-----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, EBK0d/boGXH7EqzOtmtL2syIExhB3+OzhOGcMz9UUpG6WCdYP2HcFtHF56MPajw1 pRTkpUaR71uaWRi4oi2t5w== 0001047469-97-000771.txt : 19971016 0001047469-97-000771.hdr.sgml : 19971016 ACCESSION NUMBER: 0001047469-97-000771 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19971015 SROS: CBOE 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: S-3/A SEC ACT: SEC FILE NUMBER: 333-36213 FILM NUMBER: 97695593 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 S-3/A 1 S-3/A AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 15, 1997 REGISTRATION NO. 333-36213 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ AMENDMENT NO. 2 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ JONES APPAREL GROUP, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) PENNSYLVANIA 06-0935166 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)
250 RITTENHOUSE CIRCLE KEYSTONE PARK BRISTOL, PA 19007 (215) 785-4000 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) SIDNEY KIMMEL 250 RITTENHOUSE CIRCLE KEYSTONE PARK BRISTOL, PA 19007 (215) 785-4000 (Name, address, including zip code and telephone number, including area code, of agent for service) ------------------------------ COPIES TO:
BRIAN BRODRICK, ESQ. PHILLIPS NIZER BENJAMIN KRIM & IRA M. DANSKY, ESQ. WILLIAM J. GRANT, JR., ESQ. BALLON LLP JONES APPAREL GROUP, INC. WILLKIE FARR & GALLAGHER 666 FIFTH AVENUE 1411 BROADWAY 153 EAST 53RD STREET NEW YORK, NEW YORK 10103-0084 NEW YORK, NEW YORK 10018 NEW YORK, NEW YORK 10022 (212) 977-9700 (212) 536-9526 (212) 821-8000
-------------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the "Securities Act"), other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. / / If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / -------------------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED OCTOBER 15, 1997 Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. PROSPECTUS 4,500,000 SHARES JONES APPAREL GROUP, INC. COMMON STOCK ---------------- All of the 4,500,000 shares of Common Stock of the Company offered hereby are being sold by a Selling Shareholder of the Company. The Company is not selling shares of Common Stock in the Offerings and will not receive any of the proceeds from the sale of shares of Common Stock offered hereby. Of the 4,500,000 shares of Common Stock being offered hereby, 3,600,000 shares are being offered for sale initially in the United States and Canada by the U.S. Underwriters and 900,000 shares are being offered for sale initially in a concurrent offering outside the United States and Canada by the International Managers. The initial public offering price and the aggregate underwriting discount per share will be identical for both Offerings. See "Underwriting." The Common Stock is listed on the New York Stock Exchange under the symbol "JNY." On September 29, 1997, the last sale price of the Common Stock as reported on the New York Stock Exchange was $53 1/16 per share. See "Price Range of Common Stock." SEE "RISK FACTORS," BEGINNING ON PAGE 8, FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY. --------------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROCEEDS TO PRICE TO UNDERWRITING SELLING PUBLIC DISCOUNT(1) SHAREHOLDER(2) Per Share................................................ $ $ $ Total(3)................................................. $ $ $
(1) The Company and the Selling Shareholder have agreed to indemnify the several Underwriters against certain liabilities, including certain liabilities under the Securities Act of 1933, as amended. See "Underwriting." (2) Before deducting expenses payable by the Selling Shareholder estimated at $340,000. (3) The Selling Shareholder has granted the U.S. Underwriters and the International Managers options to purchase up to an additional 540,000 shares and 135,000 shares of Common Stock, respectively, in each case exercisable within 30 days after the date hereof, solely to cover over-allotments, if any. If such options are exercised in full, the total Price to Public, Underwriting Discount and Proceeds to Selling Shareholder will be $ , $ and $ , respectively. See "Underwriting." ------------------------ The shares of Common Stock are offered by the several Underwriters, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of certain legal matters by counsel for the Underwriters and certain other conditions. The Underwriters reserve the right to withdraw, cancel or modify such offer and to reject orders in whole or in part. It is expected that delivery of the shares of Common Stock will be made in New York, New York on or about , 1997. ------------------------ MERRILL LYNCH & CO. BEAR, STEARNS & CO. INC. GOLDMAN, SACHS & CO. ------------------------ The date of this Prospectus is , 1997. [PICTURES OF CERTAIN OF THE COMPANY'S APPAREL PRODUCTS] Certain persons participating in the Offerings may engage in transactions that stabilize, maintain or otherwise affect the price of the Common Stock. Such transactions may include stabilizing, the purchase of Common Stock to cover syndicate short positions and the imposition of penalty bids. For a description of these activities, see "Underwriting." 2 THE COMPANY Jones Apparel Group, Inc. (the "Company") is a leading designer and marketer of better priced women's sportswear, suits and dresses. The Company has pursued a multi-brand strategy marketing its products under several nationally known brands, including JONES NEW YORK, EVAN-PICONE and RENA ROWAN, and the LAUREN BY RALPH LAUREN brand licensed from Polo Ralph Lauren Corporation. Each of the Company's brands is positioned by style and price point to address a distinct segment of the women's better priced market. In addition, the Company recently announced the formation of a JONES NEW YORK men's sportswear division with products to be shipped in the second half of 1998. The Company has leveraged the strong consumer recognition of its brand names through 35 licenses for a range of products including footwear, outerwear, men's suits and accessories under the JONES NEW YORK brand name and 18 licenses under the EVAN-PICONE brand name with select manufacturers of women's and men's apparel and accessories. The Company has grown significantly over the last five years, with net sales increasing from $436.6 million in 1992 to over $1.0 billion in 1996, representing compound annual growth of 23.7%. During this period, the Company's operating income increased from $67.6 million to $130.3 million, representing compound annual growth of 17.8%, and net income increased from $41.3 million to $80.9 million, representing compound annual growth of 18.3%. For the first half of 1997, net sales and earnings per share increased to $581 million and $0.90, representing a 28.1% and 42.9% increase, respectively, over the comparable period of 1996. In July 1996, the Company commenced shipping its first collection of women's career and casual sportswear under the LAUREN BY RALPH LAUREN brand in the United States under an exclusive licensing alliance. The Company's LAUREN BY RALPH LAUREN lifestyle collection offers the classic styling, concepts and elegance associated with internationally known designer Ralph Lauren to a new group of consumers in the "better" market. This product line was initially shipped to 275 department store concept shops and has expanded to 680 concept shops as of August 1997. For Fall 1997, the Company added a petite collection which is being offered in an additional 270 concept shops within petite departments. The Company also recently expanded this lifestyle collection through the addition of coats and suits. In addition to its nationally-recognized brand names, the Company believes it enjoys a number of competitive strengths. The Company believes that its competitive advantages include its ability to design, merchandise, source and distribute superior products at price points within the better market. Through the combination of its worldwide network of quality contract manufacturers and highly efficient information and distribution systems, the Company has developed a reputation among retailers for customer service. The Company also believes it has benefitted from a trend among its major retail accounts to concentrate their apparel buying among a narrowing group of established brand name vendors. As one of the primary apparel resources for many of its retail accounts, the Company is able to influence the mix and timing of orders. As a result, the Company is able to more effectively market complete lines of sportswear and minimize excess inventory. The Company seeks to capitalize on its competitive advantages through a growth strategy that focuses on five principal areas: (i) continuing to expand the LAUREN BY RALPH LAUREN lines by adding new store locations, increasing the amount of retail space devoted to this label in existing store locations and introducing additional product classifications; (ii) continuing to expand the JONES NEW YORK brand by increasing the amount of retail space devoted to this label in existing store locations and by leveraging its brand name recognition to introduce new product lines such as the recently announced JONES NEW YORK men's sportswear line; (iii) continuing to expand the RENA ROWAN and EVAN-PICONE brands by adding new store locations and increasing the amount of retail space devoted to these brands in existing store locations; (iv) seeking new opportunities to license its brand names to increase the market presence and enhance the consumer awareness of its brands, such as the recent licenses for women's swimwear and men's and women's watches; and (v) selectively pursuing acquisitions to provide new brands, products or channels of distribution. 3 The Company distributes its products through approximately 1,550 customers, including department stores, specialty retailer accounts and direct catalog companies throughout the United States and Canada, representing 7,700 locations. In addition, as of September 1, 1997, the Company operated a total of 215 factory outlet stores and five full price stores. The Company was incorporated in Pennsylvania in 1975. The Company's executive offices are located at 250 Rittenhouse Circle, Keystone Park, Bristol, Pennsylvania 19007. RECENT DEVELOPMENTS On September 30, 1997 the Company announced that revenues for its third quarter ended September 28, 1997 will be in the range of $440 million to $450 million. Earnings per share for the quarter should fall in a range of $.86 to $.88, as compared to $.58 per share in the third quarter of 1996. In addition, the Company's order backlog at September 28, 1997 is 49% ahead of the same point in 1996. The Company's growth has been fueled by growth in its JONES NEW YORK brand, as well as stronger than anticipated growth in the LAUREN BY RALPH LAUREN brand. Based on the current order backlog, the Company now anticipates that LAUREN BY RALPH LAUREN sales will exceed $250 million for 1997. 4 THE OFFERINGS The offering of 3,600,000 shares of Common Stock being offered in the United States and Canada (the "U.S. Offering") and the offering of 900,000 shares of Common Stock being offered outside the United States and Canada (the "International Offering") are collectively referred to herein as the "Offerings." Common Stock to be offered by the Selling Shareholder(1)............................. 4,500,000 shares Common Stock outstanding before and after the Offerings(2)............................... 51,699,806 shares Use of Proceeds.............................. The Company will not receive any of the proceeds from the Offerings. New York Stock Exchange Symbol............... JNY
- ------------------------ (1) Assumes the Underwriters' over-allotment options are not exercised. (2) Excludes an aggregate of (i) 3,806,541 shares of Common Stock issuable upon exercise of outstanding employee stock options as of June 29, 1997, and (ii) 2,692,734 shares of Common Stock reserved as of June 29, 1997 for issuance upon exercise of stock options which may be granted under the Company's stock option plans. 5 SELECTED FINANCIAL INFORMATION The following financial information is qualified by reference to, and should be read in conjunction with, the Company's Consolidated Financial Statements and the Notes thereto, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996 and the Company's quarterly report on Form 10-Q for the fiscal quarter ended June 29, 1997 incorporated by reference in this Prospectus. The selected consolidated financial information for each of the five years in the period ended December 31, 1996 is derived from the Company's audited Consolidated Financial Statements for the five fiscal years ended December 31, 1996. The selected consolidated financial information as of June 29, 1997 and June 30, 1996 and the periods ended June 29, 1997 and June 30, 1996 is derived from financial statements that are unaudited but which, in the opinion of management, include all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of financial condition and the results of operations. The results for interim periods may not be indicative of results for the full fiscal year.
