancies. If the office of a director shall become vacant for any reason, including an increase in the number of directors, the remaining directors shall elect a successor, who shall hold office for the unexpired term for which the vacancy occurred or until his or her successor is duly qualified and seated. A majority of the remaining directors shall constitute a quorum for purposes of filling the vacancy on the Board of Directors.

5.10 Compensation. Members of the Board shall not receive any salary for their services as directors, but directors may be reimbursed for expenses incurred in connection with service on the Board, and a fixed sum may be allowed for attendance at each regular or special meeting of the Board or at meetings of committees. Directors shall not be precluded from serving the corporation in any other capacity and receiving compensation therefor.

ARTICLE VI - COMMITTEES

6.1 Establishment. The Board of Directors may establish one or more standing or special committees, including without limitation an executive committee. Except as otherwise provided in these By-Laws, the Articles of Incorporation, or applicable law, any committee may exercise such powers and functions as the Board of Directors may from time to time determine.

6.2 Committee Members. The President shall appoint all committee members and committee chairpersons and may appoint alternates for any member or chairperson of any committee. Members of a committee need not be directors.

ARTICLE VII - OFFICERS

7.1 Officers. The officers of the corporation shall be chosen by the Board of Directors and shall include a Chairman, Vice Chairman, President, Treasurer, Secretary, and such Vice Presidents and assistant officers as the Board of Directors may determine to be necessary or appropriate. Any two or more offices may be held by the same person.

7.2 Election and Term.

A. The Chairman, Vice Chairman, President, each Vice President, Treasurer and Secretary shall be elected by the Board of Directors at its annual meeting and shall serve for terms of one year, or until their successors are duly elected and qualified. All assistant officers shall be elected or appointed at such times and for such terms as the Board of Directors may determine.

B. A vacancy in any office shall be filled by the Board.

7.3 Chairman. The Chairman shall be the chief executive officer of the corporation and shall preside at all meetings of the Board of Directors. He or she shall, with the President, have general direction and control of the affairs of the corporation, except as the Board of Directors may otherwise determine, and he or she shall have the authority and duties generally invested in the chief executive officer of a corporation. He or she may execute on behalf of the corporation all bonds, mortgages, contracts, and other documents, except for such documents required by law to be otherwise executed or where the execution thereof shall be delegated by the Board of Directors to another officer.

7.4 Vice Chairman. The Vice Chairman shall act in all cases for the Chairman, in the Chairman's absence, disability or incapacity and shall perform such other duties as may be delegated to him by the Board of Directors or the Chairman. The Vice Chairman may execute

on behalf of the corporation all bonds, mortgages, contracts and other documents, except for such documents required by law to be otherwise executed or where the execution thereof shall be delegated by the Board of Directors exclusively to another officer.

7.5 President. The President shall be the chief operating officer of the corporation. He or she shall, with the Chairman, have the general direction and control of the affairs of the corporation, except as the Board of Directors may otherwise determine, and he or she shall have the authority and duties generally invested in the chief operating officer of a corporation. He or she may execute on behalf of the corporation all bonds, mortgages, contracts, and other documents, except where such documents are required by law to be otherwise executed or when the execution thereof shall be delegated by the Board of Directors to another officer.

7.6 Vice Presidents. The Vice Presidents, if any, in such order and manner as the Board may determine, shall act in all cases for the President in the President's absence, disability, or incapacity, and shall perform such other duties as may be delegated to any of them by the Board of Directors or the President.

7.7 Treasurer. The Treasurer shall have custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all monies and other valuable effects of the corporation in separate accounts or depositaries in the name of and to the credit of the corporation as shall be designated by the Board of Directors. He or she shall disburse the funds of the corporation as may be ordered by the Board of Directors for such disbursements and shall render to the Board of Directors, whenever it may so require it, an account of all his or her transactions as Treasurer and of the financial condition of the corporation.

7.8 Secretary. The Secretary shall attend all meetings of the Board of Directors and record all votes of the corporation and the minutes of all transactions in a book to be kept for that purpose and perform like duties for committees of the Board of Directors, if and when required. He or she shall give, or cause to be given, notice of all meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or the President. He or she shall keep, or cause to be kept, in safe custody the corporate seal and, when authorized to do so by the Board of Directors, affix the same to any instrument requiring it and attest to it by his or her signature.

7.9 Assistant Officers. Assistant officers, who may include a controller, shall perform such functions and have such responsibilities as the Board of Directors may determine.

ARTICLE VIII - LIMITATION OF LIABILITY AND INDEMNIFICATION

8.1 Limitation of Liability. Directors of this corporation shall not be personally liable for monetary damages as such for any action taken or failure to take any action other than as expressly provided in 42 Pa.C.S. Section 8364. It is the intention of this Section 8.1 to limit the liability of directors of this corporation to the fullest extent permitted by 42 Pa.C.S. Section 8364 or by any other present or future provision of Pennsylvania law.

8.2 Indemnification. The corporation shall indemnify every director and officer, and may indemnify any employee or agent, to the full extent permitted by the Pennsylvania Business Corporation Law, the Pennsylvania Directors' Liability Act and any other present or future provision of Pennsylvania law. The corporation shall pay and advance expenses to directors and officers for matters covered by indemnification to the full extent permitted by such law, and may similarly pay and advance expenses for employees and agents. This Section 8.2 shall not

exclude any other indemnification or other rights to which any party may be entitled in any manner.

ARTICLE IX - NOTICES

9.1 Form of Notice. Whenever written notice is required or permitted, by these By-Laws or otherwise, to be given to any person or entity, it may be given either personally or by sending a copy thereof by first class mail, postage prepaid, or by telegram, charges prepaid, to the address of the appropriate person or entity as it appears on the books of the corporation. If the notice is sent by mail or telegraph, it shall be deemed to have been given when deposited in the United States Mail or with a telegraph office for transmission.

9.2 Waiver of Notice. Whenever a written notice is required, by these By-Laws or otherwise, a waiver of such notice in writing, signed by the person or persons or on behalf of the entity or entities entitled to receive the notice shall be deemed equivalent to the giving of such notice, whether the waiver is signed before or after the time required for such notice. Except as otherwise required by law, the waiver of notice need not state the business to be transacted at nor the purpose of the meeting, except that the waiver of notice of a special meeting of the shareholders or the Board of Directors shall specify the general nature of the business to be transacted at the meeting. Attendance at any meeting shall constitute a waiver of notice of such meeting, except where a person attends a meeting for the purpose of objecting, at the beginning of the meeting, to the transaction of business because the meeting was not called or convened upon proper notice.

ARTICLE X - MISCELLANEOUS PROVISIONS

10.1 Fiscal Year. The fiscal year of the corporation shall be as the Board of Directors may determine.

10.2 Participation by Telecommunications. One or more persons may participate in a meeting of the Board of Directors or of any committee by means of a conference telephone or similar communications equipment by which all persons participating in the meeting can hear one another. Participation in a meeting pursuant to this section shall constitute the presence in person at such meeting.

10.3 Dividends. The Board of Directors may, at any meeting, declare dividends upon the shares of the corporation to be paid in cash, property or shares, subject to any limitations in the Articles of Incorporation or applicable law. Before payment of any dividend, the Board may set aside out of any funds of the corporation available for dividends such sum as the Board, in its absolute discretion, thinks proper to meeting contingencies, equalize dividends, repair or maintain corporate property, or serve such other purpose as the Board thinks in the best interest of the corporation, and the Board may modify or abolish any such reserve in the manner in which it was created.

10.4 Financial Reports to Shareholders. The Board shall not be required to send to shareholders financial statements of the corporation. The President and the Board of Directors shall present at each annual meeting of the shareholders a full and complete statement of the business and affairs of the corporation for the preceding year, which statement shall be prepared and presented in whatever manner the Board of Directors shall deem advisable and need not be verified by a certified public accountant.

ARTICLE XI - AMENDMENTS

11.1 Amendments. The Board of Directors shall have the power to amend, alter, or repeal all or any part of these By-Laws, subject to the power of the shareholders to change such action.

* * * * *

EX-4 5 exhibit4_26.htm EXHIBIT 4.26 Exhibit 4.26
EXHIBIT 4.26

FIFTH SUPPLEMENTAL INDENTURE

FIFTH SUPPLEMENTAL INDENTURE dated as of December 5, 2001, by and among McNaughton Apparel Group Inc., a Delaware corporation (the "Company"), Norton McNaughton of Squire, Inc., a New York corporation, Miss Erika, Inc., a Delaware corporation, McNaughton Apparel Holdings Inc., a South Carolina corporation, and Jeri-Jo Knitwear, Inc., a Delaware corporation (collectively, the "Guarantors"), and United States Trust Company of New York, a New York banking corporation, as trustee (the "Trustee").

WHEREAS, the Company, the Guarantors and the Trustee have entered into an Indenture dated as of June 18, 1998, as amended and supplemented from time to time (the "Indenture"), pursuant to which the Company issued $125 million aggregate principal amount of its 12-1/2% Senior Securities due 2005, Series B (the "Securities");

WHEREAS, Section 9.2 of the Indenture provides that the Company, the Guarantors and the Trustee may amend the Indenture with the consent of the Holders of at least a majority in outstanding principal amount of the Securities;

WHEREAS, the Company desires to amend certain provisions of the Indenture and of the Securities, as set forth in Article I hereof;

WHEREAS, the Holders of all of the outstanding principal amount of the Securities have consented to the amendments effected by this Fifth Supplemental Indenture;

WHEREAS, all things necessary to make this Fifth Supplemental Indenture a valid agreement, in accordance with the terms of the Indenture, have been done.

NOW, THEREFORE, this Fifth Supplemental Indenture witnesseth that, for and in consideration of the premises, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows:

ARTICLE I.
AMENDMENTS TO INDENTURE AND ADDITIONAL PROVISIONS
SECTION 1.01 Amendment to Definitions. Section 1.1 of the Indenture is hereby amended by deleting the definition of "Maturity Date" in its entirety and by substituting therefor the following:

"'Maturity Date' means December 7, 2001."

ARTICLE II.
MISCELLANEOUS

SECTION 2.01 Instruments To Be Read Together. This Fifth Supplemental Indenture is an indenture supplemental to and in implementation of the Indenture, and said Indenture and this Fifth Supplemental Indenture shall henceforth be read together.

SECTION 2.02 Confirmation. The Indenture as amended and supplemented by this Fifth Supplemental Indenture is in all respects confirmed and preserved.

SECTION 2.03 Definitions. Capitalized terms used in this Fifth Supplemental Indenture and not otherwise defined herein shall have the respective meanings set forth in the Indenture. Any defined terms present in the Indenture, but no longer used as a result of the amendments made by this Fifth Supplemental Indenture shall be eliminated.

SECTION 2.04 Headings. The headings of the Articles and Sections of this Fifth Supplemental Indenture have been inserted for convenience of reference only, and are not to be considered a part hereof and shall in no way modify or restrict any of the terms and provisions hereof.

SECTION 2.05 Governing Law. The laws of the State of New York shall govern this Fifth Supplemental Indenture.

SECTION 2.06 Counterparts. This Fifth Supplemental Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.

SECTION 2.07 Effectiveness. The provisions of this Fifth Supplemental Indenture will take effect immediately upon its execution and delivery by the Trustee in accordance with the provisions of Section 9.2 of the Indenture.

SECTION 2.08 Acceptance by Trustee. The Trustee accepts the amendments to the Indenture effected by this Fifth Supplemental Indenture and agrees to execute the trusts created by the Indenture as hereby amended, but only upon the terms and conditions set forth in the Indenture.

SECTION 2.09 Responsibility of Trustee. The recitals contained herein shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Fifth Supplemental Indenture.

IN WITNESS WHEREOF, the parties hereto have caused this Fifth Supplemental Indenture to be duly executed, all as of the date first written above.

MCNAUGHTON APPAREL GROUP INC.

By: /s/ Amanda J. Bokman
Name: Amanda J. Bokman
Title: Chief Financial Officer, Vice President, Treasurer and Secretary

NORTON MCNAUGHTON OF SQUIRE, INC.

By: /s/ Amanda J. Bokman
Name: Amanda J. Bokman
Title: Chief Financial Officer, Vice President, Treasurer and Secretary

MISS ERIKA, INC.

By: /s/ Amanda J. Bokman
Name: Amanda J. Bokman
Title: Chief Financial Officer, Vice President, Treasurer and Secretary

JERI-JO KNITWEAR, INC.

By: /s/ Amanda J. Bokman
Name: Amanda J. Bokman
Title: Chief Financial Officer, Vice President, Treasurer and Secretary

MCNAUGHTON APPAREL HOLDINGS INC.

By: /s/ Amanda J. Bokman
Name: Amanda J. Bokman
Title: Chief Financial Officer, Treasurer and Secretary

UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee

By: /s/ Louis P. Young
Name: Louis P. Young
Title: Vice President

EX-10 6 exhibit10_20.htm EXHIBIT 10.20 Exhibit 10.20
EXHIBIT 10.20

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

AGREEMENT made March 11, 2002 by and between JONES APPAREL GROUP, INC., a Pennsylvania corporation (the "Company") and PETER BONEPARTH (the "Executive").

W I T N E S S E T H:

WHEREAS, the Executive is a party to the Employment Agreement dated April 13, 2001 with the Company (as amended or supplemented to date, the "Prior Employment Agreement"); and

WHEREAS, the Company wishes to continue to employ the Executive, and the Executive wishes to continue his employment with the Company on the terms and conditions hereinafter set forth.

NOW, THEREFORE, it is agreed as follows:

1. Employment; Election to Board. (a) During the Term (as defined below), the Company shall employ Executive as the President of the Company and, effective May 22, 2002, Chief Executive Officer of the Company. Executive shall report solely and directly to the Board of Directors of the Company (the "Board"). All other employees of the Company shall report to Executive or his designee and not directly to the Board. During the Term, Executive shall have such responsibilities, duties and authorities as commensurate with chief executive officers of public entities of similar size and, in particular, shall be, in addition to being responsible for the operations of the Company, the chief external representative of the Company. Within thirty (30) days after the date hereof, the By-laws of the Company shall be amended to reflect the provisions set forth in this Section 1(a).

(b) During the Term, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote all of Executive's business time and attention to the business affairs of the Company, and to perform such responsibilities in a professional manner. Notwithstanding the foregoing, during the Term of this Agreement, it shall not be a violation of this Agreement for the Executive to (i) serve on civic or charitable boards or committees; (ii) deliver lectures, fulfill speaking engagements or teach at educational institutions; (iii) serve as a non-employee member of a board of directors of a business entity which is not competitive with the Company and as to which the Board of Directors of the Company has given its consent; and (iv) attend to personal business, so long as such activities do not interfere with the performance of the Executive's responsibilities as a senior executive of the Company in accordance with this Agreement.

