Form 10-Q

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TOpUwdPwRM++N0nlqGW1GUeoqETbgSaBOoJfkHsfLGNWgpqH5Fq8Gez4YyL8I0Zw +cmb80YhEpwhdIvkJqkM3g== 0000874016-02-000015.txt : 20020517 0000874016-02-000015.hdr.sgml : 20020517 20020517081603 ACCESSION NUMBER: 0000874016-02-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020406 FILED AS OF DATE: 20020517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JONES APPAREL GROUP INC CENTRAL INDEX KEY: 0000874016 STANDARD INDUSTRIAL CLASSIFICATION: WOMEN'S, MISSES', AND JUNIORS OUTERWEAR [2330] IRS NUMBER: 060935166 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10746 FILM NUMBER: 02655630 BUSINESS ADDRESS: STREET 1: 250 RITTENHOUSE CIRCLE STREET 2: KEYSTONE PK CITY: BRISTOL STATE: PA ZIP: 19007 BUSINESS PHONE: 2157854000 MAIL ADDRESS: STREET 1: 250 RITTENHOUSE CIRCLE CITY: BRISTOL STATE: PA ZIP: 19007 10-Q 1 tenq20021q.htm FORM 10-Q Form 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 6, 2002

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number 1-10746

JONES APPAREL GROUP, INC.
(Exact name of registrant as specified in its charter)

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)

(215) 785-4000
(Registrant's telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class of Common Stock
$.01 par value

Outstanding at May 15, 2002
128,787,927

JONES APPAREL GROUP, INC.

Index

Page No.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets
    April 6, 2002 and December 31, 2001 3

Consolidated Statements of Income
    Fiscal Quarters ended April 6, 2002 and April 7, 2001 4

Consolidated Statements of Stockholders' Equity
    Fiscal Quarters ended April 6, 2002 and April 7, 2001 5

Consolidated Statements of Cash Flows
    Fiscal Quarters ended April 6, 2002 and April 7, 2001 6

Notes to Consolidated Financial Statements 7

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 14

Item 3. Quantitative and Qualitative Disclosures About Market Risk 19

PART II. OTHER INFORMATION

Item 1. Legal Proceedings 19

Item 5. Other Information 20

Item 6. Exhibits and Reports on Form 8-K 20

Signatures 21

Exhibit Index 21

DEFINITIONS

As used in this Report, unless the context requires otherwise, "our," "us" and "we" means Jones Apparel Group, Inc. and consolidated subsidiaries, "Sun" means Sun Apparel, Inc., "Nine West" means Nine West Group Inc., "Victoria" means Victoria + Co Ltd., "Judith Jack" means Judith Jack, LLC (acquired April 26, 2001), "McNaughton" means McNaughton Apparel Group Inc. (acquired June 19, 2001), "Gloria Vanderbilt" means Gloria Vanderbilt Apparel Corp. (acquired April 8, 2002), "FASB" means the Financial Accounting Standards Board, "SFAS" means Statement of Financial Accounting Standards and "SEC" means the United States Securities and Exchange Commission. The results of Judith Jack and McNaughton are included in our operating results from the respective dates of acquisition and, therefore, our operating results for all periods presented are not comparable.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Jones Apparel Group, Inc.
Consolidated Balance Sheets
(All amounts in millions except per share data)

	April 6, 2002	December 31, 2001
	(Unaudited)
ASSETS CURRENT ASSETS: Cash and cash equivalents Accounts receivable, net of allowance for doubtful accounts of $12.1 and $11.7 Inventories Deferred taxes Prepaid expenses and other current assets	$ 143.3 585.1 478.9 64.3 45.6	$ 76.5 395.8 572.9 62.1 33.7
TOTAL CURRENT ASSETS PROPERTY, PLANT AND EQUIPMENT, at cost, less accumulated depreciation and amortization GOODWILL, less accumulated amortization OTHER INTANGIBLES, at cost, less accumulated amortization OTHER ASSETS	1,317.2 246.6 1,369.8 509.8 79.7	1,141.0 242.5 1,368.4 533.3 88.3
	$ 3,523.1	$ 3,373.5
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Short-term debt and current portion of long-term debt and capital lease obligations Accounts payable Income taxes payable Accrued employee compensation and severance payments Accrued expenses and other current liabilities TOTAL CURRENT LIABILITIES	$ 8.3 181.3 67.8 49.7 122.1 429.2	$ 7.7 216.7 7.0 42.4 104.4 378.2
NONCURRENT LIABILITIES: Long-term debt Obligations under capital leases Deferred taxes Other TOTAL NONCURRENT LIABILITIES TOTAL LIABILITIES	952.7 28.0 66.5 33.0 1,080.2 1,509.4	949.5 27.1 80.8 32.5 1,089.9 1,468.1
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY: Preferred stock, $.01 par value - shares authorized 1.0; none issued Common stock, $.01 par value - shares authorized 200.0; issued 143.2 and 142.0 Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss)	- 1.4 1,012.6 1,391.0 (0.2)	- 1.4 974.3 1,320.3 0.5
Less treasury stock, 16.3 shares, at cost	2,404.8 (391.1)	2,296.5 (391.1)
TOTAL STOCKHOLDERS' EQUITY	2,013.7	1,905.4
	$ 3,523.1	$ 3,373.5

See accompanying notes to consolidated financial statements

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Jones Apparel Group, Inc.
Consolidated Statements of Income
(Unaudited)
(All amounts in millions except per share data)

	Fiscal Quarter Ended
	April 6, 2002	April 7, 2001
Net sales Licensing income (net)	$ 1,120.3 6.6	$ 1,072.3 5.4
Total revenues Cost of goods sold	1,126.9 678.5	1,077.7 630.4
Gross profit Selling, general and administrative expenses Executive compensation obligations Amortization of goodwill	448.4 265.5 31.2 -	447.3 257.3 - 9.6
Operating income Interest income Interest expense and financing costs	151.7 (0.3) 16.3	180.4 (1.7) 22.8
Income before provision for income taxes Provision for income taxes	135.7 51.2	159.3 62.9
Income before cumulative effect of change in accounting principle Cumulative effect of change in accounting for intangible assets, net of tax	84.5 13.8	96.4 -
Net income	$ 70.7	$ 96.4
Earnings per share Basic Income before cumulative effect of change in accounting principle Cumulative effect of change in accounting for intangible assets	$0.67 0.11	$0.80 -
Basic earnings per share	$0.56	$0.80
Diluted Income before cumulative effect of change in accounting principle Cumulative effect of change in accounting for intangible assets	$0.63 0.10	$0.75 -
Basic earnings per share	$0.53	$0.75
Weighted average common shares and share equivalents outstanding Basic Diluted	126.2 137.3	120.7 130.4

See accompanying notes to consolidated financial statements

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Jones Apparel Group, Inc.
Consolidated Statements of Stockholders' Equity
(Unaudited)
(All amounts in millions)