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED ----------------------------------------------------- -------------------- JUNE 30, JUNE 29, 1992 1993 1994 1995 1996 1996 1997 --------- --------- --------- --------- --------- --------- --------- (IN THOUSANDS, EXCEPT PER SHARE DATA) INCOME STATEMENT DATA Net sales.................................... $ 436,572 $ 541,152 $ 633,257 $ 776,365 $1,021,042 $ 453,626 $ 580,978 Licensing income(1).......................... 1,564 4,907 8,487 10,314 13,036 5,235 6,766 --------- --------- --------- --------- --------- --------- --------- Total revenues............................... 438,136 546,059 641,744 786,679 1,034,078 458,861 587,744 Cost of goods sold........................... 285,844 363,742 438,572 546,413 717,250 319,800 393,426 --------- --------- --------- --------- --------- --------- --------- Gross profit(2).............................. 152,292 182,317 203,169 240,266 316,828 139,061 194,318 Selling, general and administrative expenses................................... 84,740 103,392 115,307 139,135 186,572 84,874 115,729 --------- --------- --------- --------- --------- --------- --------- Operating income............................. 67,552 78,925 87,862 101,131 130,256 54,187 78,589 Interest expense............................. 1,156 716 1,212 1,908 3,040 1,249 1,145 Interest income.............................. (221) (810) (695) (445) (547) (265) (516) --------- --------- --------- --------- --------- --------- --------- Income before provision for income taxes..... 66,617 79,019 87,345 99,668 127,763 53,203 77,960 Provision for income taxes................... 25,314 30,660 32,425 36,183 46,889 19,526 29,141 --------- --------- --------- --------- --------- --------- --------- Income before cumulative effect of change in accounting principle.................... 41,303 48,359 54,920 63,485 80,874 33,677 48,819 Cumulative effect on prior years of change in accounting for income taxes(3).......... -- 1,376 -- -- -- -- -- --------- --------- --------- --------- --------- --------- --------- Net income................................... $ 41,303 $ 49,735 $ 54,920 $ 63,485 $ 80,874 $ 33,677 $ 48,819 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- PER SHARE DATA(4) Earnings per share--primary Income before cumulative effect of change in accounting principle.................. $0.79 $0.92 $1.04 $1.20 $1.51 $0.63 $0.90 Cumulative effect on prior years of change in accounting for income taxes(3)........ -- $0.03 -- -- -- -- -- Net income................................. $0.79 $0.95 $1.04 $1.20 $1.51 $0.63 $0.90 Earnings per share--fully diluted Income before cumulative effect of change in accounting principle.................. $0.79 $0.92 $1.04 $1.19 $1.50 $0.63 $0.90 Cumulative effect on prior years of change in accounting for income taxes(3)........ -- $0.03 -- -- -- -- -- Net income................................. $0.79 $0.95 $1.04 $1.19 $1.50 $0.63 $0.90 Weighted average number of common shares and share equivalents outstanding Primary.................................... 52,040 52,365 52,924 53,046 53,665 53,749 53,979 Fully diluted.............................. 52,379 52,413 52,925 53,458 54,077 53,844 54,250
AT DECEMBER 31, ----------------------------------------------------- AT JUNE 30, AT JUNE 29, 1992 1993 1994 1995 1996 1996 1997 --------- --------- --------- --------- --------- ----------- ----------- (IN THOUSANDS) BALANCE SHEET DATA Working capital................................ $ 122,376 $ 159,175 $ 204,221 $ 260,853 $ 293,970 $ 285,444 $ 328,229 Total assets................................... 184,639 266,594 318,286 400,959 488,109 474,712 568,693 Short-term debt, including current portion of capital lease obligations................. 1,131 1,722 1,859 2,327 3,067 2,890 3,655 Long-term debt, including capital lease obligations.................................. 4,783 9,545 8,029 10,151 12,141 13,401 19,927 Stockholders' equity........................... 134,791 189,120 248,678 314,975 376,729 345,573 421,690
FOOTNOTES ON FOLLOWING PAGE 6 FOOTNOTES FROM PRIOR PAGE (1) Represents license fees received by the Company (net of related expenses). (2) Historically, the Company had included licensing income as a separate line item in operating income. In accordance with current industry practice, the Company has included this amount in total revenues and gross profit. All periods presented reflect this reclassification of licensing income. (3) For the year ended December 31, 1993, the Company recorded a cumulative effect of a change in accounting principle for income taxes as a result of the adoption of SFAS 109, which increased net income by $1,376,000. (4) On July 30, 1996, the Company's Board of Directors approved a two-for-one stock split of the Company's Common Stock in the form of a 100% stock dividend for shareholders of record as of September 12, 1996. Concurrently, the number of authorized shares of Common Stock was increased to 100,000,000. On October 2, 1996, a total of 26,744,580 shares of Common Stock were issued in connection with the split. The stated par value of each share remained at $0.01. All share and per share amounts have been restated to retroactively reflect the stock split. 7 RISK FACTORS PROSPECTIVE PURCHASERS OF THE SHARES OF COMMON STOCK OFFERED HEREBY SHOULD CAREFULLY CONSIDER ALL OF THE INFORMATION SET FORTH IN THIS PROSPECTUS AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE, AND, IN PARTICULAR, SHOULD EVALUATE THE FOLLOWING RISKS IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY. THIS PROSPECTUS AND THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN INCLUDE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT") WHICH REPRESENT THE COMPANY'S EXPECTATIONS OR BELIEFS CONCERNING FUTURE EVENTS THAT INVOLVE RISKS AND UNCERTAINTIES, INCLUDING THOSE ASSOCIATED WITH THE EFFECT OF NATIONAL AND REGIONAL ECONOMIC CONDITIONS, THE OVERALL LEVEL OF CONSUMER SPENDING, THE PERFORMANCE OF THE COMPANY'S PRODUCTS WITHIN THE PREVAILING RETAIL ENVIRONMENT, CUSTOMER ACCEPTANCE OF BOTH NEW DESIGNS AND NEWLY-INTRODUCED PRODUCT LINES, AND FINANCIAL DIFFICULTIES ENCOUNTERED BY CUSTOMERS. ALL STATEMENTS OTHER THAN STATEMENTS OF HISTORICAL FACTS INCLUDED IN THIS PROSPECTUS, AND THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN INCLUDING, WITHOUT LIMITATION, THE STATEMENTS UNDER "THE COMPANY," AND ELSEWHERE HEREIN, ARE FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD- LOOKING STATEMENTS ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE COMPANY'S EXPECTATIONS ("CAUTIONARY STATEMENTS") ARE DISCLOSED IN THIS PROSPECTUS AND THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN INCLUDING, WITHOUT LIMITATION, IN CONJUNCTION WITH THE FORWARD-LOOKING STATEMENTS OR INCORPORATED BY REFERENCE INCLUDED IN THIS PROSPECTUS AND UNDER "RISK FACTORS." ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS. CYCLICALITY OF APPAREL INDUSTRY The apparel industry is a cyclical industry heavily dependent upon the overall level of consumer spending, with purchases of apparel and related goods tending to decline during recessionary periods when disposable income is low. A difficult retail environment could result in higher than normal levels of promotional sales which could adversely impact the Company's gross profit margins. Although the retail segment in which the Company operates improved moderately in 1996 and 1997, there can be no assurance that the improved retail environment will continue or that the retail environment will not deteriorate. CONCENTRATION OF CUSTOMERS Department stores account for approximately two-thirds of the Company's sales, and its ten largest customers accounted for approximately 64% and 65% of sales in 1996 and the first half of 1997, respectively. Although no single customer accounted for more than 10% of net sales, certain of the Company's customers are under common ownership. When considered together as a group under common ownership, sales to the seven department store customers currently owned by Federated Department Stores Inc. and sales to eight department store customers currently owned by The May Department Store Company each accounted for approximately 20% of 1996 sales, and 21% and 20% of sales for the first half of 1997, respectively. Although the Company believes that purchasing decisions are generally made independently by each department store customer within a commonly-controlled group, in some cases the trend may be toward more centralized purchasing decisions. If such decisions become more centralized, the risk to the Company of such concentration would become greater than is presently the case. The loss of any of the Company's ten largest customers, or any such customer's insolvency, bankruptcy or material financial difficulty, could have a material adverse effect upon the Company. 8 FASHION TRENDS The Company believes that its success depends in substantial part on its ability to anticipate, gauge and respond to changing consumer demands and fashion trends in a timely manner. There can be no assurance, however, that the Company will continue to be successful in this regard. If the Company misjudges the market for a number of products or product groups, it may be faced with a significant amount of unsold finished goods inventory, which could have an adverse effect on the Company's operations. LAUREN BY RALPH LAUREN LICENSE AGREEMENTS The Company has an exclusive license to manufacture and market women's career and casual sportswear under the LAUREN BY RALPH LAUREN trademark in the United States pursuant to license and design service agreements with Polo Ralph Lauren Corporation which expire on December 31, 2001. The license agreement provides for the payment by the Company of a percentage of net sales against guaranteed minimum royalty and design service payments, as set forth in the agreements. Upon the expiration of the initial term, the Company has the right to renew the license for an additional three year term provided that it meets certain minimum sales level requirements. In the event that the license is terminated or not renewed as a result of the Company's failure to comply with the terms of these agreements, including the minimum sales level requirements, such termination could have a material adverse effect upon the Company. DEPENDENCE UPON KEY PERSONNEL The success of the Company is dependent upon the personal efforts and abilities of Sidney Kimmel (Chairman), Jackwyn Nemerov (President), and Irwin Samelman (Executive Vice President, Marketing). The Company does not have employment agreements with Mr. Kimmel, Ms. Nemerov, or Mr. Samelman. The Company believes that the loss of the services of any of Mr. Kimmel, Ms. Nemerov, or Mr. Samelman could have an adverse effect on the Company. See "Management." FOREIGN OPERATIONS AND MANUFACTURING During 1996 approximately 35% of the Company's products were manufactured in the United States and Mexico and approximately 65% in Asia and, to a lesser extent, other parts of the world. As a result, the Company's operations may be adversely affected by political instability resulting in the disruption of trade from foreign countries in which the Company's contractors and suppliers are located, the imposition of additional regulations relating to imports or duties, taxes and other charges on imports, any significant fluctuation of the value of the dollar against foreign currencies and restrictions on the transfer of funds. In addition, the Company's import operations are subject to constraints imposed by bilateral textile agreements between the United States and a number of foreign countries. These agreements impose quotas on the amount and type of goods which can be imported into the United States from these countries. Furthermore, because the Company's foreign manufacturers are located at greater geographic distances from the Company than its domestic manufacturers, the Company is generally required to allow greater lead time for foreign orders. This reduces the Company's manufacturing flexibility, which increases the risk that the Company will be required to mark down unsold inventory as a result of misjudging the market for a foreign sourced product. Although the Company seeks to actively monitor the compliance of its contractors with applicable labor and wage standards, violations of these standards and the resulting publicity relating to such violations could have an adverse effect on the Company. 9 COMPETITION There is intense competition in the sectors of the apparel industry in which the Company participates. The Company competes with many other apparel companies, some of which are larger and have greater resources than the Company. The Company believes in order to be successful in its industry, it must be able to evaluate and respond to changing consumer demand and taste and to remain competitive in the areas of style, quality and price while operating within the significant domestic and foreign production and delivery constraints of the industry. POSSIBLE VOLATILITY OF STOCK PRICE The market price of the Company's Common Stock may be highly volatile. Factors such as quarter-to-quarter variations in the Company's revenues and earnings could cause the market price of the Company's Common Stock to fluctuate significantly. In addition, in recent years the stock markets have experienced significant volatility, which often may have been unrelated to the operating performance of the affected companies. Such volatility may adversely affect the market price of the Company's Common Stock. See "Price Range of Common Stock." SHARES ELIGIBLE FOR FUTURE SALE The prevailing market price of Common Stock after this offering could be adversely affected by future sales of substantial amounts of Common Stock by existing shareholders. There will be 51,699,806 shares of Common Stock outstanding immediately following the Offerings, 44,350,756 of which will be tradeable without restriction and 7,349,050 of which may be sold subject to the restrictions of Rule 144 under the Securities Act of 1933 (the "Securities Act"). However, the Company, its executive officers and directors, including General Partner and the Selling Shareholder, have agreed, subject to certain exceptions, not to directly or indirectly (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of or otherwise dispose of or transfer any shares of Common Stock or securities convertible into or exchangeable or exercisable for Common Stock, whether now owned or thereafter acquired by the person executing the agreement or with respect to which the person executing the agreement thereafter acquires the power of disposition, or file a registration statement under the Securities Act with respect to the foregoing or (ii) enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership of the Common Stock whether any such swap or transaction is to be settled by delivery of Common Stock or other securities, in cash or otherwise, without the prior written consent of Merrill Lynch on behalf of the Underwriters for a period of 90 days after the date of this Prospectus, in the case of the Selling Shareholder and the General Partner, or 30 days after the date of this Prospectus, in the case of the other executive officers and directors of the Company. See "Shares Eligible for Future Sale." 10 CAPITALIZATION The following table sets forth the capitalization of the Company at June 29, 1997. The sale of the shares of Common Stock offered hereby will not affect the Company's capitalization.
JUNE 29, 1997 -------------- (IN THOUSANDS) Short-term debt: Current portion of long-term debt .............................................................. $ 10 Current portion of capital lease obligations.................................................... 3,645 -------------- Total short-term debt....................................................................... $ 3,655 -------------- -------------- Long-term debt: Obligations under capital leases................................................................ $ 19,925 Long-term debt.................................................................................. 2 -------------- Total long-term debt........................................................................ 19,927 Stockholders' equity: Common Stock, par value $0.01 per share: 100,000,000 shares authorized: 54,053,000 shares issued and outstanding(1)............................................................................ 541 Additional paid-in capital...................................................................... 109,444 Retained earnings .............................................................................. 366,011 Cumulative foreign currency translation adjustment.............................................. (1,216) Treasury stock (1,976,000 shares at cost) ...................................................... (53,090) -------------- Total stockholders' equity.................................................................. 421,690 -------------- Total capitalization...................................................................... $ 441,617 -------------- --------------
- ------------------------ (1) As of the date of this Prospectus, there were 51,699,806 shares of Common Stock outstanding which excludes an aggregate of (i) 3,806,541 shares of Common Stock issuable upon exercise of outstanding employee stock options as of June 29, 1997, and (ii) 2,692,734 shares of Common Stock reserved as of June 29, 1997 for issuance upon exercise of stock options which may be granted under the Company's stock option plans. USE OF PROCEEDS The Company will not receive any of the proceeds from the Offerings. All of the expenses of the Offerings will be paid by the Selling Shareholder. 11 PRICE RANGE OF COMMON STOCK The Company's Common Stock is traded on the New York Stock Exchange under the symbol "JNY." The following table sets forth, for the periods indicated, the high and low sale prices per share of the Company's Common Stock as reported on the New York Stock Exchange Composite Tape.