(c) During the Term, and provided that Executive then is employed by the Company, the Board (or if it then exists, the nominating committee of the Board) shall nominate Executive for

election to the Board at each meeting of the stockholders of the Company at which directors are to be elected and shall recommend to such stockholders that they vote in favor of Executive's election to the Board. The Board shall, in good faith, consider Executive's advice and recommendations, if any, in connection with any appointments or nominations to the Board.

2. Term. The Executive shall be employed for the period commencing as of March 11, 2002 and ending on March 31, 2005 (the "Expiration Date"), as renewed in accordance with the following sentence (the "Term"). The Executive's employment will continue, and this Agreement will be automatically extended without limitation, for successive 12-month periods commencing April 1 and ending March 31 (a "Contract Year"), unless either party to this Agreement advises the other in writing, no later than March 31, 2003 and no later than each March 31 thereafter, that such party does not wish to extend (a "Non-extension Notice"). If this Agreement shall be so extended, the "Expiration Date" shall mean the then applicable extended "Expiration Date," and the "Term" shall mean the period commencing March 11, 2002 and ending on the then applicable extended "Expiration Date."

For example, (i) if by March 31, 2003, neither party has given a Non-extension Notice to the other, the Term will be automatically extended through March 31, 2006, and (ii) if the Term is so extended through March 31, 2006, then if by March 31, 2004, neither party has given a Non-extension Notice to the other, the Term will be automatically extended through March 31, 2007.

3. Salary, Retirement Plans, Fringe Benefits and Allowances.

(a) Throughout the Term, the Executive shall receive a salary at the annual rate of not less than (i) $1,500,000 for the period commencing March 11, 2002 and ending on December 31, 2002, (ii) $2,000,000 for the period commencing January 1, 2003 and ending December 31, 2003, and (iii) $2,500,000 thereafter. The Executive's salary shall be payable at such regular times and intervals as the Company customarily pays its senior executives from time to time, but no less frequently than once a month.

(b) During the Term, the Executive shall be eligible to participate in all savings and retirement plans, practices, policies and programs to the extent applicable generally to other senior executives of the Company. In addition, during the Term, the Company will continue to provide to Executive the life and disability insurance coverage which has been provided to Executive pursuant to the Prior Employment Agreement.

(c) During the Term, the Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare, fringe and other benefit plans, practices, policies and programs provided by the Company (including, without limitation, medical, prescription drug, dental, disability, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other senior executives of the Company.

(d) The Executive shall be entitled to an aggregate of four (4) weeks paid vacation during each calendar year of the Term. The Executive shall also be entitled to the benefits of the Company's policies relating to sick leave and holidays.

(f) The Company shall make available to the Executive all perquisites that are made available to senior executives of the Company and will, without limiting the foregoing, continue to provide to Executive such use of automobiles and reimbursement for related expenses as has been provided to Executive pursuant to the Prior Employment Agreement.

(g) As an inducement to Executive to enter into this Agreement, and in consideration of the Executive's agreement to the terms and conditions set forth herein, the Company agrees to pay the Executive the aggregate amount of $2,000,000, payable as follows: $1,000,000 on the date hereof; and, $1,000,000 on January 2, 2003.

4. Executive shall participate in the Company's Executive Annual Incentive Plan (the "Bonus Plan"), pursuant to which the Executive will be entitled to receive an annual bonus payment for each full calendar year of employment which ends prior to the Expiration Date and throughout which the Executive has been employed by the Company, and a partial annual bonus payment for the calendar year in which this Agreement expires, prorated for the portion of such year preceding expiration, conditioned upon the attainment of annual criteria and objectives established for participants in the Bonus Plan.

5. Stock Options. (a) In anticipation of entering into this Agreement, and as an inducement to the Executive to do so, on March 11, 2002 the Stock Option Committee of the Board of Directors of the Company granted to Executive an option to purchase 1,500,000 shares of the Company's common stock ("Common Shares") on the terms and conditions contained in the form of stock option agreement ("Form Stock Option Agreement") annexed hereto and consistent with the provisions of Section 5(b)(iii)-(iv) hereof.

(b) Subject to the absolute authority of the Stock Option Committee of the Board of Directors of the Company from time to time to grant (or not to grant) to eligible individuals options to purchase common stock of the Company ("Options"), it is the intention of the Company and the expectation of the Executive that while the Executive is employed hereunder, the Executive will receive Options annually (in addition to those described in Section 5(a) and 5(c) hereof), beginning in calendar year 2003, on the following terms and conditions (and any Options so granted shall be subject to the following terms and conditions, which shall govern any conflicts in the terms hereof with any terms and conditions in any stock option agreement):

(i) Target awards will be in an amount (plus or minus 25%) equal to 300% of Executive's salary;

(ii) For purposes of determining the number of shares subject to a given Option grant, the value of such Option shall be determined using the Black-Scholes valuation method, or another generally recognized valuation method which is being used uniformly by the Company for its senior executives;

(iii) The exercise price per share of the Options shall be the fair market value of the common stock on the date of grant, and the Options shall expire on the tenth anniversary of the date of grant; and

(iv) The Options shall vest ratably on the first three anniversaries of the date of grant; provided, however, that all Options (and all other options to purchase Common Shares then held by the Executive) which are not then vested shall become fully vested and immediately exercisable during the remaining original term of each such Accelerated Option, upon the occurrence of any of the following events ("Acceleration Events"): Executive's Retirement, death, Disability, a Change in Control, and termination of Executive's employment by the Company without Cause or by the Executive for Good Reason; and

(v) The Options shall be granted on such other terms and conditions as are generally made applicable to Options granted to the other senior executives of the Company.

(c) The Company agrees to submit to stockholders, at the Annual Meeting of Stockholders scheduled for May 22, 2002 (the "May 22 Meeting"), a proposal to amend the Company's 1999 Stock Incentive Plan (the "1999 Plan"), as follows: (i) to increase the number of shares reserved for issuance under Section 2 of the Plan from 15,000,000 shares to no fewer than 20,000,000 shares, and (ii) to increase the limitation on the number of options any Eligible Individual (as defined in the 1999 Plan) may be granted under Section 4(c) of the Plan during its ten-year term from 3,000,000 shares of Common Stock to 6,000,000 shares of Common Stock. As an alternative to the above proposal, the Company may, with the consent of the Executive, submit to stockholders, at the May 22 Meeting, a proposal to adopt a new stock incentive plan, upon terms and conditions substantially similar to the 1999 Plan, with a minimum of 1,500,000 shares reserved for issuance thereunder. The Company shall use its best efforts to obtain stockholder approval of any such proposal at the May 22 Meeting. Upon the approval of any proposal authorizing the grant of additional stock options, the Stock Option Committee of the Board (or the Board or other Committee with authority) will grant to the Executive an option to purchase 1,500,000 Common Shares on the terms and conditions contained in the Form Stock Option Agreement and consistent with the provisions of Section 5(b)(iii)-(iv) above, provided, however, that notwithstanding the provision in the first clause of Section 5(b)(iv) above, such options shall vest at the same times as the options granted pursuant to Section 5(a) above (the "Option Grant"). With respect to the vesting provisions of the Option Grant, and only by way of

example, the options subject to the Option Grant shall vest, under the following circumstances, as follows: assuming the necessary proposals for the Option Grant are approved by stockholders at the May 22 Meeting, 500,000 options shall vest on March 11, 2003, 500,000 options shall vest on March 11, 2004 and 500,000 options shall vest on March 11, 2005; or, assuming the necessary proposals for the Option Grant are not approved by stockholders at the May 22 Meeting, but are approved at the subsequent annual meeting of stockholders of the Company scheduled to be held in May 2003, 500,000 options shall be fully vested upon such grant, 500,000 options shall vest on March 11, 2004 and 500,000 options shall vest on March 11, 2005.

(d) In the event the stockholders do not approve any of the proposals set forth in Section 5(c) above at the May 22 Meeting, the Company agrees to resubmit the proposal to stockholders at the next Special or Annual Meeting of Stockholders held by the Company thereafter, and at subsequent Special or Annual Meetings of Stockholders, until such time as such proposal is approved by stockholders and the Executive has received the Option Grant. The Company shall use its best efforts to obtain stockholder approval of any such proposal. Upon the approval of such proposal, the Stock Option Committee of the Board (or the Board or other Committee with authority) will grant to the Executive the Option Grant.

(e) In the event that the exercise price per share of the Options granted to the Executive pursuant to Section 5(a) above (the "March 11 Exercise Price") is less than the fair market value of the Company's common stock on the date of grant of the Option Grant (i.e. the date of stockholder approval as provided in Sections 5(c) or 5(d) above), the number of options to purchase Common Shares subject to the Option Grant shall be increased based upon a Black-Scholes valuation method, or another generally recognized valuation method which is being used uniformly by the Company for its senior executives; in no event shall the number of options subject to the Option Grant be less than 1,500,000. For example, if the March 11 Exercise Price is $37 and the fair market value of the common stock of the Company on the date of stockholder approval is $47, the exercise price of the Option Grant shall be $47, and the number of options granted, and the Common Shares reserved for issuance, shall be increased so that the value of the Option Grant based upon the $47 exercise price shall represent a right to receive the same value that the Executive would have received had the Option Grant been made at the $37 price, as follows: the product of $10 (the difference between the $37 March 11 Exercise Price and the $47 exercise price for the Option Grant) multiplied by 1,500,000, divided by the Black Scholes value.

(f) The Company agrees to allocate to the Option Grant the first shares that are reserved for issuance pursuant to any of the proposals referred to in Sections 5(c) and 5(d) above or any other equity plan adopted by the Company. In the event the any of such proposals are not approved by stockholders and, in lieu thereof, the Company adopts a non-equity based incentive compensation plan or plans (in each case, a "Non-equity Plan") to achieve the same or similar goals that the Company would have hoped to achieve had the stockholders approved the proposals, the Executive shall receive, at his option, "equivalent value" in such non-equity based plan or plans as he would have received had the Option Grant been made on March 11, 2002. For purposes hereof, "equivalent value" shall mean the difference between the March 11 Market

Price and the fair market value of the Company's common stock on the date of an award or vesting of an award under a Non-equity Plan. By way of example, if the March 11 Exercise Price is $37 and the fair market value of the common stock on the date of an award under a Non-equity Plan is $47, the "equivalent value" for such award shall be $10 multiplied by the number of options that would have been vested had the Option Grant been made on March 11, 2002. In the same example, if the fair market value of the common stock on the date of the award or the vesting thereof is less than the March 11 Exercise Price, no payments shall be made to the Executive. Notwithstanding anything contained herein, the Compensation Committee of the Board and the Board of Directors shall use its best efforts to provide to Executive "equivalent value."

(g) At all times, the Company shall maintain registrations on Form S-8 or another applicable form relating to the Common Shares issued in connection with the exercise of stock options granted pursuant to this Section 5.

6. Termination of Employment.

(a) By the Company for Cause, or by the Executive without Good Reason. The Company may terminate the Executive's employment for Cause (as defined herein) before the Expiration Date. If the Executive's employment is terminated for Cause, or if Executive resigns during the Term without Good Reason (as defined below), the Company shall pay to the Executive any unpaid salary through the date of termination and any bonus earned in the prior year but not yet paid, as well as reimburse the Executive for any unpaid reimbursable expenses incurred on behalf of the Company, and thereafter the Company shall have no additional obligations to the Executive under this Agreement.

(b) Death or Disability; Retirement. (i) If the Executive's employment terminates before the Expiration Date because of Executive's death or Disability (as defined herein), the Company shall pay Executive or Executive's duly appointed personal representative, as the case may be, (i) any unpaid salary through the date of death or the Disability Termination Date (as defined herein) and any bonus earned in the prior year but not yet paid, as well as reimbursement of any unpaid reimbursable expenses incurred on behalf of the Company, (ii) an amount equal to Executive's monthly salary during each of the six (6) months following Executive's death or the Disability Termination Date, and (iii) the greater of $3,000,000 (the ATarget Amount@) or the Target Bonus for the calendar year in which Executive dies or becomes Disabled, prorated for the portion of such year preceding Executive's death or the Disability Termination Date, which shall be paid not later than 120 days after the end of such year. Except as set forth in this Section 6(b), the Company shall have no additional obligations to the Executive under this Agreement in the event of Executive's termination of employment under this Section 6(b).

(ii) In addition to the foregoing and notwithstanding any other agreement between the Executive and the Company, all options to purchase the Company's common stock

which were held by the Executive at the time of the Executive's Retirement, death or the Disability Termination Date, shall become fully exercisable and shall remain exercisable by the Executive or by the Executive's estate or her representative, as the case may be, during the remaining original term of the option in the case of the Executive's Retirement or Disability, or during the 3-year period following the date of the Executive's death.

(c) By the Company without Cause, or by the Executive for Good Reason. (i) The Company may terminate the Executive's employment before the Expiration Date without Cause, and the Executive may terminate Executive's employment before the Expiration Date for Good Reason, upon 30-days written notice to the other party. If the Executive's employment is so terminated by the Company without Cause, or by the Executive for Good Reason, as the case may be, the Company shall pay and provide to the Executive (i) any unpaid salary through the date of termination and any bonus earned in the prior year but not yet paid, as well as reimbursement of any unpaid reimbursable expenses incurred on behalf of the Company, (ii) the greater of the Target Amount or the Target Bonus for the calendar year in which termination occurs, prorated for the portion of such year preceding termination (payable no later than the 30^th day immediately following termination of employment), (iii) during each month of the Severance Period (as defined below), an amount equal to the sum of (x) Executive's monthly salary at the rate in effect immediately preceding termination and (y) one-twelfth of the greater of the Target Amount or the Executive's Target Bonus for the calendar year in which termination occurs, (iv) throughout the Severance Period, continuation of Executive's participation (including the Company's contributions thereto) in all benefit plans and practices in which Executive was participating immediately preceding termination, and (v) reimbursement to the Executive for up to $10,000 of executive outplacement services. Except as set forth in this Subsection 6(c), the Company shall not have any additional obligations to the Executive under this Agreement in the event of Executive's termination of employment under this Subsection 6(c).

(ii) In addition to the foregoing and notwithstanding any other agreement between the Executive and the Company, all options to purchase the Company's common stock which were held by the Executive at the time of the termination of the Executive's employment by the Company without Cause or by the Executive for Good Reason (whether or not following a Change of Control), shall become fully exercisable and shall remain exercisable for the same period following termination as would apply if the Executive's employment had not terminated.

(d) Change in Control. If, following a "Change in Control" (as defined herein) and prior to the Expiration Date, the Company terminates the Executive's employment without Cause, or the Executive terminates employment hereunder for Good Reason, the Company shall pay to the Executive, within 20 days following termination, (i) any unpaid salary through the date of termination and any bonus earned in the prior year but not yet paid, as well as reimbursement of any unpaid reimbursable expenses incurred on behalf of the Company, (ii) the Target Bonus for the calendar year in which termination occurs, prorated for the portion of such year preceding termination, (iii) a lump-sum payment equal to (x) the sum of (q) Executive's yearly salary at the rate in effect immediately preceding termination and (r) the greater of the Target Amount or

Executive's Target Bonus for the calendar year in which termination occurs multiplied by (y) the Severance Multiple (as defined herein), and (iv) a lump-sum equal to the Company's cost for health insurance, life insurance and retirement benefits for the Severance Period.