	Total stock- holders' equity	Common stock	Additional paid-in capital	Retained earnings	Accumu- lated other compre- hensive income (loss)	Treasury stock
Balance, January 1, 2001:	$ 1,477.2	$ 1.4	$ 752.0	$ 1,084.1	$ (2.4)	$ (357.9)
Fiscal quarter ended April 7, 2001: Comprehensive income: Net income Gain on termination of interest rate hedges Reclassification adjustment for gains included in net income Foreign currency translation adjustments Total comprehensive income	96.4 8.3 (0.2) (0.7) 103.8	- - - -	- - - -	96.4 - - -	- 8.3 (0.2) (0.7)	- - - -
Amortization of deferred compensation in connection with executive stock options Exercise of stock options Tax benefit derived from exercise of stock options Treasury stock acquired	0.1 28.3 9.9 (69.0)	- - - -	0.1 28.3 9.9 -	- - - -	- - - -	- - - (69.0)
Balance, April 7, 2001	$ 1,550.3	$ 1.4	$ 790.3	$ 1,180.5	$ 5.0	$ (426.9)
Balance, January 1, 2002:	$ 1,905.4	$ 1.4	$ 974.3	$ 1,320.3	$ 0.5	$ (391.1)
Fiscal quarter ended April 6, 2002: Comprehensive income: Net income Change in fair value of cash flow hedges Reclassification adjustment for gains included in net income Total comprehensive income	70.7 (0.3) (0.4) 70.0	- - -	- - -	70.7 - -	- (0.3) (0.4)	- - -
Amortization of deferred compensation in connection with executive stock options Exercise of stock options Tax benefit derived from exercise of stock options	7.5 26.0 4.8	- - -	7.5 26.0 4.8	- - -	- - -	- - -
Balance, April 6, 2002	$ 2,013.7	$ 1.4	$ 1,012.6	$ 1,391.0	$ (0.2)	$ (391.1)

See accompanying notes to consolidated financial statements

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Jones Apparel Group, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(All amounts in millions)

	Fiscal Quarter Ended
	April 6, 2002	April 7, 2001
CASH FLOWS FROM OPERATING ACTIVITIES: Net income	$ 70.7	$ 96.4
Adjustments to reconcile net income to net cash provided by (used in) operating activities: Cumulative effect of change in accounting for intangible assets Amortization of goodwill Amortization of original issue discount Depreciation and other amortization Provision for losses on accounts receivable Deferred taxes Other Changes in operating assets and liabilities: Accounts receivable Inventories Prepaid expenses and other current assets Other assets Accounts payable Income taxes payable Accrued expenses and other liabilities	13.8 - 3.6 21.8 0.8 (7.0) 0.4 (190.1) 94.1 (12.2) 6.0 (11.1) 65.5 0.9	- 9.6 2.3 17.3 2.0 0.6 2.3 (229.1) (47.7) 7.2 2.9 (6.1) 60.6 (25.0)
Total adjustments	(13.5)	(203.1)
Net cash provided by (used in) operating activities	57.2	(106.7)
CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures Payments relating to acquisition of Victoria Proceeds from sale of Nine West United Kingdom operations Repayment of loans to officers Acquisition of intangibles Other	(14.5) (2.0) - 2.0 - 0.3	(12.5) - 28.0 18.0 (1.0) (0.7)
Net cash (used in) provided by investing activities	(14.2)	31.8
CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of Zero Coupon Convertible Senior Notes, net of discount and debt issuance costs Net payments under long-term credit facilities Repurchase of 6.25% Senior Notes Proceeds from termination of interest rate swaps Principal payments on capital leases Purchases of treasury stock Proceeds from exercise of stock options	- (0.7) - - (1.5) - 26.0	393.1 (236.2) (16.1) 8.3 (1.2) (69.0) 28.3
Net cash provided by financing activities	23.8	107.2
EFFECT OF EXCHANGE RATES ON CASH	-	0.8
NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING	66.8 76.5	33.1 60.5
CASH AND CASH EQUIVALENTS, ENDING	$143.3	$ 93.6

See accompanying notes to consolidated financial statements

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JONES APPAREL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Jones Apparel Group, Inc. and its wholly-owned subsidiaries. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and in accordance with the requirements of Form 10-Q. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and the footnotes therein included within our Annual Report on Form 10-K. The results of Judith Jack and McNaughton are included in our operating results from the date of acquisition and, therefore, our operating results for the periods presented are not comparable.

In our opinion, the information presented reflects all adjustments necessary for a fair statement of interim results. All such adjustments are of a normal and recurring nature. Certain reclassifications have been made to conform prior year data with the current presentation. The foregoing interim results are not necessarily indicative of the results of operations for the full year ending December 31, 2002.

GOODWILL AND OTHER INTANGIBLE ASSETS - ADOPTION OF SFAS No. 142

In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets," which changed the accounting for goodwill and other intangible assets from an amortization method to an impairment-only approach. Upon our adoption of SFAS No. 142 on January 1, 2002, we ceased amortizing our trademarks without determinable lives and our goodwill. As prescribed under SFAS No. 142, we had our goodwill and trademarks tested for impairment during the first fiscal quarter of 2002.

Due to market conditions resulting from a sluggish economy compounded by the aftereffects of the events of September 11, 2001, we revised our earnings forecasts for future years for several of our trademarks and licenses. As a result, the fair market value of these assets (as appraised by an independent third party) was lower than their carrying value as of December 31, 2001. We accordingly recorded an after-tax impairment charge of $13.8 million, which is reported as a cumulative effect of change in accounting principle resulting from the adoption of SFAS No. 142.

The components of other intangible assets are as follows:

(In millions)	April 6, 2002		December 31, 2001
	Gross Carrying Amount	Accumulated Amortization	Gross Carrying Amount	Accumulated Amortization
Amortized intangible assets License agreements Covenant not to compete	$ 42.3 2.9	$ 11.9 1.2	$ 44.3 2.9	$ 11.9 1.1
Unamortized trademarks	45.2 477.7	13.1 -	47.2 499.1	13.0 -
	$ 522.9	$ 13.1	$ 546.3	$ 13.0

Amortization expense for intangible assets subject to amortization for each of the years in the five-year period ending December 31, 2006 is estimated to be $4.1 million in 2002, $4.0 million in 2003, $4.0 million in 2004, $3.5 million in 2005 and $1.6 million in 2006.

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The following table presents a comparison of net income and earnings per share for the fiscal quarter ended April 6, 2002 to the respective adjusted amounts for the fiscal quarter ended April 7, 2001 that would have been reported had SFAS No. 142 been in effect during 2001.

(In millions except per share amounts)

Fiscal Quarter Ended:	April 6, 2002	April 7, 2001
Reported net income Add back goodwill amortization Add back trademark amortization	$70.7 - -	$96.4 9.6 1.9
Adjusted net income	$70.7	$107.9
Earnings per share - basic Reported net income Goodwill amortization Trademark amortization	$0.56 - -	$0.80 $0.07 $0.02
Adjusted net income	$0.56	$0.89
Earnings per share - diluted Reported net income Goodwill amortization Trademark amortization	$0.53 - -	$0.75 $0.07 $0.02
Adjusted net income	$0.53	$0.84

ACCRUED RESTRUCTURING COSTS

In connection with the acquisitions of Nine West, 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 is as follows:

(In millions)	Balance at December 31, 2001	Net Additions (Reductions)	Utilized	Balance at April 6, 2002
Severance and other employee costs Consolidation of facilities	$ 11.2 4.2	$ - -	$ 2.1 1.1	$ 9.1 3.1
Total	$ 15.4	$ -	$ 3.2	$ 12.2

Estimated severance payments and other employee costs of $9.1 million accrued at April 6, 2002 relate to the remaining estimated severance for an estimated 163 employees at locations to be closed. Employee groups affected (totaling an estimated 248 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 the fiscal quarter ended April 6, 2002, $2.1 million of the reserve was utilized (relating to severance and related costs for approximately 78 employees).

The $3.1 million accrued at April 6, 2002 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.

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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 will be charged to operations in the period in which they occur.

INVENTORIES

Inventories are summarized as follows (in millions):

	April 6, 2002	December 31, 2001
Raw materials Work in process Finished goods	$ 39.7 35.8 403.4	$ 22.2 31.4 519.3
	$ 478.9	$ 572.9

DERIVATIVES

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") 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.