HIGH LOW ------- ------- 1995 First Quarter................................................................................... $13 15/16 $11 5/16 Second Quarter.................................................................................. 15 7/16 12 15/16 Third Quarter................................................................................... 18 3/8 14 7/8 Fourth Quarter.................................................................................. 19 3/4 15 3/16 1996 First Quarter................................................................................... 24 1/4 17 13/16 Second Quarter.................................................................................. 27 3/4 23 1/4 Third Quarter................................................................................... 37 3/8 22 9/16 Fourth Quarter.................................................................................. 37 3/8 29 5/8 1997 First Quarter................................................................................... 41 3/8 32 1/8 Second Quarter.................................................................................. 49 1/8 36 1/8 Third Quarter (through September 29, 1997) ..................................................... 57 3/16 46 5/8
The last reported sale price per share of the Company's Common Stock as reported on the New York Stock Exchange Composite Tape on September 29, 1997 was $53 1/16. DIVIDEND POLICY The Company has not paid any cash dividends on shares of its Common Stock. The Company presently anticipates that all of its future earnings will be retained for development of its business and does not anticipate paying cash dividends on its Common Stock in the foreseeable future. The payment of any future dividends will be at the discretion of the Company's Board of Directors and will depend upon, among other things, future earnings, operations, capital requirements, the general financial condition of the Company and general business conditions. 12 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY The directors and executive officers of the Company are as follows:
NAME AGE OFFICE - --------------------------------------------------- --- --------------------------------------------------- Sidney Kimmel...................................... 69 Chairman and Director Herbert J. Goodfriend.............................. 71 Vice Chairman and Director Jackwyn Nemerov.................................... 46 President Irwin Samelman..................................... 66 Executive Vice President, Marketing and Director Wesley R. Card..................................... 49 Chief Financial Officer Gary R. Klocek..................................... 47 Controller Geraldine Stutz.................................... 69 Director Howard Gittis...................................... 63 Director
SIDNEY KIMMEL founded the Jones Apparel Division of W.R. Grace & Co. in 1970. Mr. Kimmel has served as Chairman since 1975. Prior to 1975, Mr. Kimmel occupied various executive offices, including President of JONES NEW YORK and Vice President of John Meyer of Norwich. Prior to founding the Company, Mr. Kimmel was employed by W.R. Grace & Co. and was President of Villager, Inc., a sportswear company. HERBERT J. GOODFRIEND joined the Company in 1990 after serving as the Company's legal counsel for the previous three years and has served as a director since July 1991. Before joining the Company, Mr. Goodfriend served as a director of Villager, Inc. and Venice Industries, Inc. In addition, Mr. Goodfriend is engaged in the practice of law and is of counsel to the firm of Phillips Nizer Benjamin Krim & Ballon LLP, which performs legal services for the Company. JACKWYN NEMEROV was appointed President of the Company in January 1997. She joined the Company in 1985 and served as President of the Company's casual sportswear divisions and LAUREN BY RALPH LAUREN division. Prior to joining the Company, Ms. Nemerov was President of the Gloria Vanderbilt division of Murjani, Inc. from 1980 through 1985. IRWIN SAMELMAN has been Executive Vice President, Marketing of the Company since 1991 and has served as a director since July 1991. In addition, from 1987 to 1991, Mr. Samelman provided marketing consulting services to the Company through Samelman Associates, Inc., a private consulting company controlled by him. Prior thereto, Mr. Samelman was Regional Marketing Manager of Russ Togs, Inc. and a Vice President of Villager, Inc. WESLEY R. CARD joined the Company in 1990 as Chief Financial Officer. Prior to joining the Company, Mr. Card held the positions of Executive Vice President and Chief Financial Officer of Carolyne Roehm, Inc., and Corporate Vice President, Controller and Assistant Secretary of Warnaco, Inc. GARY R. KLOCEK has been Controller of the Company since August 1987. Prior to joining the Company, Mr. Klocek held various positions with Atlantic Richfield Company ("ARCO") from 1979 through 1987, his last position being Manager of Cost and Inventory Control for one of ARCO's subsidiaries. GERALDINE STUTZ has been a director of the Company since July 1991. Since 1993, Ms. Stutz has been a principal partner of Panache Productions, a fashion and marketing service. During the previous five years, she was Publisher of Panache Press at Random House, a book publisher. From 1960 until 1986, Ms. Stutz was President of Henri Bendel. Ms. Stutz serves on the Board of Directors of Tiffany & Co., Hanover Direct, The Theatre Development Fund and The Actors' Fund. 13 HOWARD GITTIS has been a director of the Company since April 1992. During the past five years, Mr. Gittis' principal occupation has been Director and Vice Chairman of MacAndrews & Forbes Holdings Inc., a diversified holding company. In addition, Mr. Gittis is a director of Andrews Group Incorporated, Consolidated Cigar Corporation, First Nationwide Holdings Inc., First Nationwide Bank, a Federal Savings Bank, Loral Corporation, Mafco Consolidated Group Inc., Mafco Worldwide Corporation, NWCG Holdings Corporation, New World Communications Group Incorporated, New World Television Incorporated, Power Control Technologies Inc., Revlon, Inc., Revlon Consumer Products Corporation, and Revlon Worldwide Corporation. KEY EMPLOYEES The following persons, although not executive officers of the Company, make significant business contributions to the Company: RENA ROWAN was the original creator of the JONES NEW YORK line and served as the division's Chief Designer from 1970 to 1982. She is currently Vice President, Design of the Company. From 1991 to 1993, Ms. Rowan was an executive vice president of the Company. Prior to the inception of the Company, Ms. Rowan was employed by Villager, Inc. and Rosenau, Inc. ANITA BRITT, Director of Investor Relations and Financial Planning, joined the Company in December 1993. Prior to joining the Company, Ms. Britt was Director of Internal Audit of American Reliance Group, Inc. HOWARD BUERKLE has been President of Retail Operations for the Company since 1989. From 1986 through 1989, Mr. Buerkle was President of the retail division of Inwear/Matinique. ELLEN DANIEL joined the Company in 1994 in the dual capacity of Senior Vice President--Corporate Merchandising Manager and President of the EVAN-PICONE division. From 1982 through 1994, Ms. Daniel was employed by Liz Claiborne, most recently as Senior Vice President--Corporate Design Director. IRA DANSKY joined the Company in 1996 as General Counsel. Prior to joining the Company, Mr. Dansky was engaged in private law practice from 1987 though 1996, prior to which he served as Associate General Counsel of Xerox Corporation. RONALD HARRISON, Vice President of Manufacturing, joined the Company in 1981. Mr. Harrison had been Plant Manager for Chief Apparel, Inc. from 1965 through 1981. JOSEPH HIESS was appointed President of the JONES NEW YORK Men's Sportswear division in August 1997. Prior to his appointment, Mr. Hiess served as head of Design and Marketing of JJ Farmer, a menswear company he founded in 1986 and subsequently sold to Salant Corporation in 1993. BARBARA KENNEDY has been President of the JONES NEW YORK Dress Division since August 1991. From 1983 through August 1991, Ms. Kennedy was employed by Bloomingdale's in various capacities, most recently as Vice President, Merchandise Manager. RICHARD SHAW, President of JONES APPAREL GROUP CANADA, INC., joined the Company in May, 1997. Prior to joining the Company, Mr. Shaw served as President of Liz Claiborne Canada which he helped launch in 1987. JEFFREY LEVY, President of RENA ROWAN, joined the Company in 1990. Prior to joining the Company, Mr. Levy was Vice President of Sales and National Sales Manager, of Russ Togs, Inc. from 1984 through 1990. BENNY LIN joined the Company in December 1995 as Creative Director of the LAUREN BY RALPH LAUREN division. Mr. Lin had been Fashion Director at Macy's East prior to joining the Company. 14 MARTIN MARLOWE joined the Company in 1992 as Vice President of Foreign Manufacturing. Prior to joining the Company, Mr. Marlowe was President of Jodi International, an apparel importer, from 1988 to 1992. HELEN MERRIL, President of the EVAN-PICONE Dress Divisions, joined the Company in October 1993. Prior to joining the Company, Ms. Merril held the positions of President of Scassi Dress of De Peche Corporation and President of Nipon Boutique of Albert Nipon Inc. SUSAN METZGER, Vice President of Sales for the LAUREN BY RALPH LAUREN division, joined the Company in May 1996. Prior to joining the Company, Ms. Metzger held the positions of Vice President of Sales of Chaus, Inc and Sales Manager of JH Collectibles. DEANNA RANDALL, who joined the Company in 1981, has held various sales and marketing positions with the Company, and is currently President of the JONES NEW YORK career division. JOHN SAMMARITANO, Vice President of Distribution, joined the Company in 1975. Mr. Sammaritano had been Vice President of Distribution for Villager, Inc. from 1964 through 1975. 15 SELLING SHAREHOLDER The following tables sets forth certain information with respect to the beneficial ownership of Common Stock as of the date of this Prospectus by Bristol Rittenhouse Investments, L.P. (the "Selling Shareholder") and as adjusted to reflect the sale of 4,500,000 shares by the Selling Shareholder in the Offerings. Mr. Sidney Kimmel, as the sole general partner (the "General Partner") of the Selling Shareholder, has sole voting and investment power with respect to all shares of Common Stock shown as beneficially owned by it except as set forth in the footnotes below.