(e) As used herein:

(i) the term "Cause" shall mean (v) the Executive's commission of an act of fraud or dishonesty or a crime involving money or other property of the Company; (w) the Executive's conviction of a felony or a plea of guilty or nolo contendere to an indictment for a felony; (x) if, in carrying out Executive's duties hereunder, the Executive engages in conduct which constitutes willful misconduct or gross negligence; (y) the Executive's failure to carry out a lawful order of the Board of Directors of the Company; or (z) a material breach by the Executive of this Agreement. Any act or failure to act on the part of the Executive which is based upon authority given pursuant to a resolution duly adopted by the Board of Directors of the Company, or based upon the advice of counsel for the Company, shall not constitute Cause as used herein. For purposes of this Section 6(e)(i) only, a breach shall be "material" if it is demonstrably injurious to the Company, its affiliates or any of its respective business units, financially or otherwise.

Cause shall not exist unless and until the Company (i) has delivered to the Executive a written Notice of Termination that specifically identifies the events, actions, or non-actions, as applicable, that the Company believes constitute Cause hereunder, and, in the case of termination for Cause under clauses (x), (y) or (z) above, the Executive has been provided with an opportunity to cure the offending conduct (if at all possible) within 30 days after delivery of the written Notice of Termination, and has not so cured such conduct (if at all possible), and (ii) the Executive has been provided an opportunity to be heard (with counsel) by the Board within 30 days after delivery of the notice of Termination; provided, however, that in the case of termination for Cause under clauses (x), (y), and (z) above, the date of termination shall be no earlier than 35 days after delivery of the Notice of Termination. The Company shall assume the burdens of establishing, by clear and convincing evidence, that (a) the acts claimed to constitute Cause occurred, and (b) any claimed breach, willful misconduct, gross negligence and/or failure (or any other claims under the Cause provisions hereunder) are material.

(ii) the term "Good Reason" shall mean any one of the following:

(1) a material breach of the Company's obligations under this Agreement, including, without limitation, the Company's failure to comply with its covenants in Section 5, which breach has not been cured within 20 business days after the Company's receipt of written notice from the Executive of such breach;

(2) a reduction in the Executive's then annual base salary;

(3) the relocation of the Executive's office to a location more than 30 miles from Executive's present office;

(4) the failure to pay the Executive any undisputed portion of the Executive's compensation within 15 business days after the date of receipt of written notice that such compensation or payment is due;

(5) the failure to continue in effect any compensation or benefit plan in which the Executive is participating, unless either (i) an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan; or (ii) the failure to continue the Executive's participation therein (or in such substitute or alternative plan) does not discriminate against the Executive, both with respect to the amount of benefits provided and the level of the Executive's participation, relative to other similarly situated participants;

(6) a reduction in the Executive's title and status as President and Chief Executive Officer of the Company, or any change in the Executive's status as the sole employee of the Company reporting directly to the Board of Directors of the Company; or the assignment to the Executive of any duties materially inconsistent with the Executive's position (including, without limitation, status, office, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 1 of this Agreement, or any other action by the Company which results in a material diminution in such position, authority, duties or responsibilities, excluding for this purpose any action not taken in bad faith and which is remedied by the Company no later than thirty (30) days after written notice by the Executive; or

(7) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted in this Agreement.

Executive by this Agreement for one hundred twenty (120) or more consecutive days; the term "Disability Termination Date" shall mean the date as of which the Executive's employment with the Company is terminated, either by the Executive or by the Company, following the suffering of a Disability by the Executive.

(iv) the term "Severance Period" shall mean the period commencing with the termination of the Executive's employment and ending with the Expiration Date, as renewed in accordance with Section 2 hereof.

(v) the term "Severance Multiple" shall mean 3 times.

(vi) A "Change in Control" shall have the same meaning as in the Company's 1999 Stock Incentive Plan, as in effect on the date hereof.

(vii) the term "Target Bonus" shall mean 100% of Executive's annual salary for any given year during the Term.

(viii) the term "Retirement" shall mean voluntary retirement by the Executive after attaining age 55 with 10 years of service with the Company (including service with McNaughton Apparel Group Inc. and its businesses (collectively, "MAG") prior to acquisition of MAG by the Company (the "Merger"), or, if the Executive has not attained age 55 and/or has less than 10 years of service with the Company (including service with MAG prior to the acquisition of MAG by the Company), the Company determines that circumstances exist that warrant the granting of Retirement status.

(f) The Executive shall have no obligation to seek other employment or otherwise mitigate the Company's obligations to make payments under this Section 6, and the Company's obligations shall not be reduced by the amount, if any, of other compensation or income earned or received by the Executive after the effective date of Executive's termination.

7. Effect of Section 280G of the Internal Revenue Code.

federal, state and local income taxes and the Excise Tax), than if the Executive received the entire amount of such Total Payments. Unless the Executive shall have given prior written notice specifying a different order to the Company to effectuate the foregoing, the Company shall reduce or eliminate the Total Payments, by first reducing or eliminating the portion of the Total Payments which are not payable in cash and then by reducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the Determination (as defined herein). Any notice given by the Executive pursuant to the preceding sentence shall take precedence over the provisions of any other plan, arrangement or agreement governing the Executive's rights and entitlements to any benefits or compensation.

(b) The determination of whether the Total Payments shall be reduced as provided in this Section 7 and the amount of such reduction shall be made at the Company's expense by an accounting firm selected by the Company from among its independent auditors and the five (5) largest accounting firms (an "Eligible Accounting Firm") in the United States (the "Accounting Firm"). The Accounting Firm shall provide its determination (the "Determination"), together with detailed supporting calculations and documentation to the Company and the Executive within ten (10) days of the last day of Executive's employment. If the Accounting Firm determines that no Excise Tax is payable by the Executive with respect to the Total Payments, it shall furnish the Executive with an opinion reasonably acceptable to the Executive that no Excise Tax will be imposed with respect to any such payments and, absent manifest error, such Determination shall be binding, final and conclusive upon the Company and the Executive. If the Accounting Firm determines that an Excise Tax would be payable, the Executive shall have the right to accept the Determination of the Accounting Firm as to the extent of the reduction, if any, pursuant to this Section 7, or to have such Determination reviewed by another Eligible Accounting Firm selected by the Executive, at the expense of the Company, in which case the determination of such second accounting firm shall be binding, final and conclusive upon the Company and Executive.

8. Company Property. Any trade name or mark, program, discovery, process, design, invention or improvement which the Executive makes or develops, which relates, directly or indirectly, to the business of the Company or its affiliates, or Executive's employment by the Company, shall be considered as "made for hire" and shall belong to the Company and shall be promptly disclosed to the Company. During the Executive's employment and thereafter, the Executive shall, without additional compensation, execute and deliver to or as requested by the Company, any instruments of transfer and take such other action as the Company may reasonably request to carry out the provisions hereof, including filing, at the Company's sole expense, trademark, patent or copyright applications for any trade name or mark, invention or writing covered hereby and assigning such applications to the Company.

9. Confidential Information. The Executive shall not, either during the term of Executive's employment by the Company or thereafter, disclose to anyone or use (except, in each case, in the performance of Executive's responsibilities hereunder and in the regular course of the Company's business), any information acquired by the Executive in connection with or during the

period of Executive's employment by the Company or MAG, with respect to any confidential, proprietary or secret aspect of the affairs of the Company or any of its affiliates, including but not limited to the requirements and terms of dealings with existing or potential licensors, licensees, designers, suppliers and customers and methods of doing business, all of which the Executive acknowledges are confidential and proprietary to the Company, and any of its affiliates, as the case may be. Notwithstanding the foregoing, nothing contained in this Section 9 shall, except during the Severance Period, constitute a basis to prevent the Executive from working for any other entity, provided that he is permitted to do so under Section 10 hereunder.

10. Competition; Recruitment; Non-Disparagement.

(a) The Executive shall not, at any time during Executive's employment by the Company and during the Severance Period (provided that the Company is making the payments to Executive which may be required hereby during such Severance Period) (the "Non-Compete Period") and under the following circumstances, engage or become interested (as an owner, stockholder, partner, director, officer, employee, consultant or otherwise) in any business which then competes, directly or indirectly, with the business then conducted by the Company or any of its subsidiaries or affiliates. Notwithstanding the provisions of the previous sentence, if the Executive's employment is terminated by the Company for Cause prior to June 19, 2004, the restrictions imposed on Executive by such sentence shall remain in effect only for so long as the Company pays the Executive during each month or portion thereof through June 19, 2004, an amount equal to the sum of (x) Executive's monthly salary at the rate in effect immediately preceding termination and (y) one-twelfth of the Executive's Target Bonus for the calendar year in which termination occurs, and provides to Executive through June 19, 2004, continuation of Executive's participation (including the Company's contributions thereto) in all benefit plans and practices in which Executive was participating immediately preceding termination. The ownership of less than 5% of the stock of a publicly owned company which competes with the Company, any of its subsidiaries or affiliates, in and of itself, shall not be considered a violation of the provisions of this Section 10.

(b) The Executive shall not, at any time during Executive's employment by the Company and thereafter until the second anniversary of the expiration of the Non-Compete Period, recruit, solicit for employment, hire or engage, or assist any person or entity in recruiting, soliciting for employment, hiring or engaging, any employee or consultant of the Company, any of its subsidiaries or affiliates, or any person who was an employee or consultant of the Company, any of its subsidiaries or affiliates within one year before the termination of the Executive's employment.

(c) For the longer of any period applicable under this Section 10 or a period of three years immediately following the date of termination, (i) the Company, and its respective affiliates and employees shall not disparage the Executive, and (ii) the Executive shall not disparage the Company, or its respective affiliates and employees.

(d) The Executive acknowledges that the provisions in Section 10(b) are necessary for the protection of the Company, and its subsidiaries and affiliates and are not unreasonable, because the Executive would be able to recruit and hire personnel other than employees of the Company, and any of their subsidiaries and affiliates. The Executive further agrees that a breach of Section 8, 9 or 10 of this Agreement shall result in the immediate cessation of any payments pursuant to this Section 10 and Section 6 hereof, if applicable. The duration and the scope of these restrictions on the Executive's activities are divisible, so that if any provision of this Section 10 is held or deemed to be invalid, that provision shall be automatically modified to the extent necessary to make it valid.

11. Notices. Any notice or other communication to the Company or to the Executive under this Agreement shall be in writing and shall be considered given on the third business day following mailing by certified mail, return receipt requested, to such party at Executive's address on file with the Company, with a copy to Charles M. Modlin, Esq., Modlin Haftel & Nathan LLP, 777 Third Avenue, New York, New York 10017, or to the Company at 1411 Broadway, New York, New York 10018, Attention: General Counsel (or at such other address as such party may specify by written notice to the other party).

12. Successors; Binding Agreement.

(a) Company's Successors. No rights or obligations of the Company under this Agreement may be assigned or transferred by the Company, except that such rights or obligations may be assigned or transferred pursuant to a merger or consolidation in which the Company is not the continuing entity, or the sale or liquidation of all or substantially all of the business or assets of the Company, provided that the assignee or transferee is the successor to all or substantially all of the business or assets of the Company and such assignee or transferee assumes all of the liabilities, obligations and duties of the Company, as contained in this Agreement, either contractually or as a matter of law. The Company will require any such successor to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business or assets as aforesaid, which executes and delivers the agreement provided for in this Section 12 or which otherwise becomes bound by all the terms and provisions of this Agreement or by operation of law.

(b) Executive's Successors. This Agreement shall not be assignable by the Executive. This Agreement and all rights of the Executive hereunder shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. Upon the Executive's death, all amounts to which Executive is entitled hereunder, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the Executive's devisee, legatee, or other designee or, if there be no such designee, to the Executive's estate.

13. Indemnification. The Company shall indemnify Executive and hold the Executive harmless, to the maximum extent permitted by applicable law, from and against all claims, actions, suits, proceedings, loss, damage, liability, costs, charges and expenses, including reasonable attorneys' fees and costs arising in connection with the Executive's performance of Executive's duties hereunder or Executive's status as an employee, officer, director or agent of the Company or its affiliates, in accordance with the Company's indemnity policies for its senior executives.

14. Interest on Late Payments. "Undisputed Late Obligations" shall bear interest beginning on the Due Date until paid in full at an annual rate of one percent (1.0%) plus the prime rate as declared from time to time by JP MorganChase. For purposes hereof, "Undisputed Late Obligations" shall mean any obligation which remains unpaid 5 days after written notice thereof is delivered to the other party in accordance with Section 11 (the "Due Date") for money under this Agreement owing from one party to another, which obligation (i) is not subject to any bona fide dispute or (ii) has been adjudicated by an arbitration panel or court of competent jurisdiction to be due and payable.

15. Arbitration. Except as otherwise provided herein, all controversies, claims or disputes arising out of or related to this Agreement shall be settled under the rules of the American Arbitration Association then in effect in the State of New York, as the sole and exclusive remedy of either party, and judgment upon such award rendered by the arbitrator(s) may be entered in any court of competent jurisdiction.

16. Attorneys' Fees. The Company shall reimburse the Executive (or the Executive shall reimburse the Company) for all reasonable costs, including without limitation reasonable attorneys' fees, of the Executive or the Company, as the case may be, in any dispute, arbitration or proceeding arising under this Agreement (collectively, a "Proceeding"), so long as the Executive or the Company, as the case may be, "prevails in substantial part" with respect to Executive's or the Company's claims or defenses in such Proceeding. For purposes hereof, the Executive shall be deemed to have "prevailed in substantial part" if (i) the Executive is the party originally demanding a Proceeding, and the arbitrator(s) shall have awarded the Executive at least 75% of the amount originally demanded by the Executive, or (ii) the Company is the party originally demanding a Proceeding, and the arbitrator(s) shall have denied the Company the relief originally requested. The Company shall be deemed to have "prevailed in substantial part" if the Executive is the party originally demanding a Proceeding and the arbitrator(s) shall have awarded the Executive less than 25% of the amount originally demanded by the Executive.

17. Restrictions on Disposition of Shares and Exercise of Options. The Company and the Executive each agree that the Executive shall have the right (1) to sell, exchange, assign, pledge, encumber, hypothecate, transfer, enter into any hedge (or similar transaction with the same economic effect as a sale or partial sale) in respect of or otherwise dispose of (a "Transfer") any shares of the Company's common stock ("Company Shares") (or interests therein) underlying

the options to acquire Company Shares that Executive received in the Merger ("Merger Options") or (2) Transfer any Company Shares (or interests therein) that Executive receives upon exercise of the Merger Options.

Except as specifically provided above or as specifically provided in the Agreement and Plan of Merger dated as of April 13, 2001 among the Company, MN Acquisition Corporation and MAG (the AMerger Agreement@), the terms and conditions of the MAG stock options (that were converted into Merger Options in the Merger) will continue to apply and remain in full force and effect.