Our primary objectives for holding derivative financial instruments have historically been to manage foreign currency and interest rate risks. We currently use foreign currency-based derivatives and interest rate swaps to hedge both the fair value of recognized assets or liabilities (a "fair value" hedge) and the variability of anticipated cash flows of a forecasted transaction (a "cash flow" hedge). Fair value hedges are entered into in order to hedge the fair value of recognized assets or liabilities denominated in non-functional currencies. Cash flow hedges are entered into in order to hedge forecasted inventory purchases and royalty payments that are denominated in non-functional currencies. The terms of foreign currency-based derivative instruments are generally less than 12 months; the terms of interest rate swaps are matched to the maturity date of the underlying debt instrument.

On the date the derivative contract is entered into, we designate the derivative as either a fair value hedge or a cash flow hedge. Changes in derivative fair values that are designated as fair value hedges are recognized in earnings as offsets to the changes in fair value of the related hedged assets and liabilities. Changes in derivative fair values that are designated as cash flow hedges are deferred and recorded as a component of accumulated other comprehensive income until the associated hedged transactions impact the income statement, at which time the deferred gains and losses are reclassified to either cost of sales for inventory purchases or to selling, general and administrative expenses for all other items. Any ineffective portion of a hedging derivative's change in fair value will be immediately recognized in selling, general and administrative expenses.

During the fiscal quarter ended April 6, 2002, no material amounts were reclassified from other comprehensive income to earnings relating to cash flow hedges. If foreign currency exchange rates or interest rates do not change from their April 6, 2002 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.

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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.

STATEMENT OF CASH FLOWS

Fiscal Quarter Ended: (In millions)	April 6, 2002	April 7, 2001
Supplemental disclosures of cash flow information: Cash paid (received) during the period for: Interest Income taxes, net of refunds	$ 7.2 (7.5)	$ 17.8 1.4
Supplemental disclosures of non-cash investing and financing activities: Tax benefits related to exercise of stock options Equipment acquired through capital lease financing	4.8 3.0	9.8 -

SEGMENT INFORMATION

We identify operating segments based on, among other things, the way our management organizes the components of our business for purposes of allocating resources and assessing performance. With the addition of McNaughton in 2001 and the recent acquisition of Gloria Vanderbilt, we have redefined our reportable operating segments. Our operations are now comprised of four reportable segments: wholesale better apparel, wholesale moderate apparel, wholesale footwear and accessories, and retail. 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 operations by our own stores. We define segment profit as operating income before interest expense, income taxes and (for periods prior to January 1, 2002) amortization of goodwill. Summarized below are our segment revenues, income (loss) and total assets by reportable segments for the fiscal quarter ended April 6, 2002 and restated segment revenues, income (loss) and total assets by reportable segments for the fiscal quarter ended April 7, 2001.

(In millions)	Wholesale Better Apparel	Wholesale Moderate Apparel	Wholesale Footwear & Accessories	Retail	Other & Elim- inations	Consolidated
For the fiscal quarter ended April 6, 2002 Revenues from external customers Intersegment revenues	$ 474.0 29.8	$ 256.5 1.4	$ 233.9 22.5	$ 155.9 -	$ 6.6 (53.7)	$ 1,126.9 -
Total revenues	503.8	257.9	256.4	155.9	(47.1)	1,126.9
Segment income	$ 108.1	$ 46.9	$ 31.0	$ 6.6	$ (40.9)	151.7
Net interest expense						(16.0)
Income before provision for income taxes						$ 135.7

For the fiscal quarter ended April 7, 2001 Revenues from external customers Intersegment revenues	$ 538.9 25.6	$ 78.7 6.1	$ 294.1 25.6	$ 160.6 -	$ 5.4 (57.3)	$ 1,077.7 -
Total revenues	564.5	84.8	319.7	160.6	(51.9)	1,077.7
Segment income	$ 123.9	$ 5.6	$ 71.6	$ 2.1	$ (13.2)	190.0
Amortization of goodwill Net interest expense						(9.6) (21.1)
Income before provision for income taxes						$ 159.3

Total Assets April 6, 2002 April 7, 2001	$1,683.7 1,973.2	$ 796.0 246.4	$ 1,160.0 1,245.0	$ 306.5 326.4	$ (423.1) (553.5)	$ 3,523.1 3,237.5

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SUPPLEMENTAL SUMMARIZED FINANCIAL INFORMATION

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, statements of income and 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.

Condensed Consolidating Balance Sheets
(In millions)

                                                              April 6, 2002                            December 31, 2001
                                                -----------------------------------------  -----------------------------------------
                                                                         Elim-      Cons-                           Elim-      Cons-
                                                  Issuers    Others   inations   olidated    Issuers    Others   inations   olidated
                                                -----------------------------------------  -----------------------------------------
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents                     $   122.5 $    20.8 $        -  $   143.3  $    24.5 $    52.0 $        -  $    76.5
  Accounts receivable - net                         369.7     215.4          -      585.1      251.9     143.9          -      395.8
  Inventories                                       296.8     197.8      (15.7)     478.9      351.9     230.4       (9.4)     572.9
  Prepaid and refundable income taxes                 3.7       1.4       (5.1)         -        4.0         -       (4.0)         -
  Deferred taxes                                     35.5      28.8          -       64.3       35.6      26.6       (0.1)      62.1
  Prepaid expenses and other current assets          30.4      15.2          -       45.6       20.8      12.9          -       33.7
                                                -----------------------------------------  -----------------------------------------
     TOTAL CURRENT ASSETS                           858.6     479.4      (20.8)   1,317.2      688.7     465.8      (13.5)   1,141.0


Property, plant and equipment - net                 164.5      82.1          -      246.6      166.0      76.5          -      242.5
Due from affiliates                                 595.7     391.5     (987.2)         -      595.9     349.7     (945.6)         -
Goodwill - net                                      646.3     723.5          -    1,369.8      646.3     722.1          -    1,368.4
Other intangibles - net                             254.3     255.5          -      509.8      267.1     266.2          -      533.3
Investments in subsidiaries                       2,695.6      24.9   (2,720.5)         -    2,521.2      24.4   (2,545.6)         -
Deferred taxes                                       14.2         -      (14.2)         -       10.7         -      (10.7)         -
Other assets                                         50.8      28.9          -       79.7       58.1      30.2          -       88.3
                                                -----------------------------------------  -----------------------------------------
                                                $ 5,280.0 $ 1,985.8 $ (3,742.7) $ 3,523.1  $ 4,954.0 $ 1,934.9 $ (3,515.4) $ 3,373.5
                                                =========================================  =========================================