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP PRIOR TO OFFERINGS SHARES AFTER OFFERINGS ------------------------- BEING --------------------------- NAME SHARES PERCENT (1) OFFERED SHARES PERCENT (1) - ---------------------------------------------- ---------- ------------- -------------- ------------ ------------- Bristol Rittenhouse Investments, L.P.(3)(4)... 5,400,000 10.4% 4,500,000(2) 900,000(2) 1.7%
- ------------------------ (1) Based upon 51,699,806 shares of Common Stock issued and outstanding as of October 12, 1997. (2) Assumes the Underwriters' over-allotment options are not exercised. If such over-allotment options are exercised in full, an additional 675,000 shares will be sold by the Selling Shareholder. See "Underwriting." (3) The Selling Shareholder is a recently organized Delaware limited partnership in which Sidney Kimmel is the sole general partner with a 99% partnership interest, with the remaining 1% held by a limited partner. (4) Does not include (i) 6,449,050 shares of Common Stock (12.5% of the outstanding Common Stock) owned directly by the General Partner, and (ii) 400,000 shares of Common Stock which are issuable to the General Partner upon exercise of stock options, which do not become exercisable until July 1998. 16 SHARES ELIGIBLE FOR FUTURE SALE The General Partner of the Selling Shareholder will beneficially own 7,349,050 shares of the Company's Common Stock subsequent to the completion of the Offerings (6,674,050 shares if the Underwriters' over-allotment options are exercised in full). The General Partner of the Selling Shareholder has agreed not to sell any such shares for a period of 90 days from the date of this Prospectus without the prior written consent of Merrill Lynch on behalf of the Underwriters. Subsequently, such shares may be eligible for sale pursuant to Rule 144 under the Securities Act of 1933 or otherwise. In addition, the Company, its executive officers and directors, including the General Partner and the Selling Shareholder, have agreed, subject to certain exceptions, not to directly or indirectly (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of or otherwise dispose of or transfer any shares of Common Stock or securities convertible into or exchangeable or exercisable for Common Stock, whether now owned or thereafter acquired by the person executing the agreement or with respect to which the person executing the agreement thereafter acquires the power of disposition, or file a registration statement under the Securities Act with respect to the foregoing or (ii) enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership of the Common Stock whether any such swap or transaction is to be settled by delivery of Common Stock or other securities, in cash or otherwise, without the prior written consent of Merrill Lynch on behalf of the Underwriters for a period of 90 days after the date of this Prospectus, in the case of the Selling Shareholder and the General Partner, or 30 days after the date of this Prospectus, in the case of the other executive officers and directors of the Company. See "Underwriting." Pursuant to Rule 144, each shareholder who is deemed to be an "affiliate" of the Company may sell, within any three-month period, a number of shares that does not exceed the greater of (a) 1% of the shares of Common Stock then outstanding or (b) the average weekly trading volume in the Common Stock during the four calendar weeks preceding such sale. No predictions can be made as of the effect, if any, that sales of shares under Rule 144 or the availability of shares for sale will have on the market price prevailing from time to time after the Offerings. Nevertheless, sales of substantial amounts of Common Stock in the public market could adversely affect the market price of the Common Stock. 17 CERTAIN UNITED STATES FEDERAL TAX CONSEQUENCES TO NON-U.S. HOLDERS OF COMMON STOCK The following is a general discussion of certain United States federal income and estate tax consequences of the ownership and disposition of Common Stock by a holder who is not a United States person (a "Non-U.S. Holder") and who acquires and owns such Common Stock as a capital asset within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code"). For this purpose, the term "Non-U.S. Holder" generally is defined as any person other than (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in the United States or under the laws of the United States or of any state, or (iii) an estate whose income is included in gross income for United States federal income tax purposes regardless of its source, or (iv) a trust if, (a) a court within the United States is able to exercise primary jurisdiction supervision over the administration of the trust and (b) one or more United States fiduciaries have the authority to control all substantial decisions of the trust. This discussion does not consider specific facts and circumstances that may be relevant to a particular Non-U.S. Holder's tax position, does not address all aspects of United States federal income, gift and estate taxes and does not deal with foreign and United States state and local consequences that may be relevant to such Non-U.S. Holders in light of their personal circumstances. Further, it does not discuss the rules applicable to Non-U.S. Holders subject to special tax treatment under the federal tax laws (including, but not limited to, banks and insurance companies, dealers in securities, and holders of securities held as part of a "straddle," "hedge," or "conversion transaction"). Furthermore, this discussion is based on current provisions of the Code, existing, proposed and newly issued regulations which are not yet effective promulgated thereunder and administrative and judicial interpretations thereof, all of which are subject to change, possibly on a retroactive basis. ACCORDINGLY, PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE UNITED STATES FEDERAL, STATE, LOCAL AND NON-UNITED STATES INCOME AND OTHER TAX CONSEQUENCES OF OWNING AND DISPOSING OF SHARES OF COMMON STOCK. An individual may, subject to certain exceptions, be deemed to be a resident alien (as opposed to a nonresident alien) by virtue of being present in the United States on at least thirty-one (31) days in the calendar year and for an aggregate of at least one hundred eighty-three (183) days during a three-year period ending in the current calendar year (counting for such purposes all of the days present in the current year, one-third of the days present in the immediately preceding year, and one-sixth of the days present in the second preceding year). In addition to the "substantial presence test" described in the immediately preceding sentence, an alien may be treated as a resident alien if he (i) meets a lawful permanent residence test (a so-called "green card" test) or (ii) elects to be treated as a U.S. resident and meets the "substantial presence test" in the immediately following year. Resident aliens are subject to United States federal income tax as if they were United States citizens. DIVIDENDS In general, dividends paid to a Non-U.S. Holder of Common Stock will be subject to withholding of U.S. federal income tax at a thirty (30%) percent rate (or such lower rate as may be specified by an applicable income tax treaty), unless the dividends are (i) effectively connected with the conduct of a trade or business of the Non-U.S. Holder within the United States ("United States trade or business income") or (ii) if an applicable treaty so provides, attibutable to a United States permanent establishment maintained by the Non-U.S. Holder. If the dividend is United States trade or business income or attributable to a United States permanent establishment, the dividend would be subject to United States federal income tax on a net income basis at applicable graduated individual or corporate rates and would be exempt from the thirty (30%) percent withholding tax described above (if the Non-U.S. Holder files certain forms, including United States Internal Revenue Service ("Service") Form 4224 or such other certification required by the Service, with the payor of the dividend). Any such dividends that are United States trade or business 18 income received by a foreign corporation may, under certain circumstances, be subject to an additional "branch profits tax" at a thirty (30%) percent rate (or such lower rate as may be specified by an applicable income tax treaty). Under current United States Treasury regulations, dividends paid to a shareholder at an address in a foreign country are presumed to be paid to a resident of such country for purposes of the withholding discussed above (unless the payor has knowledge to the contrary) and, under the current interpretation of United States Treasury regulations, for purposes of determining the applicability of a tax treaty rate, unless an applicable tax treaty requires some other method for determining a shareholder's residence. Under newly issued United States Treasury regulations which will be effective for payments made after December 31, 1998, however, a Non-U.S. Holder of Common Stock who wishes to claim the benefit of an applicable treaty rate would be required to satisfy applicable certification and other requirements, including the requirement generally to file Service Form W-8. In addition, under the newly issued regulations, in the case of Common Stock held by a foreign partnership the certification requirement generally would be applied to the partners of the partnership and the partnership may be required to provide certain information. Such regulations also provide for look through rules for tiered partnerships. Prospective investors should consult their tax advisors concerning the newly issued regulations and the effect that such regulations could have on an investment in the Common Stock. A Non-U.S. Holder of Common Stock eligible for a reduced rate of United States withholding tax pursuant to a tax treaty or whose dividends have otherwise been subjected to withholding in an amount which exceeds such Non-U.S. Holder's United States federal income tax liability, may obtain a refund or credit of any excess amounts withheld by filing an appropriate claim for refund with the Service. GAIN ON DISPOSITION OF COMMON STOCK A Non-U.S. Holder generally will not be subject to United States federal income tax with respect to gain recognized on a sale or other disposition of Common Stock unless (i) the gain is effectively connected with a trade or business of the Non-U.S. Holder in the United States or, if an applicable income tax treaty so provides, attributable to a permanent establishment maintained by the Non-U.S. Holder in the United States, (ii) in the case of a Non-U.S. Holder who is a nonresident alien individual and holds the Common Stock as a capital asset, such holder is present in the United States for 183 or more days in the taxable year of the sale or other disposition and certain other conditions are met, (iii) the Non-U.S. Holder is subject to tax pursuant to provisions of United States tax law that apply to certain expatriates, or (iv) under certain circumstances if the Company is or has been during certain time periods a "U.S. real property holding corporation" for United States federal income tax purposes and, if the Common Stock is "regularly traded on an established securities market," the Non-U.S. Holder held, directly or indirectly, during certain time periods more than 5% of the Common Stock. The Company believes that it has not been, is not currently and is not likely to become, a "U.S. real property holding corporation." If an individual Non-U.S. Holder falls under clause (i) above, he will be taxed on his net gain derived from the sale under regular graduated United States federal income tax rates. If the individual falls under clause (ii) above, he will be subject to a flat thirty (30%) percent tax on his United States source capital gains for the taxable year which may be offset by United States source capital losses for such year (notwithstanding the fact that he is not considered a resident of the United States). Thus, Non-U.S. Holders who spend 183 days or more in the United States in the taxable year in which they contemplate the sale of the Common Stock are urged to consult their tax advisors as to the tax consequences of such sale. If the Non-U.S. Holder that is a foreign corporation falls under clause (i) above, it will be taxed on its gain on a net income basis at applicable graduated corporate rates and, in addition, may be subject to the branch profits tax equal to thirty (30%) percent of its "effectively connected earnings and profits" within the meaning of the Code for the taxable year, as adjusted for certain items, unless it qualifies for a lower rate under an applicable income tax treaty. 19 FEDERAL ESTATE TAXES Common Stock that is owned, or treated as owned, by an individual who is not a citizen or resident (as specifically determined under residence rules for United States federal estate tax purposes) of the United States at the time of death or that has been the subject of certain lifetime transfers will be included in such holder's gross estate for United States federal estate tax purposes, unless an applicable estate tax treaty provides otherwise. U.S. INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING The Company must report annually to the Service and to each Non-U.S. Holder the amount of dividends paid to such Non-U.S. Holder and any tax withheld with respect to such dividends. These information reporting requirements apply regardless of whether withholding is required. Copies of the information returns reporting such dividends and withholding may also be made available under the provisions of an applicable treaty or agreement, to the tax authorities in the country in which the Non-U.S. Holder resides. United States backup withholding tax (which generally is a withholding tax imposed at the rate of thirty-one (31%) percent on certain payments to persons that fail to furnish certain information under the United States information reporting requirements) and information reporting generally will not apply to dividends paid on Common Stock to a Non-U.S. Holder at an address outside of the United States, provided that the payor does not have actual knowledge that the holder is a United States person. However, under the newly issued regulations dividend payments will be subject to backup withholding and information reporting unless applicable certification requirements are satisfied. See the discussion above with respect to rules applicable to foreign partnerships under the newly issued regulations. In general, the payment of proceeds from the disposition of Common Stock to or through a United States office of a broker will be subject to information reporting and backup withholding unless the owner, under penalties of perjury, certifies, among other things, its status as a Non-U.S. Holder or otherwise establishes an exemption. The payment of proceeds from the disposition of Common Stock to or through a non-U.S. office of a non-U.S. broker generally will not be subject to backup withholding and information reporting except as noted below. In the case of proceeds from the disposition of Common Stock paid to or through a non-U.S. office of a broker that is (i) a United States person, (ii) a "controlled foreign corporation" for United States federal income tax purposes or (iii) a foreign person 50% or more of whose gross income (from all sources) from certain periods is effectively connected with a United States trade or business (or, after the newly issued regulations are effective, a foreign partnership, if at any time during its tax year one or more of its partners are United States persons who in the aggregate hold more than 50% of its income or capital or if, at any time during its tax year the partnership is engaged in the conduct of a trade or business), information reporting (but not backup withholding) will apply unless the broker receives a certification that the owner is a Non-U.S. Holder (and the broker has no knowledge to the contrary). Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to a Non-U.S. Holder will be allowed as a refund or as a credit against such Non-U.S. Holder's United States federal income tax liability, provided that the required information is furnished to the Service. THE FOREGOING DISCUSSION IS INCLUDED FOR GENERAL INFORMATION ONLY. ACCORDINGLY, EACH PROSPECTIVE PURCHASER IS URGED TO CONSULT WITH HIS TAX ADVISOR WITH RESPECT TO THE UNITED STATES FEDERAL INCOME TAX AND FEDERAL ESTATE TAX CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF COMMON STOCK, INCLUDING THE APPLICATION AND EFFECT OF THE LAWS OF ANY STATE, LOCAL, FOREIGN, OR OTHER TAXING JURISDICTION. 20 UNDERWRITING Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Bear, Stearns & Co. Inc. and Goldman, Sachs & Co. are acting as representatives (the "U.S. Representatives") of each of the Underwriters named below (the "U.S. Underwriters"). Subject to the terms and conditions set forth in a U.S. purchase agreement (the "U.S. Purchase Agreement") among the Company, the Selling Shareholder, the General Partner and the U.S. Underwriters, and concurrently with the sale of 900,000 shares of Common Stock to the International Managers (as defined below), the Selling Shareholder has agreed to sell to the U.S. Underwriters, and each of the U.S. Underwriters severally has agreed to purchase from the Selling Shareholder, the number of shares of Common Stock set forth opposite its name below.