18. Miscellaneous.

(a) Given that a breach of the provisions of this Agreement would injure the Company irreparably, the Company may, in addition to its other remedies, obtain an injunction or other comparable relief restraining any violation of this Agreement, and no bond, security or other undertaking shall be required of the Company in connection therewith.

(b) The provisions of this Agreement are separable, and if any provision of this Agreement is invalid or unenforceable, the remaining provisions shall continue in full force and effect.

(c) This Agreement constitutes the entire understanding and agreement between the parties with respect to the subject matter hereof, and supersedes the Prior Employment Agreement and all other existing agreements between MAG and Executive or the Company and Executive, and cannot be amended, unless such amendment is in writing and signed by both parties to this Agreement.

(d) This Agreement shall be governed by and construed in accordance with the laws of the State of New York (other than its choice of laws rules), where it has been entered and where it is to be performed. The parties hereto consent to the exclusive jurisdiction of any federal or state court in the State of New York to resolve any dispute arising under this Agreement or otherwise.

(e) The headings in this Agreement are solely for convenience of reference and shall not affect its interpretation.

(f) The failure of either party to insist on strict adherence to any term of this Agreement on any occasion shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. For any waiver of a provision of this Agreement to be effective, it must be in writing and signed by the party against whom the waiver is claimed.

(g) The obligations of the Executive and the Company hereunder shall survive the

termination of the term of this Agreement and the Executive's employment hereunder, to the extent necessary to give full effect to the provisions of this Agreement.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed as of the date first above written.

JONES APPAREL GROUP, INC.

By: /s/ Wesley R. Card
Chief Operating and Financial Officer

/s/ Peter Boneparth
Executive

JONES APPAREL GROUP, INC.
FORM OF STOCK OPTION AGREEMENT

THIS AGREEMENT, made as of this ___ day of ________ by JONES APPAREL GROUP, INC., a Pennsylvania corporation (hereinafter called the "Company"), with the person executing this Agreement (hereinafter called the "Holder"):

The Company has adopted the stock option plan identified on Annex I attached hereto (the "Plan"). Said Plan, as it may hereafter be amended and continued, is incorporated herein by reference and made part of this Agreement.

The Committee, which is charged with the administration of the Plan pursuant to Section 3 thereof, has determined that it would be to the advantage and interest of the Company to grant the option provided for herein to the Holder.

NOW, THEREFORE, pursuant to the Plan, the Company with the approval of the Committee hereby grants to the Holder as of the date hereof an option (the "Option") to purchase all or any part of the number of shares of Common Stock of the Company set forth on Annex I, at the price per share set forth on Annex I, which price is not less than the fair market value of a share of Common Stock on the date hereof, and upon the following terms and conditions:

1. The Option shall continue in force through the "Expiration Date" stated on Annex I, unless sooner terminated as provided herein and in the Plan. Subject to the provisions of the Plan, the Option shall become exercisable as provided in the Vesting Schedule in Annex I. Such installments shall be cumulative, subject to the following:

a. Except as provided hereinbelow, the Option may not be exercised unless the Holder is then an employee (including directors and officers who are employees), director or officer of the Company or any subsidiary of the Company, in each case, on the date of grant, or a consultant, advisor, agent or independent representative of the Company or any subsidiary of the Company, or any combination thereof.

2. In the event that the employment of the Holder shall be terminated by the Holder without "Good Reason" (as defined in that employment agreement dated March 11, 2001 between the Company and the Holder - the "Employment Agreement") prior to the Expiration Date, the Option may be exercised (to the extent that the Holder was entitled to do so at the termination of employment) at any time within three months after such termination, but not after the Expiration Date. Nothing in this Agreement shall confer upon the Holder any right to continue in the employ or service of the Company or any subsidiary of the Company or affect the right of the Company or any subsidiary to terminate his employment at any time.

3. If the Holder shall (a) die while he is employed by the Company or a corporation which is a subsidiary thereof, or (b) become Disabled (as defined in the Employment

Agreement) while employed by the Company, or (c) enter Retirement (as defined in the Employment Agreement), or Holder's employment is terminated by the Company without Cause (as defined in the Employment Agreement) or by the Holder for Good Reason, or there shall have occurred a "Change in Control" (as defined in the Employment Agreement), then the Option shall become immediately fully exercisable, as set forth herein by the Holder or by the person or persons to whom the Holder's rights under the Option pass by will or applicable law, or if no such person has such right, by his executors or administrators, and shall remain exercisable until (x) the Expiration Date in the case of the Holder's Retirement or Disability or following termination of employment by the Company without Cause or by the Holder for Good Reason or following a Change in Control, or (y) during the 3-year period following the Holder's death.

4. a. The Holder may exercise the Option with respect to all or any part of the shares then purchasable hereunder by giving the Company written notice in the form annexed, as provided in paragraph 8 hereof, of such exercise. Such notice shall specify the number of shares as to which the Option is being exercised and shall be accompanied by payment in full in cash of an amount equal to the exercise price of such shares multiplied by the number of shares as to which the Option is being exercised; provided that, if permitted by the Board, the purchase price may be paid, in whole or in part, by surrender or delivery to the Company of securities of the Company having a fair market value on the date of the exercise equal to the portion of the purchase price being so paid. In such event fair market value should be determined pursuant to paragraph 5 of the Plan.

b. Prior to or concurrently with delivery by the Company to the Holder of a certificate(s) representing such shares, the Holder shall, upon notification of the amount due, pay promptly any amount necessary to satisfy applicable federal, state or local tax requirements. In the event such amount is not paid promptly, the Company shall have the right to apply from the purchase price paid any taxes required by law to be withheld by the Company with respect to such payment and the number of shares to be issued by the Company will be reduced accordingly.

5. Notwithstanding any other provision of the Plan, in the event of a change in the outstanding Common Stock of the Company by reason of a stock dividend, split-up, split-down, reverse split, recapitalization, merger, consolidation, combination or exchange of shares, spin-off, reorganization, liquidation or the like, then the aggregate number of shares and price per share subject to the Option shall be appropriately adjusted by the Board, whose determination shall be conclusive.

6. a. For Non-Qualified Stock Options: No Non-Qualified Stock Options ("NQSO") granted hereunder shall be transferable other than by will or by the laws of descent and distribution, except that all or any portion of the NQSO may be transferred to or for the benefit of (by trust) the spouse or lineal descendents of the Holder, subject to such restrictions on transfer which may be imposed by federal and state securities laws, and if prior thereto the transferee agrees to be bound by the terms of the Plan and this Agreement. Options may be exercised, during the lifetime of the Holder, only by the Holder, or by his guardian or legal representative or permitted transferee.

b. For Incentive Stock Options: Incentive Stock Options ("ISO") shall, during the Holder's lifetime, be exercisable only by him, and neither the ISO nor any right hereunder shall be transferable by him, by operation of law or otherwise, except by will or by the laws of descent and distribution.

7. Neither the Holder nor in the event of his death, any person entitled to exercise his rights, shall have any of the rights of a stockholder with respect to the shares subject to the Option until share certificates have been issued and registered in the name of the Holder or his estate, as the case may be.

8. Any notice to the Company provided for in this Agreement shall be addressed to the Company in care of its Chief Financial Officer, 250 Rittenhouse Circle, Bristol, Pennsylvania 19007 and any notice to the Holder shall be addressed to him at his address now on file with the Company, or to such other address as either may last have designated to the other by notice as provided herein. Any notice so addressed shall be deemed to be given on the second business day after mailing, by registered or certified mail, at a post office or branch post office within the United States.

9. In the event that any question or controversy shall arise with respect to the nature, scope or extent of any one or more rights conferred by this Option, the determination by the Committee (as constituted at the time of such determination) of the rights of the Holder shall be conclusive, final and binding upon the Holder and upon any other person who shall assert any right pursuant to this Option.

	JONES APPAREL GROUP, INC. By: ________________________________
ACCEPTED AND AGREED ______________________________ Holder

ANNEX I

Peter Boneparth

Granted To: Peter Boneparth
Grant Date: _____________

Options Granted: _______________
Option Type: Non-Qualified Stock Option

Option Price per Share: __________________
Expiration Date: __________________
Plan: 1999

Vesting Schedule
________ on March __, 200_
________ on March __, 200_
________ on March __, 200_

ANNEX I

Peter Boneparth

Granted To: Peter Boneparth
Grant Date: _____________

Options Granted: _______________
Option Type: Incentive Stock Option

Option Price per Share: __________________
Expiration Date: __________________
Plan: 1999

Vesting Schedule
________ on March __, 200_
________ on March __, 200_
________ on March __, 200_

EX-10 7 exhibit10_22.htm EXHIBIT 10.22 Exhibit 10.22

EXHIBIT 10.22

BUYING AGENCY AGREEMENT

This Agreement is entered into this 30th day of November, 2001 between NINE WEST GROUP INC., (hereinafter referred to as "Principal"), a corporation organized under the laws of the State of Delaware, United States of America, having its principal place of business located at 1129 Westchester Avenue, White Plains, New York, U.S.A. 10604-3529, and BENTLEY HSTE FAR EAST SERVICES, LIMITED. (hereinafter referred to as "Agent"), a Corporation having its principal place of business located at 38 Esplanade, St. Helier. Jersey, Channel Islands J34 8QL

WHEREAS, Principal is engaged in the purchase and importation into the United States, the United Kingdom and Canada of leather footwear (the "Products") which is manufactured in Brazil and other countries in South America (the "Territory") for sale in the United States, the United Kingdom and Canada; and

WHEREAS, Principal acts as buying agent for its Private Label Customers (the "Customers"); and

WHEREAS, Agent wishes to act as a representative in the Territory for interested parties in the United States, and Canada; and

WHEREAS, the parties hereto are desirous of entering into a written agreement which incorporates all understandings with regard to the agency relationship between the parties;

NOW THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:

SECTION I. AGENCY RELATIONSHIP

1.1. Creation of the Agency. Principal hereby appoints Agent, and Agent hereby agrees: (i) to act as a non-exclusive buying agent for Principal in connection with Principal's

purchases of the Products from various manufacturers in the Territory; and (ii) to provide services to Principal in connection with Principal's activities for Customers.

1.2. Services to be Provided. Agent agrees to provide assistance to Principal by contractually employing the services of qualified personnel in the form of business entities, corporations, partnerships and/or individuals, and by providing office and work facilities and all other incidents necessary, in order to perform the following services on behalf of Principal:

(a)	Agent shall assist Principal in locating sources for the manufacture of the Products, obtaining models, prototypes and samples (preliminary and manufacturing) from manufacturers or sellers in the Territory;
(b)	Agent shall use its best efforts to ensure that all factories manufacturing for, and/or conducting business with, Principal have acknowledged, signed and remain in full compliance with the Jones Apparel Group Standards for Contractors and Suppliers as updated from time to time (copy of current version attached as Exhibit A); and, notify Nine West Group of any violations or problems noted;
(c)	Agent shall assist in the negotiation of the most favorable prices for the Principal and its Customers. In this regard, Agent shall visit manufacturers or sellers designated by Principal, obtain samples of merchandise, and submit samples to Principal quoting prices at which the merchandise can be purchased;
(d)	Agent shall familiarize itself with Principal's needs and survey the potential markets to obtain the best available merchandise. Agent will advise Principal of new developments in the Territory which may be of interest to Principal and Customers;
(e)	Agent shall place orders with manufacturers or sellers on behalf of Principal and Customers. Agent shall act only upon the explicit and specific instructions of Principal and, in no case, shall Agent act without such explicit instructions;
(f)	Agent shall quote "f.o.b. Country of Origin" prices. Agent shall arrange for payment terms to the manufacturers or sellers pursuant to the explicit instructions of Principal;

(g)	Agent shall facilitate the preparation and acquisition of documentation necessary for the importation of the Products into the United States, the United Kingdom and Canada;
(h)	Agent shall visit manufacturers and/or sellers with whom the orders are placed in order to inspect the quality of the merchandise shipped for the account of Principal and its Customers. At the request of Principal, Agent shall provide periodic production progress reports to Principal. In the event that such merchandise does not conform to quality specifications, or any other requirement of the purchase order, Agent shall immediately notify Principal;
(i)	Agent shall use its best efforts to ensure that no manufacturer and/or seller with whom it places orders on behalf of Principal produces or sells goods which infringe or potentially infringe any trademark, service mark, patent, copyright or other proprietary right of the Principal. The Agent shall maintain records accounting for labels, trims, packing materials, hangtags, etc. bearing the Principal's trademarks, service marks, patents, etc. which have been supplied to the manufacturers and/or sellers and shall use its best efforts to ensure that the manufacturers and/or sellers do not misappropriate such labels, trim, etc., or merchandise bearing any such labels, trim packing materials, hangtags, etc.;
(j)	Agent shall assist Principal and Customers in the return of any merchandise deemed to be defective. In addition, Agent shall assist in the recovery of any monies due to Principal or its Customers from the manufacturer or seller as a result of defective merchandise, shortages, etc. Such action will be taken only after consultation with Principal;
(k)	Agent shall provide manufacturer's or seller's invoices to Principal and Customers for each shipment handled by Agent;
(l)	Agent shall never act as a seller in any transaction involving Principal;
(m)	At the request of Principal, Agent shall maintain inventory records to keep track of any material or finished products which are in Agent's possession

	for the account of Principal and Customers and shall provide Principal with a monthly stock inventory report;
(n)	At the request of Principal, Agent shall arrange for consolidation of shipments and, at the direction of Principal, arrange for all inland freight, hauling, lighterage, insurance and/or storage. Moreover, Agent shall facilitate the acquisition of the documentation necessary for importation of Product into the United States, the United Kingdom and Canada;
(o)	Agent shall instruct manufacturers and/or sellers to prepare commercial invoices which properly describe the Product and materials from which it is made in English, list the price to be paid in U.S. currency; and meet all requirements of the United States Customs Laws and Regulations;
(p)	Agent shall provide inspection certificates for each shipment as required by Principal;
(q)	In the event merchandise is refused by Principal or any Customer or not shipped, Agent shall endeavor to prevent the manufacturer or seller from disposing of such merchandise without the removal of all labels, brand names or markings identifying Principal or such Customer;
(r)	Agent shall use its best efforts to ensure that Principal's and Customer's designs, styles, models, prototypes, approved sample, and specifications are observed in the manufacture of the Products;
(s)	Agent shall use its best efforts to ensure timely delivery of the Products;
(t)	Agent shall assist Principal in selectively distributing information among manufacturers or sellers in such manner as to ensure that no one manufacturer or seller is in a position to produce a full line of Products;
(u)	Agent shall assist in the choice of the manufacturers or sellers most qualified for the carrying out of each order, it being understood that in the placing of substantial orders, preference is to be given to manufacturers and sellers affording exclusivity of exports to Principal as to the United States, United Kingdom and Canada;
(v)	Agent shall keep a file of all styles produced;
(w)	Agent shall maintain records which include the following:

- A listing of the styles, designs, models and prototypes provided to each manufacturer.