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Current portion of long-term debt and
    capital lease obligations                   $     6.8 $     1.5 $        -  $     8.3  $     6.2 $     1.5 $        -  $     7.7
  Accounts payable                                  116.1      65.2          -      181.3      152.7      64.0          -      216.7
  Income taxes payable                               47.7      25.2       (5.1)      67.8        5.8       5.2       (4.0)       7.0
  Accrued expenses and other current liabilities    119.3      52.5          -      171.8       85.9      61.0       (0.1)     146.8
                                                -----------------------------------------  -----------------------------------------
    TOTAL CURRENT LIABILITIES                       289.9     144.4       (5.1)     429.2      250.6     131.7       (4.1)     378.2
                                                -----------------------------------------  -----------------------------------------
NONCURRENT LIABILITIES:
  Long-term debt                                    945.0       7.7          -      952.7      941.5       8.0          -      949.5
  Obligations under capital leases                   28.0         -          -       28.0       27.1         -          -       27.1
  Deferred taxes                                     13.3      67.4      (14.2)      66.5       40.8      50.7      (10.7)      80.8
  Due to affiliates                                 374.3     612.9     (987.2)         -      337.2     608.4     (945.6)         -
  Other                                              29.3       3.7          -       33.0       28.5       4.0          -       32.5
                                                -----------------------------------------  -----------------------------------------
    TOTAL NONCURRENT LIABILITIES                  1,389.9     691.7   (1,001.4)   1,080.2    1,375.1     671.1     (956.3)   1,089.9
                                                -----------------------------------------  -----------------------------------------
    TOTAL LIABILITIES                             1,679.8     836.1   (1,006.5)   1,509.4    1,625.7     802.8     (960.4)   1,468.1
                                                -----------------------------------------  -----------------------------------------
STOCKHOLDERS' EQUITY:
  Common stock and additional paid-in capital     2,116.2     818.3   (1,920.5)   1,014.0    2,061.0     835.3   (1,920.6)     975.7
  Retained earnings                               1,867.2     338.2     (814.4)   1,391.0    1,648.8     303.7     (632.2)   1,320.3
  Accumulated other comprehensive income (loss)       7.9      (6.8)      (1.3)      (0.2)       9.6      (6.9)      (2.2)       0.5
                                                -----------------------------------------  -----------------------------------------
                                                  3,991.3   1,149.7   (2,736.2)   2,404.8    3,719.4   1,132.1   (2,555.0)   2,296.5
  Less treasury stock                              (391.1)        -          -     (391.1)    (391.1)        -          -     (391.1)
                                                -----------------------------------------  -----------------------------------------
    TOTAL STOCKHOLDERS' EQUITY                    3,600.2   1,149.7   (2,736.2)   2,013.7    3,328.3   1,132.1   (2,555.0)   1,905.4
                                                -----------------------------------------  -----------------------------------------
                                                $ 5,280.0 $ 1,985.8 $ (3,742.7) $ 3,523.1  $ 4,954.0 $ 1,934.9 $ (3,515.4) $ 3,373.5
                                                =========================================  =========================================

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Condensed Consolidating Statements of Income
(In millions)

                                                   Fiscal Quarter Ended April 6, 2002         Fiscal Quarter Ended April 7, 2001
                                                -----------------------------------------  -----------------------------------------
                                                                         Elim-      Cons-                           Elim-      Cons-
                                                  Issuers    Others   inations   olidated    Issuers    Others   inations   olidated
                                                -----------------------------------------  -----------------------------------------


Net sales                                       $   759.2   $ 388.2    $ (27.1) $ 1,120.3  $   870.7   $ 234.8   $  (33.2) $ 1,072.3
Licensing income (net)                                3.9       2.7          -        6.6        2.4       3.0          -        5.4
                                                -----------------------------------------  -----------------------------------------
  Total revenues                                    763.1     390.9      (27.1)   1,126.9      873.1     237.8      (33.2)   1,077.7
Cost of goods sold                                  437.5     264.1      (23.1)     678.5      510.2     147.2      (27.0)     630.4
                                                -----------------------------------------  -----------------------------------------
  Gross profit                                      325.6     126.8       (4.0)     448.4      362.9      90.6       (6.2)     447.3
Selling, general and administrative expenses        233.2      61.3        2.2      296.7      211.9      44.6        0.8      257.3
Amortization of goodwill                                -         -          -          -        9.4       0.2          -        9.6
                                                -----------------------------------------  -----------------------------------------
  Operating income                                   92.4      65.5       (6.2)     151.7      141.6      45.8       (7.0)     180.4
Net interest expense (income) and financing costs    11.8       4.2          -       16.0       23.8      (2.7)         -       21.1
                                                -----------------------------------------  -----------------------------------------
  Income before provision for income taxes,
    equity in earnings of subsidiaries and
    cumulative effect of change in
    accounting principle                             80.6      61.3       (6.2)     135.7      117.8      48.5       (7.0)     159.3
Provision for income taxes                           29.8      21.4          -       51.2       45.6      17.3          -       62.9
Equity in earnings of subsidiaries                 (175.5)     (0.5)     176.0          -     (199.6)     (0.7)     200.3          -
                                                -----------------------------------------  -----------------------------------------
  Income before cumulative effect of
    change in accounting principle                  226.3      40.4     (182.2)      84.5      271.8      31.9     (207.3)      96.4
Cumulative effect of change in accounting for
  intangible assets, net of tax                       7.9       5.9          -       13.8          -         -          -          -
                                                -----------------------------------------  -----------------------------------------
  Net income                                    $   218.4   $  34.5   $ (182.2) $    70.7  $   271.8   $  31.9   $ (207.3) $    96.4
                                                =========================================  =========================================

Condensed Consolidating Statements of Cash Flows
(In millions)

                                                   Fiscal Quarter Ended April 6, 2002         Fiscal Quarter Ended April 7, 2001
                                                -----------------------------------------  -----------------------------------------
                                                                        Elim-       Cons-                          Elim-       Cons-
                                                  Issuers    Others  inations    olidated    Issuers    Others  inations    olidated
                                                -----------------------------------------  -----------------------------------------

Net cash provided by (used in)
  operating activities                          $    40.6    $ 16.6  $      -   $    57.2  $    69.7   $  (0.4)  $(176.0)   $ (106.7)
                                                -----------------------------------------  -----------------------------------------
Cash flows from investing activities:
  Capital expenditures                               (4.4)    (10.1)        -       (14.5)      (6.2)     (6.3)        -       (12.5)
  Payments relating to Victoria acquisition          (2.0)        -         -        (2.0)         -         -         -           -
  Proceeds from sale of Nine West UK operations         -         -         -           -       28.0         -         -        28.0
  Acquisition of intangibles                            -         -         -           -       (1.0)        -         -        (1.0)
  Repayments of loans to officers                     2.0         -         -         2.0       18.0         -         -        18.0
  Other                                               0.3         -         -         0.3       (0.7)        -         -        (0.7)
                                                -----------------------------------------  -----------------------------------------
  Net cash provided by (used in)
    investing activities                             (4.1)    (10.1)        -       (14.2)      38.1      (6.3)        -        31.8
                                                -----------------------------------------  -----------------------------------------

Cash flows from financing activities:
  Issuance of Zero Coupon Convertible Senior
    Notes, net                                          -         -         -           -      393.1         -         -       393.1
  Net payments under various credit facilities       (0.4)     (0.3)        -        (0.7)    (227.1)     (9.1)        -      (236.2)
  Repurchase of 6.25% Senior Notes                      -         -         -           -      (16.1)        -         -       (16.1)
  Proceeds from termination of interest rate swaps      -         -         -           -        8.3         -         -         8.3
  Principal payments on capital leases               (1.4)     (0.1)        -        (1.5)      (1.0)     (0.2)        -        (1.2)
  Purchases of treasury stock                           -         -         -           -      (69.0)        -         -       (69.0)
  Proceeds from exercise of stock options            26.0         -         -        26.0       28.3         -         -        28.3
  Dividends paid to affiliates                          -         -         -           -          -    (176.0)    176.0           -
  Net intercompany borrowings (payments)             37.3     (37.3)        -           -     (247.6)    247.6         -           -
                                                -----------------------------------------  -----------------------------------------
  Net cash provided by (used in) financing
    activities                                       61.5     (37.7)        -        23.8     (131.1)     62.3     176.0       107.2
                                                -----------------------------------------  -----------------------------------------

Effect of exchange rates on cash                        -         -         -           -        0.2       0.6         -         0.8
                                                -----------------------------------------  -----------------------------------------

Net increase (decrease) in cash and cash
  equivalents                                        98.0     (31.2)        -        66.8      (23.1)     56.2         -        33.1
Cash and cash equivalents, beginning                 24.5      52.0         -        76.5       45.5      15.0         -        60.5
                                                -----------------------------------------  -----------------------------------------
Cash and cash equivalents, ending               $   122.5   $  20.8  $      -    $  143.3  $    22.4   $  71.2   $     -   $    93.6
                                                =========================================  =========================================