NUMBER OF U.S. UNDERWRITERS SHARES ----------- Merrill Lynch, Pierce, Fenner & Smith Incorporated.......................................... Bear, Stearns & Co. Inc......................................... Goldman, Sachs & Co............................................. ----------- Total................................................. 3,600,000 ----------- -----------
The Company, the Selling Shareholder and the General Partner have also entered into an international purchase agreement (the "International Purchase Agreement") with certain underwriters outside the United States and Canada (the "International Managers" and, together with the U.S. Underwriters, the "Underwriters") for whom Merrill Lynch International, Bear, Stearns International Limited and Goldman Sachs International are acting as lead managers (the "Lead Managers"). Subject to the terms and conditions set forth in the International Purchase Agreement, and concurrently with the sale of 3,600,000 shares of Common Stock to the U.S. Underwriters pursuant to the U.S. Purchase Agreement, the Selling Shareholder has agreed to sell to the International Managers, and the International Managers severally have agreed to purchase from the Selling Shareholder, an aggregate of 900,000 shares of Common Stock. The initial public offering price per share and the total underwriting discount per share of Common Stock are identical under the U.S. Purchase Agreement and the International Purchase Agreement. In the U.S. Purchase Agreement and the International Purchase Agreement, the several U.S. Underwriters and the several International Managers, respectively, have agreed, subject to the terms and conditions set forth therein, to purchase all of the shares of Common Stock being sold pursuant to each such agreement if any of the shares of Common Stock being sold pursuant to such agreement are purchased. Under certain circumstances, under the U.S. Purchase Agreement and the International Purchase Agreement, the commitments of non-defaulting Underwriters may be increased. The closings with respect to the sale of shares of Common Stock to be purchased by the U.S. Underwriters and the International Managers are conditioned upon one another. The U.S. Representatives have advised the Company and the Selling Shareholder that the U.S. Underwriters propose initially to offer the shares of Common Stock to the public at the initial public offering price set forth on the cover page of this Prospectus, and to certain dealers at such price less a concession not in excess of $ per share of Common Stock. The U.S. Underwriters may allow, and such dealers may reallow, a discount not in excess of $ per share of Common Stock on sales to certain other dealers. After the initial public offering, the public offering price, concession and discount may be changed. The Selling Shareholder has granted an option to the U.S. Underwriters, exercisable for 30 days after the date of this Prospectus, to purchase up to an aggregate of 540,000 additional shares of Common Stock 21 at the initial public offering price set forth on the cover page of this Prospectus, less the underwriting discount. The U.S. Underwriters may exercise this option only to cover over-allotments, if any, made on the sale of the Common Stock offered hereby. To the extent that the U.S. Underwriters exercise these options, each U.S. Underwriter will be obligated, subject to certain conditions, to purchase a number of additional shares of Common Stock proportionate to such U.S. Underwriter's initial amount reflected in the foregoing table. The Selling Shareholder also has granted an option to the International Managers, exercisable for 30 days after the date of this Prospectus, to purchase up to an aggregate of 135,000 additional shares of Common Stock to cover over-allotments, if any, on terms similar to those granted to the U.S. Underwriters. The Company, its executive officers and directors, including the General Partner and the Selling Shareholder, have agreed, subject to certain exceptions, not to directly or indirectly (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of or otherwise dispose of or transfer any shares of Common Stock or securities convertible into or exchangeable or exercisable for Common Stock, whether now owned or thereafter acquired by the person executing the agreement or with respect to which the person executing the agreement thereafter acquires the power of disposition, or file a registration statement under the Securities Act with respect to the foregoing or (ii) enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership of the Common Stock whether any such swap or transaction is to be settled by delivery of Common Stock or other securities, in cash or otherwise, without the prior written consent of Merrill Lynch on behalf of the Underwriters for a period of 90 days after the date of this Prospectus, in the case of the Selling Shareholder and the General Partner, or 30 days after the date of this Prospectus, in the case of the other executive officers and directors of the Company. See "Shares Eligible for Future Sale." The U.S. Underwriters and the International Managers have entered into an intersyndicate agreement (the "Intersyndicate Agreement") that provides for the coordination of their activities. Pursuant to the Intersyndicate Agreement, the U.S. Underwriters and the International Managers are permitted to sell shares of Common Stock to each other for purposes of resale at the initial public offering price, less an amount not greater than the selling concession. Under the terms of the Intersyndicate Agreement, the U.S. Underwriters and any dealer to whom they sell shares of Common Stock will not offer to sell or sell shares of Common Stock to persons who are non-U.S. or non-Canadian persons or to persons they believe intend to resell to persons who are non-U.S. or non-Canadian persons, and the International Managers and any dealer to whom they sell shares of Common Stock will not offer to sell or sell shares of Common Stock to U.S. persons or to Canadian persons or to persons they believe intend to resell to U.S. or Canadian persons, except in the case of transactions pursuant to the Intersyndicate Agreement. The Company, the Selling Shareholder and the General Partner have agreed to indemnify the U.S. Underwriters and the International Managers against certain liabilities, including certain liabilities under the Securities Act, or to contribute to payments the U.S. Underwriters and International Managers may be required to make in respect thereof. Until the distribution of the Common Stock is completed, rules of the Securities and Exchange Commission may limit the ability of the Underwriters and certain selling group members to bid for and purchase the Common Stock. As an exception to these rules, the U.S. Representatives are permitted to engage in certain transactions that stabilize the price of the Common Stock. Such transactions consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of the Common Stock. If the Underwriters create a short position in the Common Stock in connection with the Offerings, i.e., if they sell more shares of Common Stock than are set forth on the cover page of this Prospectus, the U.S. Representatives may reduce that short position by purchasing Common Stock in the open market. The U.S. Representatives may also elect to reduce any short position by exercising all or part of the over-allotment option described above. 22 The U.S. Representatives may also impose a penalty bid on certain Underwriters and selling group members. This means if the U.S. Representatives purchase shares of Common Stock in the open market to reduce the Underwriters' short position or to stabilize the price of the Common Stock, they may reclaim the amount of the selling concession from the Underwriters and selling group members who sold those shares as part of the Offerings. In general, purchases of a security for the purpose of stabilization or to reduce a short position could cause the price of the security to be higher than it might be in the absence of such purchases. The imposition of a penalty bid might also have an effect on the price of the Common Stock to the extent that it were to discourage resales of the Common Stock. Neither the Company, the Selling Shareholder nor any of the Underwriters makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the Common Stock. In addition, neither the Company, the Selling Shareholder nor any of the Underwriters makes any representation that the U.S. Representatives will engage in such transactions or that such transactions, once commenced, will not be discontinued without notice. Merrill Lynch has from time to time provided investment banking financial advisory services to the Company, for which it has received customary compensation, and may continue to do so in the future. LEGAL MATTERS Certain legal matters in connection with the Common Stock offered hereby will be passed upon for the Company by Phillips Nizer Benjamin Krim & Ballon LLP, 666 Fifth Avenue, New York, New York 10103. Phillips Nizer Benjamin Krim & Ballon LLP will rely upon Mesirov Gelman Jaffe Cramer & Jamieson, 1735 Market Street, Philadelphia, Pennsylvania, with respect to certain matters concerning Pennsylvania law. Herbert J. Goodfriend, Vice Chairman of the Company, is of counsel to Phillips Nizer Benjamin Krim & Ballon LLP. Certain legal matters relating to the Offerings will be passed upon for the Underwriters by Willkie Farr & Gallagher, 153 East 53rd Street, New York, New York 10022. EXPERTS The financial statements and schedule of the Company incorporated by reference in this Prospectus have been audited by BDO Seidman, LLP, independent certified public accountants, to the extent and for the periods set forth in their reports incorporated herein by reference, and are incorporated by reference herein in reliance upon such reports given upon the authority of said firm as experts in accounting and auditing. 23 AVAILABLE INFORMATION The Company is subject to the informational requirements of the Exchange Act, and in accordance therewith files reports and other information with the Securities and Exchange Commission (the "Commission"). Reports, proxy statements and other information concerning the Company can be inspected and copied at the public reference room maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. In addition, upon request such reports, proxy statements and other information will be made available for inspection and copying at the Commission's public reference facilities at the Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and at Seven World Trade Center, 13th Floor, New York, New York 10048. Copies of such material can be obtained at prescribed rates upon request from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Such material may also be accessed electronically at the Commission's site on the World Wide Web located at http:\\www.sec.gov. The Company's Common Stock is listed on the New York Stock Exchange, and reports, proxy statements and other information concerning the Company may be inspected and copied at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. The Company has filed with the Securities and Exchange Commission, Washington, D.C., a Registration Statement on Form S-3 under the Securities Act with respect to the Common Stock offered hereby. For further information about the Company and the securities offered hereby, reference is made to the Registration Statement and to the financial statements, schedules and exhibits filed as a part hereof. Statements contained in this Prospectus as to the contents of any contract or any other document are not necessarily complete, and in each instance, reference is made to the copy of such contract or document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. The Registration Statement, including exhibits thereto, may be inspected without charge at the Commission's principal office in Washington, D.C. and copies of all or any part thereof may be obtained from such office after payment of the fees prescribed by the Commission. INCORPORATION OF DOCUMENTS BY REFERENCE The Company hereby incorporates by reference in this Prospectus (i) the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, as amended (the "1996 Form 10-K"), (ii) the Company's Quarterly Reports on form 10-Q for the fiscal quarters ended March 30, 1997 (the First Quarter Form 10-Q") and June 29, 1997 (the "Second Quarter Form 10-Q" and, together with the First Quarter Form 10-Q, the "1997 Form 10-Qs"); and (iii) the description of the Company's Common Stock contained in the Company's Registration Statement on form 8-A, dated April 5, 1991, including any amendments filed for the purpose of updated such description. All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of this Offering shall be deemed incorporated by reference into this Prospectus from the date of filing of such documents. Any statement contained herein or in a document, all or a portion of which is incorporated or deemed to be incorporated by reference herein, shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contain herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to each person, including any beneficial owner, to whom this Prospectus is delivered, upon the request of such person, a copy of the foregoing documents incorporated herein by reference, other than exhibits to such documents (unless such exhibits are incorporated by reference in such document). Requests shall be directed to Jones Apparel Group, Inc., 250 Rittenhouse Circle, Keystone Park, Bristol, Pennsylvania 19007; Attn: Wesley R. Card. 24 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- No dealer, salesperson or other individual has been authorized to give any information or to make any representations not contained in this Prospectus in connection with the offering covered by this Prospectus. If given or made, such information or representations must not be relied upon as having been authorized by the Company, the Selling Shareholder or the Underwriters. This Prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, the Common Stock in any jurisdiction where, or to any person to whom, it is unlawful to make such offer or solicitation. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that there has not been any change in the facts set forth in this Prospectus or in the affairs of the Company since the date hereof. ------------------------ TABLE OF CONTENTS
PAGE --------- The Company.................................... 3 The Offerings.................................. 5 Selected Financial Information................. 6 Risk Factors................................... 8 Capitalization................................. 11 Use of Proceeds................................ 11 Price Range of Common Stock.................... 12 Dividend Policy................................ 12 Management..................................... 13 Selling Shareholder............................ 16 Shares Eligible for Future Sale................ 17 Certain United States Federal Tax Consequences to Non-U.S. Holders of Common Stock.......... 18 Underwriting................................... 21 Legal Matters.................................. 23 Experts........................................ 23 Available Information.......................... 24 Incorporation of Documents by Reference................................. 24
4,500,000 SHARES JONES APPAREL GROUP, INC. COMMON STOCK ------------------------ PROSPECTUS ------------------------ MERRILL LYNCH & CO. BEAR, STEARNS & CO. INC. GOLDMAN, SACHS & CO. , 1997 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ALTERNATE PAGE TO INTERNATIONAL PROSPECTUS SUBJECT TO COMPLETION PRELIMINARY PROSPECTUS DATED OCTOBER 15, 1997 Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. PROSPECTUS 4,500,000 SHARES JONES APPAREL GROUP, INC. COMMON STOCK ----------- All of the shares of Common Stock of the Company offered hereby are being sold by a Selling Shareholder of the Company. The Company is not selling shares of Common Stock in the Offerings and will not receive any of the proceeds from the sale of shares of Common Stock offered hereby. Of the 4,500,000 shares of Common Stock being offered, 900,000 shares are being offered for sale initially outside the United States and Canada by the International Managers and 3,600,000 shares are being offered for sale initially in a concurrent offering in the United States and Canada by the U.S. Underwriters. The initial public offering price and the aggregate underwriting discount per share will be identical for both Offerings. See "Underwriting." The Common Stock is listed on the New York Stock Exchange under the symbol "JNY." On September 29, 1997, the last sale price of the Common Stock as reported on the New York Stock Exchange was $53 1/16 per share. See "Price Range of Common Stock." SEE "RISK FACTORS," BEGINNING ON PAGE 8, FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY. --------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROCEEDS TO PRICE TO UNDERWRITING SELLING PUBLIC DISCOUNT(1) SHAREHOLDER(2) Per Share............................................... $ $ $ Total(3)................................................ $ $ $
(1) The Company and the Selling Shareholder have agreed to indemnify the several Underwriters against certain liabilities, including certain liabilities under the Securities Act of 1933, as amended. See "Underwriting." (2) Before deducting expenses payable by the Selling Shareholder estimated at $340,000. (3) The Selling Shareholder has granted the International Managers and the U.S. Underwriters options to purchase up to an additional 135,000 shares and 540,000 shares of Common Stock, respectively, in each case exercisable within 30 days after the date hereof, solely to cover over-allotments, if any. If such options are exercised in full, the total Price to Public, Underwriting Discount and Proceeds to Selling Shareholder will be $ , $ and $ , respectively. See "Underwriting." ---------------- The shares of Common Stock are offered by the several Underwriters, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of certain legal matters by counsel for the Underwriters and certain other conditions. The Underwriters reserve the right to withdraw, cancel or modify such offer and to reject orders in whole or in part. It is expected that delivery of the shares of Common Stock will be made in New York, New York on or about , 1997. ---------------- MERRILL LYNCH INTERNATIONAL BEAR, STEARNS INTERNATIONAL LIMITED GOLDMAN SACHS INTERNATIONAL ---------------- The date of this Prospectus is , 1997. UNDERWRITING Merrill Lynch International, Bear, Stearns International Limited and Goldman Sachs International are acting as lead managers (the "Lead Managers") for each of the International Managers named below (the "International Managers"). Subject to the terms and conditions set forth in an international purchase agreement (the "International Purchase Agreement") among the Company, the Selling Shareholder, the General Partner and the International Managers, and concurrently with the sale of 3,600,000 shares of Common Stock to the U.S. Underwriters (as defined below), the Selling Shareholder has agreed to sell to the International Managers, and each of the International Managers severally has agreed to purchase from the Selling Shareholder the number of shares of Common Stock set forth opposite its name below.