- A listing of samples.

- A listing of Products ordered from each manufacturer.

and

(x)

Agent shall arrange for office space in Campo Bom, Rio Grande do Sul, Brazil for use by visiting personnel of Principal who require same in connection with their responsibilities in dealing with local manufacturing facilities.

    1.3.    Limitations. Unless specifically authorized in writing by Principal, Agent shall not:

(a)    act in the name of Principal with third parties;

(b)    share any commission in any manner directly or indirectly with any manufacturer or seller with which Agent deals on behalf of Principal and Customers;

(c)    accept any payment, rebate, or other form of remuneration from any manufacturer or seller with which Agent deals on behalf of Principal and Customers;

(d)    give any release to any manufacturer or seller for any failure to deliver purchased goods, or for failure to deliver goods of the quantity and quality required, or for any other failure on the part of a manufacturer or seller, unless instructed by Principal;

(e)    for its own account, sell raw materials to any manufacturer or seller supplying merchandise purchased pursuant to this Agreement; or

(f)    assign its rights or delegate the performance of any of its duties under this Agreement.

1.4. Related Parties. Principal acknowledges Agent's relationship to Sunley Fashions SA, but Agent represents that it will not share its commissions with, or solicit or accept remuneration from Sunley Fashions SA in connection with the subject transactions.

Agent further represents that its relationship with Sunley Fashions SA shall not interfere with Agent's obligation to operate under the specific direction and control, and in the best interests, of the Principal in all matters relating to this Agreement.

1.5. No Minimum or Maximum Purchase Restrictions. There shall be no minimum purchase obligations imposed upon Principal and Customers and no limits on the size of orders. Agent shall fulfill orders of any size coming from Principal to the best of Agent's ability.

SECTION II. PAYMENT FOR FEES AND PURCHASES

2.1. Fees. In consideration of the services performed under this Agreement, Principal agrees to pay Agent a fee equal to a percentage of the f.o.b. price of the merchandise, including the value of any "assists" supplied by the Purchaser, which is ordered and shipped to Principal. The specific percentage rate for the commission applicable to a particular shipment is dependent upon the factory utilized by Principal and will be that rate specified in the factory list annexed to this Agreement as Exhibit B.

As additional factories may be utilized subsequent to the execution of this Agreement, Principal agrees to pay Agent a fee equal to a percentage of the f.o.b. price of the merchandise shipped to Principal from such factories based upon the rate set forth in an addendum to this Agreement which must be in writing and signed by both Principal and Agent in the form set forth in Exhibit C to this Agreement.

In the event that Principal and Agent agree to change a specific commission percentage rate applicable to a factory listed in Exhibit B or in any addendum to this Agreement, the revised rate may be effected by an addendum which must be in writing and signed in the form set forth in Exhibit C.

Principal shall pay the percentage fee within twenty (20) days from the date of the invoice for such commissions. The invoice for the commissions payable to Agent shall be issued by Agent on a shipment-by-shipment basis or on a periodic basis incorporating multiple shipments at Agent's discretion. The invoice shall specify the factory name, the Nine West Group Inc. division/line, description of merchandise, f.o.b. prices of the merchandise, total f.o.b. value of the merchandise, commission rate, and commission payable. Agent shall attempt to

issue its commission invoice in a timely fashion so that Principal may reasonably verify the information presented on such invoice.

Where merchandise is determined to be defective by Principal, no commissions will accrue and any commissions paid relating to that merchandise shall be refunded by the Agent.

2.2. Purchases. Principal and Customers shall make payment for the cost of the merchandise purchased to this Agreement directly to the manufacturer(s) or seller(s) based upon the f.o.b. prices set forth on the seller's commercial invoice.

2.3 Samples. In the event that Agent provides samples to Principal or any Customer, Principal shall pay Agent for the cost of samples pursuant to separate invoices and based upon price and payment terms agreed to by the parties at the time of such sample purchases. The commercial invoices used to import and make entry of sample shipments must reflect the total agreed-upon price for the samples and no additional subsequent payments shall be made by Principal for such samples.

2.4. Fees Retained by Agent. None of the sums set forth above for the Agent's compensation or reimbursement shall be paid, directly or indirectly, to the manufacturer/seller or inure to the benefit of the manufacturer/seller in any way. Furthermore, the Agent, its officers, directors shareholders, and/or employees shall not solicit or accept any payment, rebate or other form of compensation or remuneration from any manufacturer/ seller in transactions involving the Principal.

2.5. Agent's Costs. Agent shall pay all costs of conducting its agency and all taxes, including assessments which may be made against the salary or wages of those directly or indirectly employed by Agent.

2.6 Other Costs. Principal shall reimburse Agent for all expenses incurred on Principal's behalf for the cost of merchandise, inland freight, hauling, lighterage, etc. Such expenses will be incurred only with the consent of Principal. Agent will be separately reimbursed for these expenses only if the parties have agreed to this method of payment before the expenses are incurred. In addition, Principal will reimburse Agent for all material out-of-pocket expenses incurred by Agent directly as a result of requests of Principal, including (i)

merchandise samples sent to Principal or retained in Agent's office for Principal, and (ii) car service and hotel bills for employees of Principal should such expenses be directly charged to Agent. Principal shall not be required to reimburse Agent for Agent's normal overhead related expenses, such as expenses for telephone, facsimile, duplicating, office supplies and incidental meals.

2.7. Agent's Invoice. The Agent shall provide the Principal with a separate invoice for the payment of buying commissions and non-production related expenses incurred on the Principal's behalf, such as inland freight, hauling, lighterage, etc., in addition to manufacturer's or seller's commercial invoices for the cost of merchandise.

2.8. Representations. In executing this Agreement, the Agent acknowledges that the Principal has no financial interest in the Agent and the Agent further certifies: that it has no ownership or financial interest in, nor any control of, the manufacturers supplying the merchandise purchased with the assistance of the Agent; that it does not, for its own account, sell raw materials to the manufacturers supplying such merchandise; and that the manufacturers have no ownership or financial interest in, or any control over, the Agent. In the event that any such interest or control is acquired, then the Agent will immediately inform the Principal. Failure to do so will result in the forfeiture of the Agent's commission on merchandise purchased from the related or controlled manufacturers or sellers.

SECTION III. DISPUTE RESOLUTION

    3.1.    Dispute Resolution. In the event of disputes between Principal and any manufacturer(s) or seller(s) the following mechanism shall be used to settle disputes:

(a)    known carton shortages shall be the responsibility of Principal, provided that proper bills of lading indicating transfer of ownership at the port of exportation are provided;

(b)    concealed shortages or overages less than 50 units shall be the responsibility of Principal. Net shortages and overages shall be accumulated and settled on a seasonal basis through the regular course of business;

(c)	concealed shortages or overages greater than 50 units shall be the responsibility of the specific manufacturer(s) or seller(s) and Agent, and shall be charged or credited back, as necessary, through the regular course of business;
(d)	in the event that merchandise purchased by Agent on behalf of Principal does not conform in quality to the order placed, Agent shall notify Principal immediately and shall assist Principal in settling any controversy which may arise between Principal and any manufacturer or seller in the normal course of business.

SECTION IV. MISCELLANEOUS

4.1. Term. This Agreement shall be effective January 1, 2002 and shall remain in force through December 31, 2007. Unless notice of intent not to extend this Agreement is presented in writing by either the Principal or the Agent on, or before, November 30 of each calendar year, the term of this Agreement shall automatically be extended for one (1) year from the last day of the then existing term. For example, (a) if neither party gives notice of non-extension to the other party by November 30, 2002, then the term of this Agreement will automatically be extended to December 31, 2008, and (b) if neither party gives notice of non-extension to the other party by November 30, 2003, then the term of this Agreement will be automatically extended to December 31, 2009.

All orders existing or pending at the time of termination will be executed in accordance with the terms and conditions of the original purchase order(s).

4.2. Trade Secrets. All confidential information made available to either party by the other party hereto shall be kept confidential as a trade secret by the recipient thereof and its officers, directors, and/or employees, and such information shall not, without the prior written consent of Principal or Agent, as the case may be, be divulged in any manner to any third party except to the extent that the divulgence of such information shall become necessary in any litigation concerning the provisions of this Agreement.

4.3. Indemnification. Principal and Agent agree to hold each other and each of their respective directors, officers, employees and agents ("Indemnified Parties") harmless from and

against any loss, liability or expense (including reasonable attorneys' fees and expenses) arising out of, or resulting from, any acts performed by them outside of this Agreement which may bind, obligate, or otherwise adversely affect Agent or Principal or any other Indemnified Parties.

4.4. Governing Law. This Agreement shall be construed and enforced in accordance with, and be governed by, the laws of the State of New York, U.S.A. Any dispute arising from, or in connection with, this Agreement shall be finally settled by three arbitrators appointed and proceeding in accordance with the Rules of Conciliation and Arbitration of the American Arbitration Association. The arbitration proceeding shall be held in New York and conducted in English.

4.5. Waivers. The failure at any time of any party of this Agreement to require performance by another party of any action or responsibility provided for in this Agreement shall in no way affect the full right to require such performance at any time thereafter, nor shall the waiver by any such party of a breach of any provision of this Agreement by another party constitute a waiver of any succeeding breach of the same or any other provision nor constitute a waiver of the action or responsibility itself.

4.6. Modifications. No modification to the contents of this Agreement shall be effective unless in writing and executed by both of the parties.

4.7 Entire Agreement. This Agreement (including the exhibit hereto) sets forth the entire Agreement between Principal and Agent with respect to matters relating to the agency created by this Agreement and there are no understandings, representations, warranties or inducements except as set forth herein. This Agreement may not be amended or cancelled or any of its terms waived except by a written instrument signed by Principal and Agent. The failure of any party at any time to require performance of any of the provisions hereof shall in no manner affect the right of that party to enforce such performance.

4.8. Notice. Any notice relating to the contents of this Agreement may be personally served; or it may be sent by facsimile, registered mail or special courier at the following addresses:

For Principal:

NINE WEST GROUP INC.,

1129 Westchester Avenue

White Plains, New York, USA 10601-3529

Attn: Ira M. Dansky

Executive Vice President and General Counsel

For Agent:

BENTLEY HSTE FAR EAST SERVICES, LIMITED

P.O. BOX 148

38 Esplanade, St. Helier

Jersey, Channel Islands

JE 4 8QL

Any such notice shall be deemed given on the date when it is received by the party to whom it is sent. Either party may change its address for notices by notice in the manner set forth above.

IN WITNESS WHEREOF, Principal and Agent have caused this Agreement to be signed by their duly authorized officers the day and year first above written.

NINE WEST GROUP INC.

PRINCIPAL

By: /s/ Ira M. Dansky
Executive Vice President

BENTLEY HSTE FAR EAST SERVICES, LIMITED

AGENT

By: /s/ Brian Frith
Director

EX-23 8 exhibit10_23.htm EXHIBIT 10.23 Exhibit 10.23

EXHIBIT 10.23

EMPLOYMENT AGREEMENT

AGREEMENT made October 1, 2001 by and between JONES APPAREL GROUP, INC., a Pennsylvania corporation (the "Company"), and RHONDA BROWN (the "Executive").

W I T N E S S E T H:

WHEREAS, the Company wishes to employ the Executive, and the Executive wishes to enter employment with the Company on the terms and conditions hereinafter set forth.

NOW, THEREFORE, it is agreed as follows:

1. Employment. During the term of this Agreement, the Company shall employ the Executive as the President and Chief Executive Officer of the Company's Footwear, Accessories & Retail Group (the "FAR Group"), which presently is comprised of the United States and international wholesale and retail operations of its Nine West Group Inc. ("NWG") subsidiary, and as the President and Chief Executive Officer of NWG, with overall responsibility for and authority over all of the operations of the FAR Group. During Executive's employment, the Company shall also elect Executive to the board of directors of each of NWG and NWG's subsidiaries. The Executive shall report directly to the Executive Management Committee of the Company. During the Term of this Agreement, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote all of Executive's business time and attention to the business affairs of the Company, and to perform such responsibilities in a professional manner. Notwithstanding the foregoing, during the Term of this Agreement, it shall not be a violation of this Agreement for the Executive to (a) serve on civic or charitable boards or committees; (b) deliver lectures, fulfill speaking engagements or teach at educational institutions; (c) serve as a non-employee member of a board of directors of a business entity which is not competitive with the Company and as to which the Board of Directors of the Company has given its consent; and (d) attend to personal business, so long as such activities do not interfere with the performance of the Executive's responsibilities as a senior executive of the Company in accordance with this Agreement.

2. Term. The Executive shall be employed for the period (the "Initial Term") commencing October 22, 2001 and ending on December 31, 2004 (the "Expiration Date"), as renewed in accordance with the following sentence (the "Term"). The Executive's employment will continue, and this Agreement will be automatically extended without limitation, for successive 12-month periods commencing January 1 and ending December 31 (a "Contract Year"), unless either party to this Agreement advises the other in writing, no later than December

31, 2002 and each December 31 thereafter, that such party does not wish to extend (a "Non-extension Notice"). If this Agreement shall be so extended, the "Expiration Date" shall mean the then applicable extended "Expiration Date", and the "Term" shall mean the period commencing December 17, 2001 and ending on the then applicable extended "Expiration Date".

For example, (i) if by December 31, 2002, neither party has given a Non-extension Notice to the other, the Term will be automatically extended through December 31, 2005, and (ii) if the Term is so extended through December 31, 2005, then if by December 31 , 2003, neither party has given a Non-extension Notice to the other, the Term will be automatically extended through December 31, 2006.

3. Salary, Retirement Plans, Fringe Benefits and Allowances; Commencement Bonus.

(a) Throughout the Term, the Executive shall receive a salary at the annual rate of not less than $1,000,000. The Executive's salary shall be payable at such regular times and intervals as the Company customarily pays its senior executives from time to time, but no less frequently than once a month.

(d) The Executive shall be entitled to an aggregate of four (4) weeks paid vacation during each Contract Year. The Executive shall also be entitled to the benefits of the Company's policies relating to sick leave and holidays.

(e) The Executive shall have all expenses reasonably incurred by Executive on behalf of the Company reimbursed by the Company in accordance with the Company's standard policies and practices. The Executive shall be entitled to first class seating for air travel on Company business. The Company shall provide the Executive with a Company-paid automobile and driver for her use in performing her services hereunder.

(f) The Company shall make available to the Executive all perquisites that are made available to senior executives of the Company.

(g) In addition to any other compensation provided for herein, the Company shall pay to Executive $25,000 no later than 10 days following Executive's commencement of work hereunder.