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EARNINGS PER SHARE

The computation of basic and diluted earnings per share is as follows:

	Fiscal Quarter Ended
(In millions except per share amounts)	April 6, 2002	April 7, 2001
Basic Net income Weighted average common shares outstanding	$ 70.7 126.2	$ 96.4 120.7
Basic earnings per share	$ 0.56	$ 0.80
Diluted Net income Add: interest expense associated with convertible notes, net of tax benefit	$ 70.7 2.3	$ 96.4 1.4
Income available to common shareholders	$ 73.0	$ 97.8
Weighted average common shares outstanding Effect of dilutive securities: Employee stock options Assumed conversion of convertible notes	126.2 3.2 7.9	120.7 4.4 5.3
Weighted average common shares and share equivalents outstanding	137.3	130.4
Diluted earnings per share	$ 0.53	$ 0.75

SHORT-TERM BOND TRANSACTION

In December 2001, we entered into a transaction relating to the short sale of $157.9 million of U. S. Treasury Securities. The transaction, which is expected to close in August 2002, was intended to address interest rate exposure and generate capital gains that could be used to offset previously incurred capital losses. As a result of this transaction, we recorded a short-term capital gain of $4.2 million and related interest income of $0.5 million and interest expense and fees of $4.8 million for the fiscal quarter ended April 6, 2002. The net effect of $0.1 million is included in the statement of operations as interest expense. We have placed the proceeds from the short sale into an interest-bearing collateral account to provide for our obligation to repurchase the U. S. Treasury Securities (which had a market value of $166.8 million at April 6, 2002) on or before November 15, 2002. At April 6, 2002, the net excess of funds in the collateral account over the obligation to repurchase the securities is $1.9 million, which is included in prepaid expenses and other current assets.

ACQUISITIONS

On April 8, 2002, we acquired 100% of the common stock of Gloria Vanderbilt and also the Gloria Vanderbilt (and related) trademarks and third-party licenses from Gloria Vanderbilt Trademark B.V. Gloria Vanderbilt is a leading designer, marketer and distributor of women's moderately priced stretch and twill jeanswear. Gloria Vanderbilt markets its products nationwide to national chains, department stores, mass merchants, and specialty retailers. Brands include Gloria Vanderbilt and junior product marketed under the GLO brand name. Licensed products under the Gloria Vanderbilt brand include footwear, watches, socks, sleepwear, outerwear, swimwear and hair accessories.

- 13 -

The aggregate purchase price was $100.4 million, which included $80.4 million in cash payments and 562,947 shares of our common stock valued at $35.564 (the average price for the week in which the acquisition was announced). The purchase price will be 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 allocated to goodwill and property based on estimates of fair values. The prior shareholders of Gloria Vanderbilt will also be entitled to receive a future payment in the form of cash and/or common stock if certain earnings targets are achieved for the one year following the closing of the transaction. We also assumed approximately $43.7 million of Gloria Vanderbilt's funded debt and accrued interest that we have subsequently refinanced. Gloria Vanderbilt's results will be included in our wholesale moderate apparel segment subsequent to the acquisition date.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

General

The following discussion provides information and analysis of our results of operations for the fiscal quarters ended April 6, 2002 and April 7, 2001, respectively, and our liquidity and capital resources. The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and notes thereto included elsewhere herein.

We completed our acquisitions of Judith Jack on April 26, 2001 and McNaughton on June 19, 2001. The results of operations of Judith Jack and McNaughton are included in our operating results from the respective dates of acquisition. Accordingly, the financial position and results of operations presented and discussed herein are not directly comparable between the periods presented.

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. Our adoption, effective January 1, 2002, required us to reclassify cooperative advertising expenses from a deduction against revenues to a selling, general and administrative ("SG&A") expense. As a result, restated net sales, gross profit and SG&A expenses for the first fiscal quarter of 2001 all increased by $7.2 million from amounts previously reported.

Due to market conditions resulting from a sluggish economy compounded by the aftereffects of the events of September 11, 2001, we revised our earnings forecasts for future years for several of our trademarks. As a result, the fair market value of these trademarks (as appraised by an independent third party) was lower than their carrying value as of December 31, 2001. We accordingly recorded an after-tax impairment charge of $13.8 million ($0.10 per diluted share), which is reported as a cumulative effect of change in accounting principle resulting from the adoption of SFAS No. 142.

During the fiscal quarter ended April 6, 2002, we recorded a $31.2 million charge relating to contractual obligations under employment contracts, primarily for former President Jackwyn Nemerov and former Vice

- 14 -

Chairman Irwin Samelman. The charges under these contracts are comprised of pre-tax amounts totaling $18.4 million for contractual salary and bonus obligations and $10.8 million for non-cash compensation expense resulting from contractual vesting of outstanding stock options and restricted stock. Also included is a pre-tax amount of $2.0 million related to certain obligations under the employment agreement that we entered into with Peter Boneparth when we acquired McNaughton in 2001. These obligations were satisfied in March 2002 when Mr. Boneparth was elected President and designated to become our Chief Executive Officer on May 22, 2002.

Critical Accounting Policies

Several of our accounting policies involve significant judgements and uncertainties. The policies with the greatest potential effect on our results of operations and financial position include the estimated collectibility of accounts receivable, the recovery value of obsolete or overstocked inventory and the estimated fair values of both our goodwill and intangible assets with indefinite lives. For accounts receivable, we estimate the net collectibility, considering both historical and anticipated trends of trade discounts and co-op advertising deductions taken by our customers, allowances we provide to our retail customers to effectively flow goods through the retail channels, and the possibility of non-collection due to the financial position of our customers. For inventory, we estimate the amount of goods that we will not be able to sell in the normal course of business and write down the value of these goods to the recovery value expected to be realized through off-price channels. If we incorrectly anticipate these trends or unexpected events occur, our results of operations could be materially affected. We utilize independent third-party appraisals to estimate the fair values of both our goodwill and our intangible assets with indefinite lives. These appraisals are based on projected cash flows and interest rates; should interest rates or our future cash flows differ significantly from the assumptions used in these projections, material impairment losses could result where the estimated fair values of these assets become less than their carrying amounts.

Results of Operations

Fiscal Quarter Ended April 6, 2002 Compared to Fiscal Quarter Ended April 7, 2001

Statements of Income Stated in Dollars and as a Percentage of Total Revenues

(In millions)	Fiscal Quarter Ended April 6, 2002		Fiscal Quarter Ended April 7, 2001
Net sales Licensing income (net)	$ 1,120.3 6.6	99.4% 0.6%	$ 1,072.3 5.4	99.5% 0.5%
Total revenues Cost of goods sold	1,126.9 678.5	100.0% 60.2%	1,077.7 630.4	100.0% 58.5%
Gross profit Selling, general and administrative expenses Executive compensation obligations Amortization of goodwill	448.4 265.5 31.2 -	39.8% 23.6% 2.8% -	447.3 257.3 - 9.6	41.5% 23.9% - 0.9%
Operating income Net interest expense	151.7 16.0	13.5% 1.4%	180.4 21.1	16.7% 2.0%
Income before provision for income taxes Provision for income taxes	135.7 51.2	12.0% 4.5%	159.3 62.9	14.8% 5.8%
Income before cumulative effect of change in accounting principle Cumulative effect of change in accounting for intangible assets, net of tax	84.5 13.8	7.5% 1.2%	96.4 -	8.9% -
Net income	$ 70.7	6.3%	$ 96.4	8.9%
*Percentage totals may not add due to rounding.*

Revenues. Total revenues for the 14 weeks ended April 6, 2002 (hereinafter referred to as the "first fiscal quarter of 2002") were $1.13 billion compared to $1.08 billion for the 14 weeks ended April 7, 2001 (hereinafter referred to as the "first fiscal quarter of 2001"), an increase of 4.6%.