NUMBER OF INTERNATIONAL MANAGERS SHARES ----------- Merrill Lynch International..................................... Bear, Stearns International Limited............................. Goldman Sachs International..................................... ----------- Total................................................. 900,000 ----------- -----------
The Company, the Selling Shareholder and the General Partner have also entered into a U.S. purchase agreement (the "U.S. Purchase Agreement") with certain underwriters in the United States and Canada (the "U.S. Underwriters" and, together with the International Managers, the "Underwriters") for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Bear, Stearns & Co. Inc. and Goldman, Sachs & Co. are acting as representatives (the "U.S. Representatives"). Subject to the terms and conditions set forth in the U.S. Purchase Agreement, and concurrently with the sale of 900,000 shares of Common Stock to the International Managers pursuant to the International Purchase Agreement, the Selling Shareholder has agreed to sell to the U.S. Underwriters, and the U.S. Underwriters severally have agreed to purchase from the Selling Shareholder, an aggregate of 3,600,000 shares of Common Stock. The initial public offering price per share and the total underwriting discount per share of Common Stock are identical under the International Purchase Agreement and the U.S. Purchase Agreement. In the International Purchase Agreement and the U.S. Pursuant Agreement, the several International Managers and the several U.S. Underwriters, respectively, have agreed, subject to the terms and conditions set forth therein, to purchase all of the shares of Common Stock being sold pursuant to each such agreement if any of the shares of Common Stock being sold pursuant to such agreement are purchased. Under certain circumstances, under the U.S. Purchase Agreement and the International Purchase Agreement, the commitments of non-defaulting Underwriters may be increased. The closings with respect to the sale of shares of Common Stock to be purchased by the International Managers and the U.S. Underwriters are conditioned upon one another. The Lead Managers have advised the Company and the Selling Shareholder that the International Managers propose initially to offer the shares of Common Stock to the Public at the initial public offering price set forth on the cover page of this Prospectus, and to certain dealers at such price less a concession not in excess of $ per share of Common Stock. The International Managers may allow, and such dealers may reallow, a discount not in excess of $ per share of Common Stock on sales to certain other dealers. After the initial public offering, the public offering price, concession and discount may be changed. The Selling Shareholder has granted an option to the International Managers, exercisable for 30 days after the date of this Prospectus, to purchase up to an aggregate of 135,000 additional shares of Common Stock at the initial public offering price set forth on the cover page of this Prospectus, less the underwriting discount. The International Managers may exercise this option solely to cover over-allotments, if any, made on the sale of the Common Stock offered hereby. To the extent that the International Managers exercise this option, each International Manager will be obligated, subject to certain conditions, to 21 purchase a number of additional shares of Common Stock proportionate to such International Manager's initial amount reflected in the foregoing table. The Selling Shareholder has also granted an option to the U.S. Underwriters, exercisable for 30 days after the date of this Prospectus, to purchase up to an aggregate of 540,000 additional shares of Common Stock to cover over-allotments, if any, on terms similar to those granted to the International Managers. The Company, and its executive officers and directors, including the General Partner and the Selling Shareholder, have agreed, subject to certain exceptions, not to directly or indirectly (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for the sale of or otherwise dispose of or transfer any shares of Common Stock or securities convertible into or exchangeable or exercisable for Common Stock, whether now owned or thereafter acquired by the person executing the agreement or with respect to which the person executing the agreement thereafter acquires the power of disposition, or file a registration statement under the Securities Act with respect to the foregoing or (ii) enter into any swap or other agreement that transfers, in whole or in part, the economic consequence of ownership of the Common Stock whether any such swap or transaction is to be settled by delivery of Common Stock or other securities, in cash or otherwise, without the prior written consent of Merrill Lynch on behalf of the Underwriters for a period of 90 days after the date of this Prospectus, in the case of the Selling Shareholder and the General Partner, or 30 days after the date of this Prospectus, in the case of the other executive officers and directors of the Company. See "Shares Eligible for Future Sale." The International Managers and the U.S. Underwriters have entered into an intersyndicate agreement (the "Intersyndicate Agreement") that provides for the coordination of their activities. Pursuant to the Intersyndicate Agreement, the International Managers and the U.S. Underwriters are permitted to sell shares of Common Stock to each other for purposes of resale at the initial public offering price, less an amount not greater than the selling concession. Under the terms of the Intersyndicate Agreement, the U.S. Underwriters and any dealer to whom they sell shares of Common Stock will not offer to sell or sell shares of Common Stock to persons who are non-U.S. or non-Canadian persons or to persons they believe intend to resell to persons who are non-U.S. or non-Canadian persons, and the International Managers and any dealer to whom they sell shares of Common Stock will not offer to sell or sell shares Common Stock to U.S. persons or to Canadian persons or to persons they believe intend to resell to U.S. or Canadian persons, except in the case of transactions pursuant to the Intersyndicate Agreement. The Company, the Selling Shareholder and the General Partner have agreed to indemnify the International Managers and the U.S. Underwriters against certain liabilities, including certain liabilities under the Securities Act, or to contribute to payments the U.S. Underwriters and International Managers may be required to make in respect thereof. Until the distribution of the Common Stock is completed, rules of the Securities and Exchange Commission may limit the ability of the Underwriters and certain selling group members to bid for and purchase the Common Stock. As an exception to these rules, the U.S. Representatives are permitted to engage in certain transactions that stabilize the price of the Common Stock. Such transactions consist of bids of purchases for the purpose of pegging, fixing or maintaining the price of the Common Stock. If the Underwriters create a short position in the Common Stock in connection with the Offerings, i.e., if they sell more shares of Common Stock than are set forth on the cover page of this Prospectus, the U.S. Representatives may reduce that short position by purchasing Common Stock in the open market. The U.S. Representatives may also elect to reduce any short position by exercising all or part of the over-allotment option described above. The U.S. Representatives may also impose a penalty bid on certain Underwriters and selling group members. This means that if the U.S. Representatives purchase shares of Common Stock in the open market to reduce the Underwriters' short position or to stabilize the price of the Common Stock, they may reclaim the amount of the selling concession from the Underwriters and selling group members who sold those shares as part of the Offerings. 22 In general, purchases of a security for the purpose of stabilization or to reduce a short position could cause the price of the security to be higher than it might be in the absence of such purchases. The imposition of a penalty bid might also have an effect on the price of a the Common Stock to the extent that it were to discourage resales of the Common Stock. Neither the Company nor any of the Underwriters makes any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the Common Stock. In addition, neither the Company nor any of the Underwriters makes any representation that the U.S. Representatives will engage in such transactions or that such transactions, once commenced, will not be discontinued without notice. Merrill Lynch has from time to time provided investment banking financial advisory services to the Company, for which it has received customary compensation, and may continue to do so in the future. Each International Managers has agreed that (i) it has not offered or sold and, prior to the expiration of the period of six months from the Closing Date, will not offer or sell any shares of Common Stock to persons in the United Kingdom, except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which do not constitute an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Common Stock in, from or otherwise involving the United Kingdom; and (iii) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issuance of Common Stock to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person to whom such document may otherwise lawfully be issued or pass on. No action has been or will be taken in any jurisdiction (except in the United States) that would permit a public offering of the shares of Common Stock, or the possession, circulation or distribution of this Prospectus or any other material relating to the Company, the Selling Shareholder or shares of Common Stock in any jurisdiction where action for that purpose is required. Accordingly, the shares of Common Stock may not be offered or sold, directly or indirectly, and neither this Prospectus nor any other offering material or advertisements in connection with the shares of Common Stock may be distributed or published, in or from any country or jurisdiction except in compliance with any applicable rules and regulations of any such country or jurisdiction. Purchasers of the shares offered hereby may be required to pay stamp taxes and other charges in accordance with the laws and practices of the country of purchase in addition to the offering price set forth on the cover page hereof. LEGAL MATTERS Certain legal matters in connection with the Common Stock offered hereby will be passed upon for the Company by Phillips Nizer Benjamin Krim & Ballon LLP, 666 Fifth Avenue, New York, New York 10103. Phillips Nizer Benjamin Krim & Ballon LLP will rely upon Mesirov Gelman Jaffe Cramer & Jamieson, 1735 Market Street, Philadelphia, Pennsylvania, with respect to certain matters concerning Pennsylvania law. Herbert J. Goodfriend, Vice Chairman of the Company, is of counsel to Phillips Nizer Benjamin Krim & Ballon LLP. Certain legal matters relating to the Offerings will be passed upon for the Underwriters by Willkie Farr & Gallagher, 153 East 53rd Street, New York, New York 10022. EXPERTS The financial statements and schedule of the Company incorporated by reference in this Prospectus have been audited by BDO Seidman, LLP, independent certified public accountants, to the extent and for the periods set forth in their reports incorporated herein by reference, and are incorporated by reference herein in reliance upon such reports given upon the authority of said firm as experts in accounting and auditing. 23 AVAILABLE INFORMATION The Company is subject to the informational requirements of the Exchange Act, and in accordance therewith files reports and other information with the Securities and Exchange Commission (the "Commission"). Reports, proxy statements and other information concerning the Company can be inspected and copied at the public reference room maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. In addition, upon request such reports, proxy statements and other information will be made available for inspection and copying at the Commission's public reference facilities at the Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and at Seven World Trade Center, 13th Floor, New York, New York 10048. Copies of such material can be obtained at prescribed rates upon request from the Public Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Such material may also be accessed electronically at the Commission's site on the World Wide Web located at http:\\www.sec.gov. The Company's Common Stock is listed on the New York Stock Exchange, and reports, proxy statements and other information concerning the Company may be inspected and copied at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005. The Company has filed with the Securities and Exchange Commission, Washington, D.C., a Registration Statement on Form S-3 under the Securities Act with respect to the Common Stock offered hereby. For further information about the Company and the securities offered hereby, reference is made to the Registration Statement and to the financial statements, schedules and exhibits filed as a part hereof. Statements contained in this Prospectus as to the contents of any contract or any other document are not necessarily complete, and in each instance, reference is made to the copy of such contract or document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. The Registration Statement, including exhibits thereto, may be inspected without charge at the Commission's principal office in Washington, D.C. and copies of all or any part thereof may be obtained from such office after payment of the fees prescribed by the Commission. INCORPORATION OF DOCUMENTS BY REFERENCE The Company hereby incorporates by reference in this Prospectus (i) the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996, as amended (the "1996 Form 10-K"), (ii) the Company's Quarterly Reports on form 10-Q for the fiscal quarters ended March 30, 1997 (the First Quarter Form 10-Q") and June 29, 1997 (the "Second Quarter Form 10-Q" and, together with the First Quarter Form 10-Q, the "1997 Form 10-Qs"); and (iii) the description of the Company's Common Stock contained in the Company's Registration Statement on form 8-A, dated April 5, 1991, including any amendments filed for the purpose of updated such description. All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of this Offering shall be deemed incorporated by reference into this Prospectus from the date of filing of such documents. Any statement contained herein or in a document, all or a portion of which is incorporated or deemed to be incorporated by reference herein, shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contain herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to each person, including any beneficial owner, to whom this Prospectus is delivered, upon the request of such person, a copy of the foregoing documents incorporated herein by reference, other than exhibits to such documents (unless such exhibits are incorporated by reference in such document). Requests shall be directed to Jones Apparel Group, Inc., 250 Rittenhouse Circle, Keystone Park, Bristol, Pennsylvania 19007; Attn: Wesley R. Card. 24 ALTERNATE PAGE TO INTERNATIONAL PROSPECTUS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- No dealer, salesperson or other individual has been authorized to give any information or to make any representations not contained in this Prospectus in connection with the offering covered by this Prospectus. If given or made, such information or representations must not be relied upon as having been authorized by the Company, the Selling Shareholder or the Underwriters. This Prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, the Common Stock in any jurisdiction where, or to any person to whom, it is unlawful to make such offer or solicitation. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that there has not been any change in the facts set forth in this Prospectus or in the affairs of the Company since the date hereof. In the Prospectus, reference to "dollars" and "$" are to United States dollars. ------------------------ TABLE OF CONTENTS