4. Bonus. Executive shall participate in the Company's Executive Annual Incentive Plan (the "Bonus Plan"), pursuant to which the Executive will be entitled to receive an annual bonus payment for each full Contract Year of employment which ends prior to the Expiration Date and throughout which the Executive has been employed by the Company, conditioned upon the attainment of annual criteria and objectives established for participants in the Bonus Plan. The granting of such bonus shall be in the discretion of the Compensation Committee of the Company's Board of Directors, but is anticipated to be within the range of the Target Bonus.

5. Stock Options. (a) On October 22, 2001, the Stock Option Committee of the Board of Directors of the Company shall grant to the Executive an option to purchase 250,000 shares of the Company's common stock ("Common Shares") at an exercise price equal to the fair market value of the common stock at the close of business on October 22, 2001 and vesting ratably on the first three anniversaries of the date of grant, and on the additional terms and conditions contained in the form of stock option agreement annexed hereto and consistent with the provisions of Section 5(b)(iii)-(iv) hereof.

(b) In addition to the grant on October 22, 2001, and subject to the absolute authority of the Stock Option Committee of the Board of Directors of the Company from time to time to grant (or not to grant) to eligible individuals options to purchase common stock of the Company ("Options"), it is the intention of the Company and the expectation of the Executive that while the Executive is employed hereunder, the Executive will receive Options annually (in addition to those described in Section 5(a) hereof), on the following terms and conditions (and any Options so granted shall be subject to the following terms and conditions, which shall govern any conflicts in the terms hereof with any terms and conditions in any stock option agreement):

(i) Target awards will be in an amount (plus or minus 25%) equal to 150% of Executive's salary;

(iv) The Options shall vest ratably on the first three anniversaries of the date of grant; provided, however, that all Options (and all other options to purchase Common Shares

then held by the Executive) which are not then vested shall become fully vested and immediately exercisable during the remaining original term of the option, upon the occurrence of any of the following events ("Acceleration Events"): Executive's Retirement, death, Disability, a Change in Control, and termination of Executive's employment by the Company without Cause or by the Executive for Good Reason; and

(v) The Options shall be granted on such other terms and conditions as are generally made applicable to Options granted to the other senior executives of the Company.

6. Termination of Employment.

(a) By the Company for Cause, or by the Executive without Good Reason. The Company may terminate the Executive's employment for Cause (as defined herein), and the Executive may resign without Good Reason (as defined herein), before the Expiration Date. If the Executive's employment is terminated for Cause, or if Executive resigns during the Term without Good Reason (as defined below), the Company shall pay to the Executive any unpaid salary through the date of termination and any bonus earned in the prior Contract Year but not yet paid, as well as reimburse the Executive for any unpaid reimbursable expenses incurred on behalf of the Company, and thereafter the Company shall have no additional obligations to the Executive under this Agreement.

(b) Death or Disability; Retirement. (i) If the Executive's employment terminates before the Expiration Date because of Executive's death or Disability (as defined herein), the Company shall pay Executive or Executive's duly appointed personal representative, as the case may be, (i) any unpaid salary through the date of death or the Disability Termination Date (as defined herein) and any bonus earned in the prior Contract Year but not yet paid, as well as reimbursement of any unpaid reimbursable expenses incurred on behalf of the Company, (ii) an amount equal to Executive's monthly salary during each of the six (6) months following Executive's death or the Disability Termination Date, and (iii) the Median Target Bonus for the Contract Year in which Executive dies or becomes Disabled, prorated for the portion of such year preceding Executive's death or the Disability Termination Date, which shall be paid not later than 120 days after the end of such year. Except as set forth in this Section 6(b), the Company shall have no additional obligations to the Executive under this Agreement in the event of Executive's termination of employment under this Section 6(b).

(ii) In addition to the foregoing and notwithstanding any other agreement between the Executive and the Company, all options to purchase the Company's common stock which were held by the Executive at the time of the Executive's Retirement, death or the Disability Termination Date, shall become fully exercisable and shall remain exercisable by the Executive or by the Executive's estate or her representative, as the case may be, during the remaining original term of the option in the case of the Executive's Retirement or Disability, or during the 3-year period following the date of the Executive's death.

(c) By the Company without Cause, or by the Executive for Good Reason. (i) The Company may terminate the Executive's employment before the Expiration Date without Cause, and the Executive may terminate Executive's employment before the Expiration Date for Good Reason, upon 30-days written notice to the other party. If the Executive's employment is so terminated by the Company without Cause, or by the Executive for Good Reason, as the case may be, the Company shall pay and provide to the Executive (i) any unpaid salary through the date of termination and any bonus earned in the prior Contract Year but not yet paid, as well as reimbursement of any unpaid reimbursable expenses incurred on behalf of the Company, (ii) the Median Target Bonus for the Contract Year in which termination occurs, prorated for the portion of such year preceding termination (payable no later than the 30^th day immediately following termination of employment), (iii) during each month of the Severance Period (as defined below), an amount equal to the sum of (x) Executive's monthly salary at the rate in effect immediately preceding termination and (y) one-twelfth of the Executive's Median Target Bonus for the Contract Year in which termination occurs, (iv) throughout the Severance Period, continuation of Executive's participation (including the Company's contributions thereto) in all benefit plans and practices in which Executive was participating immediately preceding termination, and (v) reimbursement to the Executive for up to $10,000 of executive outplacement services. Except as set forth in this Subsection 6(c), the Company shall not have any additional obligations to the Executive under this Agreement in the event of Executive's termination of employment under this Subsection 6(c).

(d) Change in Control. If, following a "Change in Control" (as defined herein) and prior to the Expiration Date, the Company terminates the Executive's employment without Cause, or the Executive terminates employment hereunder for Good Reason, the Company shall pay to the Executive, within 20 days following termination, (i) any unpaid salary through the date of termination and any bonus earned in the prior Contract Year but not yet paid, as well as reimbursement of any unpaid reimbursable expenses incurred on behalf of the Company, (ii) the Higher Point Target Bonus for the Contract Year in which termination occurs, prorated for the portion of such year preceding termination, (iii) a lump-sum payment equal to (x) 200% of Executive's yearly salary at the rate in effect immediately preceding termination multiplied by (y) the Severance Multiple (as defined herein), and (iv) a lump-sum equal to the Company's cost for health insurance, life insurance and retirement benefits for the Severance Period.

(e) As used herein:

(i) the term "Cause" shall mean (v) the Executive's commission of a proven act of fraud or dishonesty or a crime involving money or other property of the Company; (w) the Executive's conviction of a felony or a plea of guilty or nolo contendere to an indictment for a felony; (x) if, in carrying out Executive's duties hereunder, the Executive engages in conduct which constitutes willful misconduct or gross negligence; (y) the Executive's failure to carry out a lawful order of the Board of Directors of the Company or its Chief Executive Officer or its Executive Management Committee; or (z) a material breach by the Executive of this Agreement. Any act or failure to act on the part of the Executive which is based upon authority given pursuant to a resolution duly adopted by the Board of Directors of the Company or authorized in writing by the Chief Executive Officer of the Company or its Executive Management Committee, or based upon the advice of counsel for the Company, shall not constitute Cause as used herein. For purposes of this provision only, a breach shall be "material" if it is demonstrably injurious to the Company, its affiliates or any of its respective business units, financially or otherwise.

Cause shall not exist unless and until the Company (i) has delivered to the Executive a written Notice of Termination that specifically identifies the events, actions, or non-actions, as applicable, that the Company believes constitute Cause hereunder, and, in the case of termination for Cause under clauses (x), (y) or (z) above, the Executive has been provided with an opportunity to cure the offending conduct (if curable) within 30 days after delivery of the written Notice of Termination, and has not so cured such conduct (if curable), and (ii) the Executive has been provided an opportunity to be heard (with counsel) by the Board within 30 days after delivery of the notice of Termination; provided, however, that in the case of termination for Cause under clauses (x), (y), and (z) above, the date of termination shall be no earlier than 35 days after delivery of the Notice of Termination.

(ii) the term "Good Reason" shall mean any one of the following:

(1) a material breach of the Company's obligations under this Agreement, which breach has not been cured within 20 business days after the Company's receipt of written notice from the Executive of such breach;

(2) a reduction in the Executive's then annual base salary;

(3) the relocation of the Executive's office to a location (other than in Manhattan) further from 1411 Broadway, New York, New York than is NWG's present office in White Plains, New York;

(4) the failure to pay the Executive any undisputed portion of the Executive's compensation within 15 business days after the date of receipt of written notice that such compensation or payment is due;

(5) the failure to continue in effect any compensation or benefit plan in which the Executive is participating, unless either (i) an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan; or (ii) the failure to continue the Executive's participation therein (or in such substitute or alternative plan) does not discriminate against the Executive, both with respect to the amount of benefits provided and the level of the Executive's participation, relative to other similarly situated participants;

(6) a reduction in the Executive's title and status as President and Chief Executive Officer of the FAR Group, or as President and Chief Executive Officer of NWG, or any change in the Executive's status as reporting directly to the Executive Management Committee of the Company (other than a change pursuant to which the Executive is reporting to either the Chief Executive Officer of the Company or to the Company's Board of Directors); or the assignment to the Executive of any duties materially inconsistent with the Executive's positions (including, without limitation, status, office, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 1 of this Agreement, or any other action by the Company which results in a material diminution in such positions, authority, duties or responsibilities, excluding for this purpose any action not taken in bad faith and which is remedied by the Company no later than thirty (30) days after written notice by the Executive; or

(7) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted in this Agreement.

(iii) the terms "Disabled" or "Disability" shall mean the Executive's physical or mental incapacity which renders the Executive incapable, even with a reasonable accommodation by the Company, of performing the essential functions of the duties required of Executive by this Agreement for one hundred twenty (120) or more consecutive days; the term "Disability Termination Date" shall mean the date as of which the Executive's employment with the Company is terminated, either by the Executive or by the Company, following the suffering of a Disability by the Executive.

(v) the term "Severance Multiple" shall mean 3 times.

(vi) A "Change in Control" shall have the same meaning as in the Company's 1999 Stock Incentive Plan, as in effect on the date hereof.

(vii) the term "Target Bonus" shall mean a range of from 50% (the "Lower Point Target Bonus") to 100% (the "Higher Point Target Bonus") of Executive's annual salary for any given Contract Year during the Term. The term "Median Target Bonus" shall mean 75% of Executive's annual salary for any given Contract Year during the Term.

(viii) the term "Retirement" shall mean voluntary retirement by the Executive after attaining age 55 with 10 years of service with the Company, or, if the Executive has not attained age 55 and/or has less than 10 years of service with the Company, the Company determines that circumstances exist that warrant the granting of Retirement status.

7. Effect of Section 280G of the Internal Revenue Code.

(a) Notwithstanding any other provision of this Agreement to the contrary, and except as provided in Section 7(b), to the extent that any payment or distribution of any type to or for the benefit of the Executive by the Company (or by any affiliate of the Company, any person or entity who acquires ownership or effective control of the Company or ownership of a substantial portion of the Company's assets (within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder), or any affiliate of such person or entity, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the "Total Payments"), is or will be subject to the excise tax imposed under Section 4999 of the Code (the "Excise Tax"), then the Total Payments shall be reduced (but not below zero) if and to the extent that a reduction in the Total Payments would result in the Executive retaining a larger amount, on an after-tax basis (taking into account federal, state and local income taxes and the Excise Tax), than if the Executive received the entire amount of such Total Payments. Unless the Executive shall have given prior written notice specifying a different order to the Company to effectuate the foregoing, the Company shall reduce or eliminate the Total Payments, by first reducing or eliminating the portion of the Total Payments which are not payable in cash and then by reducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the Determination (as defined herein). Any notice given by the Executive pursuant to the preceding sentence shall take precedence over the provisions of any other plan, arrangement or agreement governing the Executive's rights and entitlements to any benefits or compensation.

shall furnish the Executive with an opinion reasonably acceptable to the Executive that no Excise Tax will be imposed with respect to any such payments and, absent manifest error, such Determination shall be binding, final and conclusive upon the Company and the Executive. If the Accounting Firm determines that an Excise Tax would be payable, the Executive shall have the right to accept the Determination of the Accounting Firm as to the extent of the reduction, if any, pursuant to this Section 7, or to have such Determination reviewed by another Eligible Accounting Firm selected by the Executive, at the expense of the Company, in which case the determination of such second accounting firm shall be binding, final and conclusive upon the Company and Executive.

8. Company Property. Any trade name or mark, program, discovery, process, design, invention or improvement which the Executive makes or develops, which relates, directly or indirectly, to the business of the Company or its affiliates, or Executive's employment by the Company, shall be considered as "made for hire" and shall belong to the Company and shall be promptly disclosed to the Company. During the Executive's employment and thereafter, the Executive shall, without additional compensation, execute and deliver to or as requested by the Company, any instruments of transfer and take such other action as the Company may reasonably request to carry out the provisions hereof, including filing, at the Company's sole expense, trademark, patent or copyright applications for any trade name or mark, invention or writing covered hereby and assigning such applications to the Company.

9. Confidential Information. The Executive shall not, either during the term of Executive's employment by the Company or thereafter, disclose to anyone or use (except, in each case, in the performance of Executive's responsibilities hereunder and in the regular course of the Company's business), any information acquired by the Executive in connection with or during the period of Executive's employment by the Company, with respect to any confidential, proprietary or secret aspect of the affairs of the Company or any of its affiliates, including but not limited to the requirements and terms of dealings with existing or potential licensors, licensees, designers, suppliers and customers and methods of doing business, all of which the Executive acknowledges are confidential and proprietary to the Company, and any of its affiliates, as the case may be.

10. Competition; Recruitment; Non-Disparagement.

long as the Company pays the Executive during each remaining month of the Initial Term an amount equal to Executive's monthly salary at the rate in effect immediately preceding termination and provides to Executive, throughout the Initial Term, continuation of Executive's participation (including the Company's contributions thereto) in all benefit plans and practices in which Executive was participating immediately preceding termination. The ownership of less than 5% of the stock of a publicly owned company which competes with the Company, any of its subsidiaries or affiliates, in and of itself, shall not be considered a violation of the provisions of this Section 10.

(b) The Executive shall not, at any time during Executive's employment by the Company and thereafter until the second anniversary of the expiration of the Non-Compete Period, recruit, solicit for employment, hire or engage, or assist any person or entity in recruiting, soliciting for employment, hiring or engaging, any employee of the Company or any of its subsidiaries or affiliates, or consultant to the Company or any of its subsidiaries or affiliates who has provided sales, marketing or merchandising consultation services to the FAR Group, or any person who was such an employee or such a consultant of the Company, any of its subsidiaries or affiliates within one year before the termination of the Executive's employment.

11. Notices. Any notice or other communication to the Company or to the Executive under this Agreement shall be in writing and shall be considered given on the third business day following mailing by certified mail, return receipt requested, to such party at Executive's address on file with the Company, with a copy to Fredric J. Gruder, Esq., Dorsey & Whitney LLP, 250 Park Avenue, New York, New York 10177, or to the Company at 1411 Broadway, New York, New York 10018, Attention: General Counsel (or at such other address as such party may specify by written notice to the other party).