- 15-

Revenues by segment were as follows:

(In millions)	First Fiscal Quarter of 2002	First Fiscal Quarter of 2001	Increase/ (Decrease)	Percent Change
Wholesale better apparel Wholesale moderate apparel Wholesale footwear and accessories Retail Other	$474.0 256.5 233.9 155.9 6.6	$538.9 78.7 294.1 160.6 5.4	$(64.9) 177.8 (60.2) (4.7) 1.2	(12.0%) 225.9% (20.5%) (2.9%) 22.2%
Total revenues	$1,126.9	$1,077.7	$49.2	4.6%

As a result of the difficult economic environment experienced in 2001 and uncertainty as to the extent and duration of any continuing impact into 2002, we planned reductions across most of our wholesale businesses in coordination with many of our wholesale customers. In our wholesale better apparel segment, these planned reductions significantly impacted shipments of our Jones New York and Rena Rowan career collection businesses (which had experienced very difficult performance at retail during 2001). Similar planned reductions in the Lauren by Ralph Lauren collection were somewhat offset by stronger shipments of Polo Jeans Company products as a result of our ability to react to the replenishment portion of that business.

Wholesale moderate apparel revenues increased primarily as a result of the product lines obtained as a result of the McNaughton acquisition, which accounted for $173.5 million of the increase.

We also planned reductions in our wholesale footwear and accessories revenues as a result of the uncertain retail environment. While we experienced reduced shipments in nearly all product lines, the most significant impact was seen in Nine West accessories and Enzo Angiolini footwear. Shipments of the Nine West footwear line, while lower, benefitted from the positive business initiatives of focusing inventory on tested and proven footwear styles, as well as shortened production lead times. The product lines obtained from the Judith Jack acquisition added $4.6 million in net sales for the first fiscal quarter of 2002.

Retail revenues decreased primarily as a result of there being 17 fewer stores in the first fiscal quarter of 2002 compared to the prior period. Comparable store sales were up approximately 2.8% for footwear and accessories stores and down 4.9% for apparel outlet stores as compared to the first fiscal quarter of 2001.

Gross Profit. The gross profit margin decreased to 39.8% in the first fiscal quarter of 2002 compared to 41.5% in the first fiscal quarter of 2001. The decrease was attributable principally to a change in the mix of products sold resulting from the acquired McNaughton moderate apparel lines, which carry lower gross margins than the overall average of our other products.

Gross profit margin in wholesale better apparel increased to 41.0% for the first fiscal quarter of 2002, compared to 40.1% for the first fiscal quarter of 2001. The primary reasons for the increase are higher than expected recoveries on off-price sales to discounters against inventory identified and written down under the special charge in the third quarter of 2001 and more favorable pricing realized from off-shore production.

Wholesale moderate apparel gross profit margins were 31.9% for the first fiscal quarter of 2002, compared to 25.2% for the first fiscal quarter of 2001. The increase was due the mix of products sold, more favorable pricing realized from off-shore production, and higher than expected recoveries on off-price sales to discounters against inventory identified and written down under the special charge in the third quarter of 2001.

Gross profit margin in wholesale footwear and accessories decreased to 32.1% from 38.1%. The decrease in the margin is principally the result of markdowns recognized in the costume jewelry business to more aggressively liquidate inventories in both the wholesale and retail channels. The gross profit margin was also negatively impacted by the decrease in our higher-margin Nine West accessories business.

- 16 -

Retail gross profit margins were 52.5% for the first fiscal quarter of 2002 compared to 51.6% for the first fiscal quarter of 2001. Margins in our Nine West retail business benefitted from better inventory planning as well as improved product assortments in our stores. This improvement was offset by more promotional activity in our apparel outlet stores, impacted by the difficulty experienced in our Jones New York career business.

SG&A expenses. SG&A expenses of $265.5 million (excluding $31.2 million of costs related to the termination of executive employment contracts) in the first fiscal quarter of 2002 represented an increase of $8.2 million from the $257.3 million (excluding amortization of goodwill and trademarks) reported for the first fiscal quarter of 2001. McNaughton added $20.9 million to the first fiscal quarter of 2002, which was offset by tighter cost controls and the reduction in retail stores mentioned above.

Operating Income. The resulting operating income for the first fiscal quarter of 2002 of $151.7 million decreased 15.9%, or $28.7 million, from the $180.4 million for the first fiscal quarter of 2001. Excluding the costs related to the termination of executive employment contracts in the first fiscal quarter of 2002 and the amortization of goodwill and intangibles for the first fiscal quarter of 2001 that ended upon the adoption of SFAS No. 142, operating income for the first fiscal quarters of 2002 and 2001 would have been $182.9 million and $191.9 million, respectively.

Net Interest Expense. Net interest expense was $16.0 million in the first fiscal quarter of 2002 compared to $21.1 million in the comparable period of 2001, resulting from lower average borrowings, lower interest rates and using the proceeds from zero coupon convertible senior debt securities issued in February 2001 to repay higher-rate borrowings under our credit facilities.

Provision for Income Taxes. The effective income tax rate was 37.7% for the first fiscal quarter of 2002 compared to 39.5% for the first fiscal quarter of 2001. The decrease was primarily due to the elimination of nondeductible goodwill amortization resulting from the adoption of SFAS No. 142.

Net Income. Net income was $84.5 million in the first fiscal quarter of 2002, a decrease of $11.9 million from the net income of $96.4 million earned in the first fiscal quarter of 2001. Excluding the costs related to the termination of executive employment contracts and the cumulative effect of the change in accounting for intangible assets for the first fiscal quarter of 2002 and the amortization of goodwill and intangibles for the first fiscal quarter of 2001 that ended upon the adoption of SFAS No. 142, net income would have been $104.1 million and $107.9 million, respectively.

Earnings Per Share. Diluted earnings per share for the first fiscal quarter of 2002 was $0.53 compared to $0.75 for the first fiscal quarter of 2001, on a 5.3% increase in shares outstanding. Excluding the costs related to the termination of executive employment contracts and the cumulative effect of the change in accounting for intangible assets for the first fiscal quarter of 2002 and the amortization of goodwill and intangibles for the first fiscal quarter of 2001 that ended upon the adoption of SFAS No. 142, earnings per diluted share would have been $0.77 and $0.84, respectively.

Liquidity and Capital Resources

Our principal capital requirements have been to fund acquisitions, working capital needs, capital expenditures and repurchases of our common stock on the open market. We have historically relied on internally generated funds, trade credit, bank borrowings and the issuance of notes to finance our operations and expansion.

Operating activities provided $57.2 million and used $106.7 million in the first fiscal quarters of 2002 and 2001, respectively. The change was primarily due to a decrease in inventories during the first fiscal quarter of 2002 compared to an increase in the first fiscal quarter of 2001 and a smaller increase in accounts receivable during the first fiscal quarter of 2002 than in the first fiscal quarter of 2001.

Investing activities used $14.2 million during the first fiscal quarter of 2002 and provided $31.8 million during the first fiscal quarter of 2001. The difference was primarily due to $28.0 million in proceeds from the sale of Nine West's United Kingdom operations and the repayment of an $18.0 million officer loan during the first fiscal

- 17 -

quarter of 2001. Capital expenditures were $14.5 million and $12.5 million for the first fiscal quarters of 2002 and 2001, respectively; total capital expenditures for 2002 are expected to be approximately $50.0 million.

Financing activities provided $23.8 million of cash in the first fiscal quarter of 2002 and $107.2 million in the first fiscal quarter of 2001. In February 2001, we issued 20-year, zero coupon convertible senior debt securities. Net proceeds of the offering were $392.8 million ($0.3 million in costs were paid during the second quarter of 2001). 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 $16.1 million of our outstanding 6.25% Senior Notes at par, and for general corporate purposes.