PAGE --------- The Company.................................... 3 The Offerings.................................. 5 Selected Financial Information................. 6 Risk Factors................................... 8 Capitalization................................. 11 Use of Proceeds................................ 11 Price Range of Common Stock.................... 12 Dividend Policy................................ 12 Management..................................... 13 Selling Shareholder............................ 16 Shares Eligible for Future Sale................ 17 Certain United States Federal Tax Consequences to Non-U.S. Holders of Common Stock.......... 18 Underwriting................................... 21 Legal Matters.................................. 23 Experts........................................ 23 Available Information.......................... 24 Incorporation of Documents by Reference................................. 24
4,500,000 SHARES JONES APPAREL GROUP, INC. COMMON STOCK ------------------------ PROSPECTUS ------------------------ MERRILL LYNCH INTERNATIONAL BEAR, STEARNS INTERNATIONAL LIMITED GOLDMAN SACHS INTERNATIONAL , 1997 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. Filing Fee-Securities Exchange Commission......................... $ 85,800 NASD Fee.......................................................... 28,817 Accounting Fees and Expenses...................................... 50,000 Legal Fees and Expenses........................................... 50,000 Blue Sky Fees and Expenses........................................ 10,000 Printing Fees and Expenses........................................ 100,000 Transfer Agent and Registrar's Fee................................ 2,500 Miscellaneous Expenses............................................ 12,883 --------- Total..................................................... $ 340,000 --------- ---------
All expenses other than the Securities and Exchange Commission and NASD filing fees are estimated. All expenses will be borne by the Selling Shareholder. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS. As permitted by the Pennsylvania Business Corporation Law, Section 8.1 of the Company's By-laws provides that a director of the Company shall not be personally liable for monetary damages for any action taken or failed to be taken, other than as expressly provided in the Pennsylvania Business Corporation Law. Furthermore, Section 8.2 of the Company's By-laws provides that the Company shall indemnify each officer and director to the full extent permitted by the Pennsylvania Business Corporation Law, and shall pay and advance expenses for any matters covered by such indemnification. Section 1741 of the Pennsylvania Business Corporation Law provides that the Company shall have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation), by reason of the fact that he is or was a representative of the corporation, or is or was serving at the request of the corporation as a representative of another domestic or foreign corporation for profit or not-for-profit, partnership, joint venture, trust or other enterprise, against expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with the action or proceeding if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the corporation and, with respect to any criminal proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action or proceeding by judgment, order, settlement or conviction or upon a plea of nolo contendere or its equivalent shall not of itself create a presumption that the person did not act in good faith and in a manner that he reasonably believed to be in, or not opposed to, the best interests of the corporation and, with respect to any criminal proceeding, had reasonable cause to believe that his conduct was unlawful. Section 1742 of the Pennsylvania Business Corporation Law provides that the Company shall have the power to indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a representative of the corporation or is or was serving at the request of the corporation as a representative of another domestic or foreign corporation for profit or not-for-profit, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of the action if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of II-1 the corporation. Indemnification shall not be made under this section in respect of any claim, issue or matter as to which the person has been adjudged to be liable to the corporation unless and only to the extent that the court of common pleas of the judicial district embracing the county in which the registered office of the corporation is located or the court in which the action was brought determined upon application that, despite the adjudication of liability but in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for the expenses that the court of common pleas or other court deems proper. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE. (a) Exhibits
EXHIBIT NO. DESCRIPTION - ----------- ----------------------------------------------------------------------------------------------------- 1.1* Form of U.S. Purchase Agreement 1.2* Form of International Purchase Agreement 5.1* Opinion of Mesirov Gelman Jaffe Cramer & Jamieson. 23.1** Consent of BDO Seidman, LLP. 23.2* Consent of Mesirov Gelman Jaffe Cramer & Jamieson (included as part of Exhibit 5.1). 23.3* Consent of Phillips Nizer Benjamin Krim & Ballon LLP. 24.1** Power of Attorney (included in Part II of this Registration Statement). 24.2* Certified resolutions of the Board of Directors authorizing signature pursuant to power of attorney.
- ------------------------ * Filed herewith. ** Previously filed. ITEM 17. UNDERTAKINGS. The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by Section 10(a)(3) of the Act; (ii) To reflect in the Prospectus any facts or events arising after the effective date of this Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this Registration Statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in this Registration Statement or any material change to such information in this registration statement; PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the Registrant pursuant to Section 13 or 15(d) of the Exchange Act by reference in this Registration Statement. (2) That, for the purpose of determining any liability under the Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. (3) To remove from registration by means of post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. II-2 (4) That, for purposes of determining any liability under the Act, each filing of the Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in this Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. (5) Insofar as indemnification for liabilities arising under the Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (6) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. (7) (i) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective; and (ii) For the purpose of determining any liability under the Securities Act of 1933,each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. II-3 SIGNATURES Pursuant to the requirements of the Securities Act, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Amendment to the Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of New York, State of New York on the 14th day of October, 1997. JONES APPAREL GROUP, INC. By: * ------------------------------------------ Sidney Kimmel, Chairman II-4 Pursuant to the requirements of the Securities Act, this Amendment to the Registration Statement has been signed by the following persons in the capacities and on the date indicated.
SIGNATURE TITLE DATE - ------------------------------------------------------ ------------------------------------ ------------------- * ------------------------------------------- Chairman and Director (Chief October 14, 1997 (Sidney Kimmel) Executive Officer) * ------------------------------------------- Chief Financial Officer (Principal October 14, 1997 (Wesley R. Card) Financial Officer) * ------------------------------------------- Controller (Principal Accounting October 14, 1997 (Gary R. Klocek) Officer) * ------------------------------------------- Vice Chairman and Director October 14, 1997 (Herbert J. Goodfriend) * ------------------------------------------- Executive Vice President, Marketing, October 14, 1997 (Irwin Samelman) and Director * ------------------------------------------- Director October 14, 1997 (Geraldine Stutz) * ------------------------------------------- Director October 14, 1997 (Howard Gittis) *By: /s/ -------------------------------------- Ira Dansky Attorney-in-Fact
- ------------------------ * Executed pursuant to a power of attorney contained in the Registration Statement. II-5 EX-1.1 2 U.S. PURCHASE AGREEMENT EXHIBIT 1.1 WF&G DRAFT 9/30/97 3,600,000 Shares JONES APPAREL GROUP, INC., (a Pennsylvania corporation) Common Stock (Par Value $.01 Per Share) U.S. PURCHASE AGREEMENT [October __, 1997] MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated Bear, Stearns & Co. Inc. Goldman, Sachs & Co. as U.S. Representatives of the several U.S. Underwriters c/o Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated North Tower World Financial Center New York, New York 10281-1209 Dear Sirs: Jones Apparel Group, Inc., a Pennsylvania corporation (the "Company"), Bristol Rittenhouse Investments, L.P., a Delaware limited partnership (the "Selling Shareholder") and Sidney Kimmel, the sole general partner of the Selling Sharholder (the "General Partner"), confirm their respective agreements with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), and each of the other Underwriters named in Schedule A hereto (collectively, the "U.S. Underwriters," which term shall also include any underwriter substituted as hereinafter provided in Section 10 hereof), for whom Merrill Lynch, Bear, Stearns & Co. Inc. and Goldman, Sachs & Co. are acting as representatives (in such capacity, the "U.S. Representatives"), with respect to (i) the sale by the Selling Shareholder of 3,600,000 shares of Common Stock, par value $.01 per share, of the Company ("Common Stock") and the purchase by the U.S. Underwriters, acting severally and not jointly, of the respective number of shares of Common Stock set forth in said Schedule A; and (ii) the grant by the Selling Shareholder to the U.S. Underwriters, acting severally and not jointly, of the option described in Section 2(b) hereof to purchase all or any part of 540,000 additional shares of Common Stock solely to cover over-allotments, if any. The 3,600,000 shares Of Common Stock (the "Initial U.S. Securities") and all or any part of the 540,000 shares of Common Stock subject to the option described in Section 2(b) hereof (the "U.S. Option Securities") to be purchased by the U.S. Underwriters are collectively hereinafter called the "U.S. Securities." It is understood that the Company, the Selling Shareholder and the General Partner are concurrently entering into an agreement dated the date hereof (the "International Purchase Agreement") providing for the offering by the Selling Shareholder of 900,000 shares of Common Stock (the "Initial International Securities") through arrangements with certain managers outside the United States and Canada (the "International Managers") for which Merrill Lynch International, Bear, Stearns International Limited and Goldman Sachs International are acting as lead managers (the "Lead Managers") and the grant by the Selling Shareholder to the International Managers, acting severally and not jointly, of an option to purchase all or any part of the International Managers' pro rata portion of the 135,000 additional shares of Common Stock solely to cover over-allotments, if any (the "International Option Securities" and, together with the U.S. Option Securities, the "Option Securities"). The Initial International Securities and the International Option Securities are hereinafter called the "International Securities." It is understood that the Selling Shareholder is not obligated to sell, and the U.S. Underwriters are not obligated to purchase, any Initial U.S. Securities unless all of the Initial International Securities are contemporaneously purchased by the International Managers. The U.S. Underwriters and the International Managers are hereinafter collectively called the "Underwriters," the Initial U.S. Securities and the Initial International Securities are hereinafter collectively called the "Initial Securities," and the U.S. Securities and the International Securities are hereinafter collectively called the "Securities." The Company, the Selling Shareholder and the General Partner understand that the Underwriters will concurrently enter into an Intersyndicate Agreement of even date herewith (the "Intersyndicate Agreement") providing for the coordination of certain transactions among the Underwriters under the direction of Merrill Lynch (in such capacity, the "Global Coordinator"). The Company, the Selling Shareholder and the General Partner understand that the U.S. Underwriters propose to make a public offering of the U.S. Securities as soon as the U.S. Representatives deem advisable after this Agreement has been executed and delivered. The Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-3 (No. 333-36213) covering the registration of the Securities under the Securities Act of 1933, as amended (the "1933 Act"), including the related preliminary prospectus or prospectuses. Promptly after execution and delivery of this Agreement, the Company will either (i) prepare and file a prospectus in accordance with the provisions of Rule 430A ("Rule 430A") of the rules and regulations of the Commission under the 1933 Act (the "1933 Act Regulations") and -2- paragraph (b) of Rule 424 ("Rule 424(b)") of the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule 434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a "Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b). Two forms of prospectus are to be used in connection with the offering and sale of the Securities: one relating to the U.S. Securities (the "Form of U.S. Prospectus") and one relating to the International Securities (the "Form of International Prospectus"). The Form of International Prospectus is identical to the Form of U.S. Prospectus, except for the front cover and back cover pages and the information under the caption "Underwriting." The information included in any such prospectus or in any such Term Sheet, as the case may be, that was omitted from such registration statement at the time it became effective but that is deemed to be part of such registration statement at the time it became effective (a) pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as "Rule 434 Information." Each Form of U.S. Prospectus and Form of International Prospectus used before such registration statement became effective, and any prospectus that omitted, as applicable, the Rule 430A Information or the Rule 434 Information, that was used after such effectiveness and prior to the execution and delivery of this Agreement, is herein called a "preliminary prospectus." Such registration statement, including the exhibits thereto, schedules thereto, if any, and the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933 Act, at the time it became effective and including the Rule 430A Information and the Rule 434 Information, as applicable, is herein called the "Registration Statement." Any registration statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein referred to as the "Rule 462(b) Registration Statement," and after such filing the term "Registration Statement" shall include the Rule 462(b) Registration Statement. The final Form of U.S. Prospectus and the final Form of International Prospectus, including the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933 Act, in the forms first furnished to the Underwriters for use in connection with the offering of the Securities are herein called the "U.S. Prospectus" and the "International Prospectus," respectively, and collectively, the "Prospectuses." If Rule 434 is relied on, the terms "U.S. Prospectus" and "International Prospectus" shall refer to the preliminary U.S. Prospectus dated [_____, 1997] and preliminary International Prospectus dated [____, 1997,] respectively, each together with the applicable Term Sheet and all references in this Agreement to the date of such Prospectuses shall mean the date of the applicable Term Sheet. For purposes of this Agreement, all references to the Registration Statement, any preliminary prospectus, the U.S. Prospectus, the International Prospectus or any Term Sheet or any amendment or supplement to any of the foregoing shall be deemed to include the