12. Successors; Binding Agreement.

13. Indemnification. The Company shall indemnify Executive and hold the Executive harmless, to the maximum extent permitted by applicable law, from and against all claims, actions, suits, proceedings, loss, damage, liability, costs, charges and expenses, including reasonable attorneys' fees and costs arising in connection with the Executive's performance of Executive's duties hereunder or Executive's status as an employee, officer, director or agent of the Company or its affiliates, in accordance with the Company's indemnity policies for its senior executives.

14. Interest on Late Payments. "Undisputed Late Obligations" shall bear interest beginning on the Due Date until paid in full at an annual rate of one percent (1.0%) plus the prime rate as declared from time to time by The Chase Manhattan Bank. For purposes hereof, "Undisputed Late Obligations" shall mean any obligation which remains unpaid 5 days after written notice thereof is delivered to the other party in accordance with Section 11 (the "Due Date") for money under this Agreement owing from one party to another, which obligation (i) is not subject to any bona fide dispute or (ii) has been adjudicated by an arbitration panel or court of competent jurisdiction to be due and payable.

15. Arbitration. Except as otherwise provided herein, all controversies, claims or disputes arising out of or related to this Agreement shall be settled under the rules of the American Arbitration Association (sitting in Manhattan) then in effect in the State of New York,

as the sole and exclusive remedy of either party, and judgment upon such award rendered by the arbitrator(s) may be entered in any court of competent jurisdiction.

17. Miscellaneous.

(b) The provisions of this Agreement are separable, and if any provision of this Agreement is invalid or unenforceable, the remaining provisions shall continue in full force and effect.

(c) This Agreement constitutes the entire understanding and agreement between the parties, and supersedes all other existing agreements between the parties, and cannot be amended, unless such amendment is in writing and signed by both parties to this Agreement.

(e) The headings in this Agreement are solely for convenience of reference and shall not affect its interpretation.

(f) The failure of either party to insist on strict adherence to any term of this Agreement on any occasion shall not be considered a waiver or deprive that party of the right

thereafter to insist upon strict adherence to that term or any other term of this Agreement. For any waiver of a provision of this Agreement to be effective, it must be in writing and signed by the party against whom the waiver is claimed.

(g) The obligations of the Executive and the Company hereunder shall survive the termination of the term of this Agreement and the Executive's employment hereunder, to the extent necessary to give full effect to the provisions of this Agreement.

[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed as of the date first above written.

JONES APPAREL GROUP, INC.

By: /s/ Wesley R. Card
Chief Financial Officer

/s/ Rhonda Brown
Executive

EX-11 9 exhibit11.htm EXHIBIT 11 Exhibit 11

EXHIBIT 11

                            JONES APPAREL GROUP, INC.
              Computation of Basic and Diluted Earnings per Share
                     (In millions except per share amounts)



                                         For the Year Ended December 31,
                                        --------------------------------
                                            2001        2000        1999
                                        --------    --------     -------
Basic Earnings per Share:
- -------------------------
Net income...........................     $236.2      $301.9      $188.4
                                        ========    ========     =======

Weighted average number of shares
outstanding..........................      123.2       119.0       114.1
                                        ========    ========     =======

Basic earnings per share.............      $1.92       $2.54       $1.65
                                        ========    ========     =======


Diluted Earnings per Share:
- ---------------------------
Net income...........................     $236.2      $301.9      $188.4
Add: interest expense associated
     with convertible notes,
     net of tax benefit..............        7.7           -           -
                                        --------    --------     -------
Income available to common
  shareholders.......................     $243.9      $301.9      $188.4
                                        ========    ========     =======

Weighted average number of shares
  outstanding........................      123.2       119.0       114.1
Effect of dilutive securities:
  Employee stock options.............        3.3         2.9         3.9
  Assumed conversion of convertible
    notes............................        7.2           -           -
                                        --------    --------     -------
                                           133.7       121.9       118.0
                                        ========    ========     =======
Diluted earnings per share..........       $1.82       $2.48       $1.60
                                        ========    ========     =======

EX-12 10 exhibit12.htm EXHIBIT 12 Exhibit 12

EXHIBIT 12

                        JONES APPAREL GROUP, INC.
            COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
                            (In millions)

                                          Year Ended December 31,
                                   ------------------------------------
                                       2001          2000          1999
                                   --------      --------      --------

Income before income taxes........   $399.8        $503.1        $314.6
                                   --------      --------      --------
Fixed charges
  Interest expense and
    amortization of
    financing costs...............     84.6         103.8          66.9
  Portion of rent expense
    representing interest.........     33.6          50.7          35.4
                                   --------      --------      --------
Total fixed charges...............    118.2         154.5         102.3
                                   --------      --------      --------
Income before income taxes and
  fixed charges...................   $518.0        $657.6        $416.9
                                   ========      ========      ========
Ratio of earnings to
  fixed charges...................      4.4           4.3           4.1
                                   ========      ========      ========

EX-21 11 exhibit21.htm EXHIBIT 21 Exhibit 21

EXHIBIT 21

                SUBSIDIARIES OF JONES APPAREL GROUP, INC.


                                                   State or County
Name                                               of Incorporation
- -----------------------------------------------    ----------------

Jones Apparel Group USA, Inc.                      Pennsylvania
Melru Corporation                                  New Jersey
Jones Apparel Group Canada Inc.                    Canada
Jones Investment Co. Inc.                          Delaware
Jones Apparel Group Holdings, Inc.                 Delaware
Jones Holding Corp.                                Delaware
Jones Management Service Company                   Delaware
Jones Factor Company                               Delaware
Jones International Limited                        Hong Kong
Camisas de Juarez S.A. de C.V.                     Mexico
Sun Apparel, Inc.                                  Delaware
Sun Management Services, Inc.                      Delaware
Import Technology of Texas, Inc.                   Texas
Sun Apparel of Texas, Ltd.                         Texas
Maquilas Pami, S.A. de C.V.                        Mexico
CNC West Division Mexico, S.A. de C.V.             Mexico
Greater Durango, S. de R.L. de C.V.                Mexico
Manufacturera Sun Apparel, S. de R.L. de C.V.      Mexico
Nine West Group Inc.                               Delaware
Nine West Development Corporation                  Delaware
Nine West Footwear Corporation                     Delaware
Nine West Canada Corporation                       Canada
Conca Del Sol International                        Cayman Islands
Nine West Accessories (HK) Limited                 Hong Kong
Nine West Melbourne Pty Ltd                        Australia
Nine West Servicos de Assessoria de Compras Ltda.  Brazil
Nine West Group Italy S.r.l.                       Italy
Nine West Australia Pty Ltd.                       Australia
Victoria + Co Ltd.                                 Rhode Island
Victoria + Co International Ltd.                   Delaware
Apparel Testing Services, Inc.                     New Jersey
McNaughton Apparel Group, Inc.                     Delaware
Edrus Imports, Inc.                                Delaware
Norton McNaughton of Squire, Inc.                  New York
McNaughton Investment Co. Inc.                     Delaware

EX-23 12 exhibit23.htm EXHIBIT 23 EXHIBIT 23

EXHIBIT 23

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Jones Apparel Group, Inc.
New York, New York

We hereby consent to the incorporation by reference in the Prospectus constituting a part of the Registration Statement on Form S-8 filed May 15, 1996, August 23, 1999 and August 2, 2001 of our reports dated February 1, 2002, except as to "Subsequent Event" which is as of March 19, 2002, relating to the consolidated financial statements and schedule of Jones Apparel Group, Inc. and subsidiaries appearing in the Company's Annual Report on Form 10-K for the year ended December 31, 2001.

We also consent to the reference to us under the caption of "Experts" in the Prospectus.

/s/ BDO Seidman, LLP

BDO Seidman, LLP

New York, New York
March 25, 2002

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(Mark One)
[X]	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2001

[ ]	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______

Pennsylvania (State or other jurisdiction of incorporation or organization)	06-0935166 (I.R.S. Employer Identification No.)

250 Rittenhouse Circle, Bristol, Pennsylvania (Address of principal executive offices)	19007 (Zip Code)

Document	Part
Those portions of the registrant's proxy statement for the registrant's 2002 Annual Meeting of Stockholders (the "Proxy Statement") that are specifically identified herein as incorporated by reference into this Form 10-K.	III

	Label	Product Classification	Market Segment	Retail Price Points
Jones New York Labels	Jones New York	Collection Sportswear	Better	$20 - $687
Skirts, blouses, pants,	Jones New York Sport	Casual Sportswear	Better
jackets, sweaters,	Jones Jeans	Casual Sportswear	Better
jeanswear, suits,	Jones New York Country	Lifestyle	Better
dresses, casual tops	Jones New York Dress	Dresses	Better
	Jones New York Suit	Suits	Better
	Jones Wear	Collection Sportswear	Moderate
	Jones Wear Sport	Casual Sportswear	Moderate

Evan-Picone Labels	Evan-Picone	Lifestyle	Moderate	$24 - $119
Skirts, blouses, pants,	Evan-Picone Dress	Dresses	Moderate
jackets, sweaters,
jeanswear, dresses,
casual tops

Nine West Labels	Nine West	Lifestyle	Better	$20 - $374
Skirts, blouses, pants,	Nine & Company	Lifestyle	Moderate
jackets, sweaters, dresses,
outerwear, shorts,
casual tops

McNaughton Labels	Norton McNaughton	Collection Sportswear	Moderate	$10 - $90
Skirts, blouses, pants,	Maggie McNaughton	Casual Sportswear	Moderate
jackets, sweaters, dresses,	Norton Studio	Casual Sportswear	Moderate
shorts, casual tops,	Norton McNaughton Dress	Dresses	Moderate
knitwear	Energie	Casual Sportswear	Moderate
	Erika	Casual Sportswear	Moderate

Other Labels	Rena Rowan	Collection Sportswear	Better	$20 - - $311
Skirts, blouses, pants,	Todd Oldham	Casual Sportswear	Better
jackets, sweaters,
jeanswear, dresses,
casual tops

Labels Under License	Lauren by Ralph Lauren	Lifestyle	Better	$20 - $939
Skirts, blouses,	Ralph by Ralph Lauren	Lifestyle	Better
pants, jackets,	Lauren Jeans Company	Lifestyle	Better
sweaters, jeanswear,	Polo Jeans Company	Casual Sportswear	Better
suits, dresses,	Lauren Dress	Lifestyle	Better
casual tops, coats	Polo Ralph Lauren (Canada)	Lifestyle	Better

Label	Product Classification	Market Segments	Retail Price Points
Label	Product Classification	Market Segments	Shoes	Boots
Footwear
Nine West	Contemporary	Better	$59 - $75	$79 - $159
Bandolino	Modern Classics	Moderate	$39 - $59	$69 - $139
Easy Spirit	Comfort/Fit Active Sport/Casuals	Upper Moderate	$39 - $75	$59 - $140
Enzo Angiolini	Sophisticated Classics	Better	$69 - $85	$120 - $169
Nine & Company	Contemporary	Moderate	$30 - $40	$45 - $65
Accessories			Accessories
Nine West	Handbags and Small Leather Goods	Better	$25 - $120
Jones New York	Handbags	Better	$35 - - $160
Nine & Company	Handbags, Small Leather Goods and Costume Jewelry	Moderate	$8 - $50
Napier, Nine West, Tommy Hilfiger and Givenchy	Costume and Fashion Jewelry	Better	$7 - - $250
Richelieu	Costume Jewelry	Moderate	$8 - $90
Judith Jack	Marcasite Jewelry, Wristwatches, Evening Bags and Belts	Bridge	$50 - $700

	Page
PART I
Item 1 Business	4
Item 2 Properties	17
Item 3 Legal Proceedings	17
Item 4 Submission of Matters to a Vote of Security Holders	17
PART II
Item 5 Market for Registrant's Common Equity and Related Stockholder Matters	18
Item 6 Selected Financial Data	19
Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations	20
Item 7A Quantitative and Qualitative Disclosures About Market Risk	27
Item 8 Financial Statements and Supplementary Data	28
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	55
PART III
Item 10 Directors and Executive Officers of the Registrant	56
Item 11 Executive Compensation	57
Item 12 Security Ownership of Certain Beneficial Owners and Management	57
Item 13 Certain Relationships and Related Transactions	58
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K	58
Signatures	59
Index to Financial Statement Schedules	60
Exhibit Index	60

			Retail Price Range				Average store size (square feet)
	Number of locations	Brands offered	Shoes and Boots	Accessories	Apparel	Type of locations	Average store size (square feet)
Nine West	210	Primarily Nine West	$50 -$170	$18 - $100	$60 - $250	Upscale and regional malls and urban retail centers	1,680
Easy Spirit	150	Primarily Easy Spirit	$40 - $150	$18 - $100	-	Upscale and regional malls and urban retail centers	1,369
Enzo Angiolini	47	Primarily Enzo Angiolini	$65 - $165	$15 - $200	-	Upscale malls and urban retail centers	1,362
Apparel	13	Various	-	-	$20 - $400	Urban retail locations and regional malls	3,436

Trademark	Expires	Trademark	Expires	Trademark	Expires
Jones New York	2006	Jones New York Sport	2004	Norton McNaughton	2004
Rena Rowan	2005	Evan-Picone	2003	Maggie McNaughton	2003
Nine West	2003	Enzo Angiolini	2005	Norton Studio	2007
Easy Spirit	2007	Bandolino	2011	Erika	2004
Napier	2009	Judith Jack	2002	Energie	2008

Location	Owned/Leased	Use	Approximate Area in Square Feet
Bristol, Pennsylvania	leased	Headquarters and distribution warehouse	463,000
Bristol, Pennsylvania	leased	Administrative and computer services	112,000
New York, New York	leased	Administrative, executive and sales offices	523,000
Vaughan, Canada	leased	Canadian headquarters and distribution warehouse	125,000
Lawrenceburg, Tennessee	leased	Distribution warehouses	1,199,000
South Hill, Virginia	owned	Distribution warehouses	534,000
Rural Hall, North Carolina	leased	Materials and distribution warehouse	447,000
El Paso, Texas	owned	Administrative, warehouse and preproduction facility	165,000
El Paso, Texas	owned	Distribution warehouses	111,000
El Paso, Texas	leased	Distribution warehouses	898,000
El Paso, Texas	leased	Distribution warehouses	120,000
Ciudad Juarez, Mexico	owned	Production	67,000
Durango, Mexico	owned	Finishing, assembly and warehouse facilities	583,000
White Plains, New York	leased	Administrative and computer services	366,000
West Deptford, New Jersey	leased	Distribution warehouses	832,000
East Providence, Rhode Island	leased	Distribution warehouses, product development and administrative	241,000
Goose Creek, South Carolina	leased	Distribution warehouses	600,000
Teterboro, New Jersey	leased	Administrative offices and distribution warehouse	220,000
Rutherford, New Jersey	leased	Distribution warehouses	130,000
Edison, New Jersey	leased	Administrative offices and distribution warehouse	101,000