During the first fiscal quarter of 2001, we realized $8.3 million in proceeds from terminating our existing interest rate swap agreements (see "Derivatives" in the Notes to Consolidated Financial Statements).

We repurchased $69.0 million of our common stock on the open market during the first fiscal quarter of 2001. As of April 6, 2002, a total of $425.8 million has been expended under announced programs to acquire up to $500.0 million of such shares. We may authorize additional share repurchases in the future depending on, among other things, market conditions and our financial condition. Proceeds from the issuance of common stock to our employees exercising stock options amounted to $26.0 million and $28.3 million in the first fiscal quarters of 2002 and 2001, respectively.

The terms of the acquisition agreement for Victoria require us to pay the former Victoria shareholders additional consideration of $3.00 for each $1.00 of Victoria's earnings before interest and taxes (as defined in the securities purchase agreement) for each of the 12-month periods ending June 30, 2001 through 2003 that exceeds certain targeted levels. Any future additional consideration is to be paid 50% in cash and 50% in our common stock, the value of which will be determined by the prices at which our common stock trades in a defined period preceding delivery in each year.

The terms of the acquisition agreement for Judith Jack require us to pay the seller additional cash consideration of $2.00 for each $1.00 of Judith Jack's earnings before interest and taxes (as defined in the asset purchase agreement) that exceeds certain targeted levels for each of the years ending December 31, 2002 and 2003.

The terms of the acquisition agreement for Gloria Vanderbilt require us to pay the former Gloria Vanderbilt shareholders additional consideration of $4.50 for each $1.00 of Gloria Vanderbilt's earnings before interest and taxes (as defined in the stock purchase agreement) for the 12 months following the completion of the acquisition that exceeds certain targeted levels. Any additional consideration (the amount of which cannot exceed $54.0 million) is to be paid either in cash or a combination of cash and our common stock, the value of which will be determined by the prices at which our common stock trades in a defined period preceding delivery.

At April 6, 2002, 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 April 6, 2002, $257.7 million was outstanding under the 364-Day Revolving Credit Facility (comprised entirely of outstanding letters of credit), 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.

In connection with the McNaughton acquisition, we 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 April 6, 2002, $78.9 million was outstanding under this line of credit.

- 18 -

We also have a C$20.0 million unsecured line of credit in Canada, under which C$14.5 million was outstanding at April 6, 2002.

We believe that funds generated by operations, proceeds from the issuance of notes, the Senior Credit Facilities, the McNaughton line of credit and the Canadian line of credit will provide the financial resources sufficient to meet our foreseeable working capital, letter of credit, debt repayment, capital expenditure and stock repurchase requirements and any ongoing obligations to the former Victoria and Gloria Vanderbilt shareholders and the seller of Judith Jack.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The market risk inherent in our financial instruments represents the potential loss in fair value, earnings or cash flows arising from adverse changes in interest rates or foreign currency exchange rates. We manage this exposure through regular operating and financing activities and, when deemed appropriate, through the use of derivative financial instruments. Our policy allows the use of derivative financial instruments for identifiable market risk exposures, including interest rate and foreign currency fluctuations. We do not enter into derivative financial contracts for trading or other speculative purposes.

The primary interest rate exposures on floating rate financing arrangements are with respect to United States and Canadian short-term interest rates. We had approximately $1.6 billion in variable rate facilities at April 6, 2002.

At April 6, 2002, we had outstanding foreign exchange contracts in Canada to purchase a total of $11.5 million U.S. dollars through July 2002. We believe that these financial instruments should not subject us to undue risk due to foreign exchange movements because gains and losses on these contracts should offset losses and gains on the assets, liabilities, and transactions being hedged. We are exposed to credit-related losses if the counterparty to the financial instruments fails to perform its obligations. However, we do not expect the counterparty, which presently has high credit ratings, to fail to meet its obligations.

On April 30, 2002, we entered into several fixed-to-floating interest rate swaps on the outstanding $225.0 million of our 7.875% Senior Notes due 2006 and $129.6 million of our 8.375% Series B Senior Notes due 2005. The expiration dates of the swaps match the maturity dates of the related debt.

For further information see "Derivatives" in the Notes to Consolidated Financial Statements.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We have been named as a defendant in various actions and proceedings 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 financial effect on us.

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Item 5. Other information

Statement Regarding Forward-looking Disclosure

This Report includes, and incorporates by reference, "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements regarding our expected financial position, business and financing plans are forward-looking statements. The words "believes," "expects," "plans," "intends," "anticipates" and similar expressions identify forward-looking statements. Forward-looking statements also include representations of our expectations or beliefs concerning future events that involve risks and uncertainties, including those associated with the effect of national and regional economic conditions, lowered levels of consumer spending resulting from a general economic downturn or generally reduced shopping activity caused by public safety concerns, the performance of our products within the prevailing retail environment, customer acceptance of both new designs and newly-introduced product lines, financial difficulties encountered by customers, the effects of vigorous competition in the markets in which we operate, the integration of the organizations and operations of any acquired businesses into our existing organization and operations, the termination or non-renewal of the licenses with Polo Ralph Lauren Corporation, our foreign operations and manufacturing, changes in the costs of raw materials, labor and advertising, and our ability to secure and protect trademarks and other intellectual property rights. All statements other than statements of historical facts included in this Report, including, without limitation, the statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations," are forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements are reasonable, such expectations may prove to be incorrect. Important factors that could cause actual results to differ materially from our expectations ("Cautionary Statements") are disclosed in this Report in conjunction with the forward-looking statements. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the Cautionary Statements.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

See Exhibit Index.

(b) Reports on Form 8-K

During the fiscal quarter ended April 6, 2002, we filed the following Current Reports on Form 8-K with the SEC.

(1)	We filed a Current Report on Form 8-K, dated March 11, 2002, announcing that Peter Boneparth had become our President and will become our Chief Executive Officer effective May 22, 2002, Wesley R. Card had been promoted to Chief Operating and Financial Officer, and Jackwyn Nemerov, our former President and Chief Operating Officer, had resigned.
(2)	We filed a Current Report on Form 8-K, dated April 3, 2002, announcing charges related to employment contracts and trademark impairments.

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SIGNATURES

Pursuant to the requirements 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.

JONES APPAREL GROUP, INC.
(Registrant)

Date: May 17, 2001

By /s/ Sidney Kimmel
SIDNEY KIMMEL
Chief Executive Officer

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

INDEX TO EXHIBITS

Number	Description
10.1*	Amended and Restated Employment Agreement dated March 11, 2002 between Jones Apparel Group, Inc. and Wesley R. Card.+
10.2*	Amended and Restated Employment Agreement dated April 4, 2002 between Jones Apparel Group, Inc. and Ira M. Dansky.+

_________

* Filed herewith.
+Management contract or compensatory plan or arrangement.

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EX-10.1 3 exhibit10_1.htm EXHIBIT 10.1 Exhibit 10.1
EXHIBIT 10.1

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

AGREEMENT made as of March 11, 2002 by and between JONES APPAREL GROUP, INC., a Pennsylvania corporation (the "Company"), and WESLEY R. CARD (the "Executive").

W I T N E S S E T H:

WHEREAS, the Executive is a party to the Employment Agreement dated as of July 1, 2000 with the Company (as amended or supplemented to date, the "Prior Employment Agreement").