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans
Equity compensation plans approved by security holders	17,603,446	$27.43	1,625,316
Equity compensation plans not approved by security holders	311,101	$17.52	--
Total	17,914,547	$27.26	1,625,316

Year Ended December 31,	2001	2000	1999	1998	1997
Income Statement Data Net sales Licensing income (net)	$ 4,048.3 24.8	$ 4,120.5 22.2	$ 3,129.8 20.9	$ 1,669.4 15.8	$ 1,372.5 15.0
Total revenues	4,073.1	4,142.7	3,150.7	1,685.2	1,387.5
Cost of goods sold Purchase accounting adjustments to cost of goods sold(1)	2,552.7 17.7	2,433.4 3.1	1,876.9 84.6	1,098.3 2.4	940.2 -
Gross profit	1,502.7	1,706.2	1,189.2	584.5	447.3
Selling, general and administrative expenses Amortization of goodwill	978.6 44.2	1,064.7 36.9	788.7 22.3	320.0 2.7	250.7 -
Operating income Interest expense and financing costs Interest income	479.9 84.6 (4.5)	604.6 103.8 (2.3)	378.2 66.9 (3.3)	261.8 11.8 (1.8)	196.6 3.6 (1.6)
Income before provision for income taxes Provision for income taxes	399.8 163.6	503.1 201.2	314.6 126.2	251.8 96.9	194.6 72.9
Net income	$ 236.2	$ 301.9	$ 188.4	$ 154.9	$ 121.7
Per Share Data (2) Net income per share Basic Diluted Dividends paid per share	$1.92 $1.82 -	$2.54 $2.48 -	$1.65 $1.60 -	$1.52 $1.47 -	$1.17 $1.13 -
Weighted average common shares outstanding Basic Diluted	123.2 133.7	119.0 121.9	114.1 118.0	101.6 105.1	103.8 107.8
December 31,	2001	2000	1999	1998	1997
Balance Sheet Data Working capital	$ 762.8	$ 294.9	$ 469.2	$ 457.9	$ 330.6
Total assets	3,373.5	2,979.2	2,792.0	1,188.7	580.8
Short-term debt and current portion of long-term debt and capital lease obligations	7.7	499.8	266.9	6.5	4.2
Long-term debt, including capital lease obligations	976.6	576.2	834.2	414.6	27.3
Stockholders' equity	1,905.4	1,477.2	1,241.0	594.4	435.6

	2001		2001 Excluding Special Charge		2000		1999
Net sales Licensing income (net)	$ 4,048.3 24.8	99.4% 0.6%	$ 4,072.4 24.8	99.4% 0.6%	$ 4,120.5 22.2	99.5% 0.5%	$ 3,129.8 20.9	99.3% 0.7%
Total revenues Cost of goods sold	4,073.1 2,552.7	100.0% 62.7%	4,097.2 2,491.0	100.0% 60.8%	4,142.7 2,433.4	100.0% 58.7%	3,150.7 1,876.9	100.0% 59.6%
Gross profit before purchase accounting adjustments	1,520.4	37.3%	1,606.2	39.2%	1,709.3	41.3%	1,273.8	40.4%
Purchase accounting adjustments	17.7	0.4%	17.7	0.4%	3.1	0.1%	84.6	2.7%
Gross profit	1,502.7	36.9%	1,588.5	38.8%	1,706.2	41.2%	1,189.2	37.7%
Selling, general and administrative expenses	978.6	24.0%	977.6	23.9%	1,064.7	25.7%	788.7	25.0%
Amortization of goodwill	44.2	1.1%	44.2	1.1%	36.9	0.9%	22.3	0.7%
Operating income	479.9	11.8%	566.7	13.8%	604.6	14.6%	378.2	12.0%
Interest expense and financing costs Interest income	84.6 (4.5)	2.1% (0.1%)	84.6 (4.5)	2.1% (0.1%)	103.8 (2.3)	2.5% (0.1%)	66.9 (3.3)	2.1% (0.1%)
Income before provision for income taxes	399.8	9.8%	486.6	11.9%	503.1	12.1%	314.6	10.0%
Provision for income taxes	163.6	4.0%	196.1	4.8%	201.2	4.9%	126.2	4.0%
Net income	$ 236.2	5.8%	$ 290.5	7.1%	$ 301.9	7.3%	$ 188.4	6.0%

	Total Revenues				Total Revenues From Continuing Businesses Only

(In millions)	2001	2000	Increase/ (Decrease)	Percent Change	2001	2000	Increase/ (Decrease)	Percent Change
Wholesale apparel	$2,369.1	$2,168.0	$201.1	9.3%	$2,369.1	$2,168.0	$201.1	9.3%
Wholesale footwear and accessories	967.5	940.0	27.5	2.9%	967.3	894.7	72.6	8.1%
Retail	711.7	1,012.5	(300.8)	(29.7%)	695.5	734.1	(38.6)	(5.3%)
Other	24.8	22.2	2.6	11.7%	24.8	22.2	2.6	11.7%
Total revenues	$4,073.1	$4,142.7	($69.6)	(1.7%)	$4,056.7	$3,819.0	$237.7	6.2%

Excluding Special Charge:
Wholesale apparel	$2,381.7	$2,168.0	$213.7	9.9%	$2,381.7	$2,168.0	$213.7	9.9%
Wholesale footwear and accessories	979.0	940.0	39.0	4.1%	978.8	894.7	84.1	9.4%
Retail	711.7	1,012.5	(300.8)	(29.7%)	695.5	734.1	(38.6)	(5.3%)
Other	24.8	22.2	2.6	11.7%	24.8	22.2	2.6	11.7%
Total revenues	$4,097.2	$4,142.7	($45.5)	(1.1%)	$4,080.8	$3,819.0	$261.8	6.9%

	2002	2003-2004	2005-2006	After 2006	Total
Long-term debt	$ 3.0	$ 181.0	$ 363.0	$ 416.8	$ 963.8
Operating leases	87.2	140.3	102.5	238.1	568.1
Capital lease obligations	6.7	11.3	8.1	16.6	42.7
Total contractual cash obligations	$ 96.9	$ 332.6	$ 473.6	$ 671.5	$ 1,574.6

	Total stock- holders' equity	Common stock	Additional paid-in capital	Retained earnings	Accumulated other comp- rehensive income	Treasury stock
BALANCE, JANUARY 1, 1999	$ 594.4	$ 1.2	$ 234.8	$ 593.8	$ (2.3)	$ (233.1)
YEAR ENDED DECEMBER 31, 1999: Comprehensive income: Net income Foreign currency translation adjustments	188.4 2.6	- -	- -	188.4 -	- 2.6	- -
Total comprehensive income	191.0
Amortization of deferred compensation in connection with employee stock options Stock issued relating to acquisition of Nine West Conversion of Nine West employee stock options Stock issued as additional consideration for acquisition of Sun	0.1 417.1 4.6 14.3	- 0.2 - -	0.1 416.9 4.6 14.3	- - - -	- - - -	- - - -
Exercise of employee stock options Tax benefit derived from exercise of employee stock options Treasury stock acquired Other	14.1 8.4 (2.8) (0.2)	- - - -	14.1 8.4 - (0.2)	- - - -	- - - -	- - (2.8) -
BALANCE, DECEMBER 31, 1999	1,241.0	1.4	693.0	782.2	0.3	(235.9)
YEAR ENDED DECEMBER 31, 2000: Comprehensive income: Net income Foreign currency translation adjustments	301.9 (2.7)	- -	- -	301.9 -	- (2.7)	- -
Total comprehensive income	299.2
Amortization of deferred compensation in connection with employee stock options	1.1	-	1.1	-	-	-
Stock issued as additional consideration for acquisition of Sun	18.3	-	18.3	-	-	-
Exercise of employee stock options Tax benefit derived from exercise of employee stock options Treasury stock acquired	27.6 11.9 (121.9)	- - -	27.7 11.9 -	- - -	- - -	(0.1) - (121.9)
BALANCE, DECEMBER 31, 2000	1,477.2	1.4	752.0	1,084.1	(2.4)	(357.9)
YEAR ENDED DECEMBER 31, 2001: Comprehensive income: Net income Gain on termination of interest rate hedges Change in fair value of cash flow hedges Reclassification adjustment for hedge gains and losses included in net income Foreign currency translation adjustments	236.2 5.0 0.1 (1.1) (1.1)	- - - - -	- - - - -	236.2 - - - -	- 5.0 0.1 (1.1) (1.1)	- - - - -
Total comprehensive income	239.1
Amortization of deferred compensation in connection with employee stock options and restricted stock	1.4	-	1.4	-	-	-
Treasury stock reissued relating to acquisition of McNaughton	109.3	-	73.6	-	-	35.7
Conversion of McNaughton employee stock options Exercise of stock options	34.2 85.8	- -	34.2 85.8	- -	- -	- -
Tax benefit derived from exercise of employee stock options Treasury stock acquired Other	27.4 (68.9) (0.1)	- - -	27.4 - (0.1)	- - -	- - -	- (68.9) -
BALANCE, DECEMBER 31, 2001	$ 1,905.4	$ 1.4	$ 974.3	$ 1,320.3	$ 0.5	$ (391.1)

	First Quarter	Second Quarter	Third Quarter	Fourth Quarter
Price range of common stock:
2001
High	$41.09	$47.43	$42.22	$34.40
Low	$31.125	$34.05	$23.75	$24.30
2000
High	$31.875	$32.5625	$29.1875	$35.00
Low	$20.125	$21.25	$22.0625	$23.3125

December 31,	2001	2000
(In millions) Land and buildings Leasehold improvements Machinery and equipment Furniture and fixtures Construction in progress	$ 90.2 139.0 191.8 55.5 12.1	$ 81.6 116.3 151.2 64.9 14.4
Less: accumulated depreciation and amortization	488.6 246.1	428.4 205.9
	$ 242.5	$ 222.5

(In millions)	Balance at December 31, 2000	Additions (Reversals)	Payments and Reductions	Balance at December 31, 2001
Severance and other employee costs Closing of retail stores and consolidation of facilities Other	$ 7.6 17.7 4.2	$ 9.1 (9.0) 0.9	$ 5.5 4.5 5.1	$ 11.2 4.2 -
Total	$29.5	$ 1.0	$ 15.1	$ 15.4

Year Ending December 31,
(In millions) 2002 2003 2004 2005 2006 Later years	$ 6.7 5.9 5.4 4.6 3.5 16.6
Total minimum lease payments Less: amount representing interest	42.7 10.9
Present value of net minimum lease payments	$ 31.8

Year Ending December 31,
(In millions) 2002 2003 2004 2005 2006 Later years	$ 87.2 77.2 63.1 54.4 48.1 238.1
	$ 568.1

	Outstanding			Exercisable
Range of Exercise Prices	Number of Options	Weighted Average Remaining Years of Contractual Life	Weighted Average Exercise Price	Number of Options	Weighted Average Exercise Price
$0 to $14 $14 to $28 $28 to $42 $42 to $68	1.0 8.1 8.6 0.2	4.6 7.5 9.2 4.7	$10.58 $23.92 $31.59 $57.92	1.0 4.0 1.5 0.2	$10.60 $24.34 $30.57 $57.92
In total	17.9	8.1	$27.26	6.7	$24.70

(In millions)	Wholesale Apparel	Wholesale Footwear & Accessories	Retail	Other & Eliminations	Consolidated
For the year ended December 31, 2001 Revenues from external customers Intersegment revenues	$ 2,369.1 84.8	$ 967.5 76.8	$ 711.7 0.1	$ 24.8 (161.7)	$ 4,073.1 -
Total revenues	2,453.9	1,044.3	711.8	(136.9)	4,073.1
Segment income	$ 350.1	$ 159.1	$ 58.5	$ (43.6)	524.1
Amortization of goodwill Net interest expense					(44.2) (80.1)
Income before provision for income taxes					$ 399.8
Depreciation and other amortization	$ 35.0	$ 3.9	$ 14.9	$ 20.9	$ 74.7
For the year ended December 31, 2000 Revenues from external customers Intersegment revenues	$ 2,168.0 87.9	$ 940.0 108.6	$1,012.5 -	$ 22.2 (196.5)	$ 4,142.7 -
Total revenues	2,255.9	1,048.6	1,012.5	(174.3)	4,142.7
Segment income	$ 351.6	$ 226.4	$ 90.9	$ (27.4)	641.5
Amortization of goodwill Net interest expense					(36.9) (101.5)
Income before provision for income taxes					$ 503.1
Depreciation and other amortization	$ 30.9	$ 2.0	$ 24.1	$ 15.4	$ 72.4
For the year ended December 31, 1999 Revenues from external customers Intersegment revenues	$ 1,994.7 97.5	$ 464.5 79.7	$ 670.6 -	$ 20.9 (177.2)	$ 3,150.7 -
Total revenues	2,092.2	544.2	670.6	(156.3)	3,150.7
Segment income	$ 381.9	$ 9.0	$ 42.2	$ (32.6)	400.5
Amortization of goodwill Net interest expense					(22.3) (63.6)
Income before provision for income taxes					$ 314.6
Depreciation and other amortization	$ 23.8	$ 2.5	$ 11.3	$ 15.5	$53.1
Total assets December 31, 2001 December 31, 2000 December 31, 1999	$ 1,470.5 1,767.9 1,661.5	$ 493.2 805.2 766.7	$ 183.9 202.3 433.0	$ 1,225.9 203.8 (69.2)	$ 3,373.5 2,979.2 2,792.0

On or for the Year Ended December 31,	2001	2000	1999
(In millions) Revenues from external customers: United States Foreign countries	$ 3,854.9 218.2	$ 3,774.5 368.2	$ 2,941.2 209.5
	$ 4,073.1	$ 4,142.7	$ 3,150.7

Long-lived assets: United States Foreign countries	$ 2,196.9 35.6	$ 1,756.3 41.2	$ 1,580.7 80.7
	$ 2,232.5	$ 1,797.5	$ 1,661.4

(a)	act in the name of Principal with third parties;
(b)	share any commission in any manner directly or indirectly with any manufacturer or seller with which Agent deals on behalf of Principal and Customers;
(c)	accept any payment, rebate, or other form of remuneration from any manufacturer or seller with which Agent deals on behalf of Principal and Customers;
(d)	give any release to any manufacturer or seller for any failure to deliver purchased goods, or for failure to deliver goods of the quantity and quality required, or for any other failure on the part of a manufacturer or seller, unless instructed by Principal;
(e)	for its own account, sell raw materials to any manufacturer or seller supplying merchandise purchased pursuant to this Agreement; or
(f)	assign its rights or delegate the performance of any of its duties under this Agreement.

(a)	known carton shortages shall be the responsibility of Principal, provided that proper bills of lading indicating transfer of ownership at the port of exportation are provided;
(b)	concealed shortages or overages less than 50 units shall be the responsibility of Principal. Net shortages and overages shall be accumulated and settled on a seasonal basis through the regular course of business;