WHEREAS, the Company wishes to continue to employ the Executive, and the Executive wishes to continue 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 Chief Operating and Financial Officer of the Company. During the Term, the Executive shall have such responsibilities, duties and authorities as are commensurate with chief operating officers and chief financial officers of public entities of similar size to the Company. The Executive shall report directly to the Chief Executive Officer 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 Company shall employ the Executive for the period commencing as of March 11, 2002 and ending as of June 30, 2004 (the "Expiration Date"), as renewed in accordance with the following sentence (the "Term"). The Executive's employment with the Company will continue, and this Agreement will be automatically extended without limitation, for successive 12-month periods commencing July 1 and ending June 30 (a "Contract Year"),

unless either party to this Agreement advises the other in writing, no later than June 30, 2002 and no later than each June 30 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 June 30, 2002, neither party has given a Non-extension Notice to the other, the Term will be automatically extended through June 30, 2005, and (ii) if the Term is so extended through June 30, 2005, then if by June 30, 2003, neither party has given a Non-extension Notice to the other, the Term will be automatically extended through June 30, 2006.

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 $850,000. 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.

(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.

(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.

(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.

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

4. Bonus.

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.

5. Stock Options.

(a) 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 2,000,000 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 500,000 Common Shares on the terms and conditions consistent with the provisions of Section 5(f)(iii)-(v) below, provided, however, that notwithstanding the provision in the first clause of Section 5(f)(iv) below, such options shall vest ratably on March 11, 2003, March 11, 2004 and March 11, 2005 (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, 166,667 options shall vest on March 11, 2002, 166,667 options shall vest on March 11, 2004 and 166,666 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 the stockholders of the Company scheduled to be held in May 2003, 166,667 options shall be fully vested upon such grant, 166,667 options shall vest on March 11, 2004 and 166,666 options shall vest on March 11, 2005.

(b) In the event the stockholders do not approve any of the proposals set forth in Section 5(a) 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.

(c) 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(a) or 5(b) above), the number of options to

purchase Common Shares subject to the Option Grant shall be inreased 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 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 500,000, divided by the Black-Scholes value.

(d) After first allocating shares for stock options required under that certain employment agreement dated March 11, 2002 between the Company and Peter Boneparth, the Company agrees to allocate to the Option Grant the next shares that are reserved for issuance pursuant to any of the proposals referred to in Sections 5(a) and 5(b) above or any other equity plan adopted by the Company. In the event that 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 that 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."

(e) 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.

(f) 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), 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 150% 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 such Options and all other options to purchase Common Shares then held by the Executive which are not then vested (in the aggregate being referred to herein as "Accelerated Options") 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 (as defined herein), death, Disability, a Change in Control (as defined herein), 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) 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, 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), 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 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 Accelerated Options 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 his representative, as the case may be, during the remaining original term of the Accelerated 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, 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 (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 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 Accelerated Options 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, 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) 200% of Executive's yearly salary at the rate in effect immediately preceding termination, multiplied by (y) the Severance Multiple (as defined herein), (iv) reimbursement to the Executive for up to $10,000 of executive outplacement services, and (v) 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 its Chief Executive Officer; 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 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) 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 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 Chief Operating and Financial Officer of the Company, or any change in the Executive's status as reporting directly to the Chief Executive Officer; 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.

(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.

(iv) the term "Severance Period" shall mean the period commencing with the termination of the Executive's employment and ending with the Expiration Date.

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

(vi) the term "Change in Control" shall have the same meaning as in the Company's 1999 Stock Option 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, 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.

(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.

(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.

(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, 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.

(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. 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 these provisions 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 when mailed by certified mail, return receipt requested, to such party at Executive's address below, 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 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 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. 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, and supersedes the Prior Employment Agreement and all other existing agreements between them 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/ Peter Boneparth
President

/s/ Wesley R. Card
Executive

Address: 3 Toftrees Court
Princeton, NJ 08540

EX-10.2 4 exhibit10_2.htm EXHIBIT 10.2 Exhibit 10.2
EXHIBIT 10.2

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

AGREEMENT made as of April 4, 2002 by and between JONES APPAREL GROUP, INC., a Pennsylvania corporation (the "Company"), and IRA M. DANSKY (the "Executive").

W I T N E S S E T H:

WHEREAS, the Executive is a party to the Employment Agreement dated as of July 1, 2000 with the Company (as amended or supplemented to date, the "Prior Employment Agreement").

WHEREAS, the Company wishes to continue to employ the Executive, and the Executive wishes to continue 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 Executive Vice President, General Counsel and Secretary of the Company, with such responsibilities and authority as Executive has heretofore had as General Counsel and Secretary of the Company. The Executive shall report directly to the Chief Executive Officer 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 Company shall employ the Executive for the period commencing as of April 4, 2002 and ending as of June 30, 2004 (the "Expiration Date"), as renewed in accordance with the following sentence (the "Term"). The Executive's employment with the Company will continue, and this Agreement will be automatically extended without limitation, for successive 12-month periods commencing July 1 and ending June 30 (a "Contract Year"), unless either party to this Agreement advises the other in writing, no later than June 30, 2002 and no later than each June 30 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 April 4, 2002 and ending on the then applicable extended "Expiration Date".

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 $500,000. 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.

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

4. Bonus.

Executive shall participate in the Company's Executive Annual Incentive Plan (the "Bonus Plan"), pursuant to which the Executive may be entitled to receive annual bonus payments 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, conditioned upon the attainment of annual criteria and objectives established for participants in the Bonus Plan.

5. Stock Options.

(a) Upon the approval by the stockholders of the Company of an increase of not less than 5,000,000 in the number of shares presently available for the granting of stock options under the Company's 1999 Stock Incentive Plan, the Stock Option Committee of the Board will grant to the Executive an option to purchase 100,000 Common Shares on the terms and conditions provided in Section 5(b)(iii)-(v) 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 granted pursuant to 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 80% of Executive's salary;

(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.

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, 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.

(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, 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 (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 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, (iv) reimbursement to the Executive for up to $10,000 of executive outplacement services, and (v) a lump-sum equal to the Company's cost for health insurance, life insurance and retirement benefits for the Severance Period.

(ii) In addition to the foregoing and notwithstanding any other agreement between the Executive and the Company, all Accelerated Options 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.

(e) As used herein:

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

(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;

(6) a reduction in the Executive's title and status as Executive Vice President, General Counsel and Secretary of the Company, or any change in the Executive's status as reporting directly to the Chief Executive Officer; 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.

(iv) the term "Severance Period" shall mean the period commencing with the termination of the Executive's employment and ending with the Expiration Date.

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

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

(vii) the term "Target Bonus" shall mean 75% 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, or, if the Executive has not attained age 55 and/or has less than10 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.

10. Competition; Recruitment; Non-Disparagement.

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 when mailed by certified mail, return receipt requested, to such party at Executive's address below, or to the Company at 1411 Broadway, New York, New York 10018, Attention: President (or at such other address as such party may specify by written notice to the other party).

12. Successors; Binding Agreement.

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.

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

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/ Peter Boneparth
President

/s/ Ira M Dansky
Executive

Address: 115 Dundee Road
Stamford, CT 06903

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		Page No.
PART I. FINANCIAL INFORMATION Item 1. Financial Statements
	Consolidated Balance Sheets April 6, 2002 and December 31, 2001	3
	Consolidated Statements of Income Fiscal Quarters ended April 6, 2002 and April 7, 2001	4
	Consolidated Statements of Stockholders' Equity Fiscal Quarters ended April 6, 2002 and April 7, 2001	5
	Consolidated Statements of Cash Flows Fiscal Quarters ended April 6, 2002 and April 7, 2001	6
	Notes to Consolidated Financial Statements	7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations		14
Item 3. Quantitative and Qualitative Disclosures About Market Risk		19
PART II. OTHER INFORMATION Item 1. Legal Proceedings		19
Item 5. Other Information		20
Item 6. Exhibits and Reports on Form 8-K		20
Signatures		21
Exhibit Index		21