copy filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system ("EDGAR"). -3- All references in this Agreement to financial statements and schedules and other information which is "contained," "included" or "stated" in the Registration Statement, any preliminary prospectus (including the Form of U.S. Prospectus and Form of International Prospectus) or the Prospectuses (or other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which is incorporated by reference in the Registration Statement, any preliminary prospectus (including the Form of U.S. Prospectus and Form of International Prospectus) or the Prospectuses, as the case may be; and all references in this Agreement to amendments or supplements to the Registration Statement, any preliminary prospectus or the Prospectuses shall be deemed to mean and include the filing of any document under the Securities Exchange Act of 1934 (the "1934 Act") which is incorporated by reference in the Registration Statement, such preliminary prospectus or the Prospectuses, as the case may be. SECTION 1. REPRESENTATIONS AND WARRANTIES. (a) The Company represents and warrants to each U.S. Underwriter as of the date hereof, as of the Closing Time referred to in Section 2(c) hereof, and as of each Date of Delivery (if any) referred to in Section 2(b) hereof, and agrees with each U.S. Underwriter, as follows: (i) COMPLIANCE WITH REGISTRATION REQUIREMENTS. The Company meets the requirements for use of Form S-3 under the 1933 Act. Each of the Registration Statement and any Rule 462(b) Registration Statement has become effective under the 1933 Act and no stop order suspending the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement has been issued under the 1933 Act and no proceedings for that purpose have been instituted or are pending or, to the knowledge of the Company, are contemplated by the Commission, and any request on the part of the Commission for additional information has been complied with. At the respective times the Registration Statement, any Rule 462(b) Registration Statement and any post-effective amendments thereto became effective and at the Closing Time (and, if any U.S. Option Securities are purchased, at the Date of Delivery), the Registration Statement, the Rule 462(b) Registration Statement and any amendments and supplements thereto complied and will comply in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations and did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Neither of the Prospectuses nor any amendments or supplements thereto, at the time the Prospectuses or any amendments or supplements thereto were issued and at the Closing Time (and, if any U.S. Option Securities are purchased, at the Date of Delivery), included or will include -4- an untrue statement of a material fact or omitted or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. If Rule 434 is used, the Company will comply with the requirements of Rule 434. The representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement or the U.S. Prospectus made in reliance upon and in conformity with information furnished to the Company in writing by any U.S. Underwriter through the U.S. Representatives expressly for use in the Registration Statement or the U.S. Prospectus. Each preliminary prospectus and the prospectuses filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so filed in all material respects with the 1933 Act Regulations and each preliminary prospectus and the Prospectuses delivered to the Underwriters for use in connection with this offering was identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (ii) INCORPORATED DOCUMENTS. The documents incorporated or deemed to be incorporated by reference in the Registration Statement and the Prospectuses, at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the 1934 Act and the rules and regulations of the Commission thereunder (the "1934 Act Regulations"), and, when read together with the other information in the Prospectuses, at the time the Registration Statement became effective, at the time the Prospectuses were issued and at the Closing Time (and, if any U.S. Option Securities are purchased, at the Date of Delivery), did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (iii) INDEPENDENT ACCOUNTANTS. The accountants who certified the financial statements and supporting schedules included in the Registration Statement are independent public accountants as required by the 1933 Act and the 1933 Act Regulations. (iv) FINANCIAL STATEMENTS. The financial statements included in the Registration Statement and the Prospectuses, together with the related schedules and notes, present fairly the financial position of the Company and its subsidiaries as of the dates indicated and the statement of operations, stockholders' equity and cash flows of the Company and its subsidiaries for the periods specified; except as otherwise stated in the Registration Statement, -5- said financial statements have been prepared in conformity with generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods involved. The supporting schedules, if any, included in the Registration Statement present fairly in accordance with GAAP the information required to be stated therein. The selected financial data and the summary financial information included in the Prospectuses present fairly the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included in the Registration Statement. (v) NO MATERIAL ADVERSE CHANGE IN BUSINESS. Since the respective dates as of which information is given in the Registration Statement and the Prospectuses, except as otherwise stated therein; (A) there has been no material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business (a "Material Adverse Effect"); (B) there have been no transactions entered into by the Company or any of its subsidiaries, other than those in the ordinary course of business, which are material with respect to the Company and its subsidiaries considered as one enterprise; and (C) there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock. (vi) GOOD STANDING OF THE COMPANY. The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the Commonwealth of Pennsylvania with corporate power and authority to own, lease and operate its properties and to conduct its business as now being conducted and as described in the Prospectuses and to enter into and perform its obligations under this Agreement; and the Company is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or be in good standing would not have a Material Adverse Effect. (vii) GOOD STANDING OF SUBSIDIARIES. Each of the operating subsidiaries of the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectuses and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of -6- property or the conduct of business, except where the failure to so qualify or be in good standing would not have a Material Adverse Effect; all of the issued and outstanding capital stock of each such operating subsidiary has been duly authorized and validly issued, is fully paid and non-assessable; the capital stock of each of the operating subsidiaries owned by the Company, directly or through subsidiaries, is owned free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity; and none of the outstanding securities of any subsidiary was issued in violation of the preemptive or similar rights of any securityholder of such subsidiary. The only subsidiaries of the Company are (a) the subsidiaries (the "Operating Subsidiaries") listed on Schedule B hereto and (b) certain other subsidiaries which, considered in the aggregate as a single Subsidiary, do not constitute a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X. (viii) CAPITALIZATION. The authorized, issued and outstanding capital stock of the Company is as set forth in the Prospectuses under "Capitalization" (except for subsequent issuances, if any, pursuant to reservations, agreements or employee benefit plans); the shares of issued and outstanding capital stock of the Company including the Securities to be purchased by the U.S. Underwriters and the International Managers from the Selling Shareholder, have been duly authorized and validly issued and are fully paid and non-assessable; none of the outstanding shares of capital stock, including the Securities to be purchased by the U.S. Underwriters, of the Company was issued in violation of the preemptive or other similar rights of any security holder of the Company; the Common Stock conforms to all statements relating thereto contained in the Prospectuses and such description conforms to the rights set forth in the instruments defining the same; the outstanding stock options relating to the Company's Common Stock have been duly authorized and validly issued and the description thereof contained in the Registration Statement and the Prospectuses is true and accurate; no holder of the Securities will be subject to personal liability by reason of being such a holder. (ix) AUTHORIZATION OF AGREEMENT. This Agreement and the International Purchase Agreement have been duly authorized, executed and delivered by the Company. (x) ABSENCE OF DEFAULTS AND CONFLICTS. Neither the Company nor any of its subsidiaries is in violation of its charter or by-laws or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other instrument or agreement to which the Company or any of -7- its subsidiaries is a party or by which it or any of them may be bound, or to which any of the property or assets of the Company or any of its subsidiaries is subject (collectively, "Agreements and Instruments"), except for such defaults that would not result in a Material Adverse Effect; and the execution, delivery and performance of this Agreement and the International Purchase Agreement and the consummation of the transactions contemplated in this Agreement and the International Purchase Agreement and in the Registration Statement have been duly authorized by all necessary corporate action and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, the Agreements and Instruments (except for such conflicts, breaches or defaults or liens, charges or encumbrances that would not result in a Material Adverse Effect), nor will such action result in any violation of the provisions of the charter or by-laws of the Company or any of its subsidiaries or any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any of its subsidiaries or any of their assets, properties or operations. As used herein, a "Repayment Event" means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or any of its subsidiaries. (xi) ABSENCE OF LABOR DISPUTE. No labor dispute with the employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, is imminent; and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its or any of its subsidiaries' principal suppliers, manufacturers, customers or contractors which, in either case, may reasonably be expected to result in a Material Adverse Effect. (xii) ABSENCE OF PROCEEDINGS. There is no action, suit, proceeding, inquiry or investigation before or brought by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, threatened, against or affecting the Company or any of its subsidiaries, that is required to be disclosed in the Registration Statement, or that might result in a Material Adverse Effect, or that might materially and adversely affect the properties or assets thereof or that might materially and adversely affect the consummation of the transactions contemplated by this Agreement and the International Purchase Agreement or the performance by the -8- Company of its obligations hereunder or thereunder; the aggregate of all pending legal or governmental proceedings to which the Company or any of its subsidiaries is a party or of which any of their respective properties or assets is the subject that are not described in the Registration Statement, including ordinary routine litigation incidental to the business, could not reasonably be expected to result in a Material Adverse Effect. (xiii) ACCURACY OF EXHIBITS. There are no contracts or documents which are required to be described in the Registration Statement, the Prospectuses or the documents incorporated by reference therein or to be filed as exhibits thereto which have not been so described and filed as required. (xiv) POSSESSION OF INTELLECTUAL PROPERTY. The Company and its subsidiaries own or possess, or can acquire on reasonable terms, the patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names and other intellectual property presently employed by them in connection with the business now operated by them or necessary in order to conduct such business, and neither the Company nor any of its subsidiaries has received any notice of infringement of or conflict with asserted rights of others with respect to any of the foregoing which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect. (xv) ABSENCE OF FURTHER REQUIREMENTS. No filing with, authorization, approval, consent, license, order, registration, qualification or decree of any court or governmental authority or agency is necessary or required for the performance by the Company or any of its subsidiaries in connection with the offering or sale of the Securities under this Agreement and the International Purchase Agreement or the transactions contemplated by this Agreement and the International Purchase Agreement, except such as may be required under the 1933 Act or the 1933 Act Regulations and foreign or state securities or blue sky laws. (xvi) POSSESSION OF LICENSES AND PERMITS. The Company and its subsidiaries possess such authorizations, approvals, consents, licenses, orders, registrations, qualifications, decrees or permits (collectively, "Governmental Licenses") issued by the appropriate state, federal or foreign regulatory agencies or bodies, necessary to conduct the business now operated by them, and neither the Company nor any of its subsidiaries has received any -9- notice of proceedings relating to the revocation or modification of any such Governmental Licenses which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect. (xvii) NO REGISTRATION RIGHTS. No holder of securities of the Company has rights to the registration of securities of the Company because of the filing of the Registration Statement. (xviii) ACCOUNTING CONTROLS. The Company and its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management's general or specific authorization; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (C) access to assets is permitted only in accordance with management's general or specific authorization; and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (xix) COMPLIANCE WITH CUBA ACT. The Company has complied with, and is and will be in compliance with, the provisions of that certain Florida act relating to disclosure of doing business with Cuba, codified as Section 517.075 of the Florida statutes, and the rules and regulations thereunder (collectively, the "Cuba Act") or is exempt therefrom. (xx) INVESTMENT COMPANY ACT. The Company is not, and upon the issuance and sale of the Securities as herein contemplated and the application of the net proceeds therefrom as described in the Prospectuses will not be, an "investment company" or an entity "controlled" by an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended (the "1940 Act"). (b) The Selling Shareholder and the General Partner, jointly and severally, represent and warrant to, and agree with, each U.S. Underwriter as of the date hereof, as of the Closing Time and as of each Date of Delivery, each of subparagraphs (i) through (xx), inclusive, of subsection (a) of this Section 1 and each of subparagraphs (i) through (vii), inclusive, of this subsection (b) as follows: (i) For a period 90 days from the date of the Prospectuses, such Selling Shareholder or General Partner, as the case may be, will not, without the prior written consent of Merrill Lynch (i) offer, pledge, sell, contract to sell, sell any option or contract to -10- purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of, directly or indirectly, any share of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or file any registration statement under the 1933 Act with respect to any of the foregoing or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Common Stock, whether any such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing sentence shall not apply to the Securities to be sold hereunder or under the International Purchase Agreement. (ii) The execution and delivery of this Agreement and the International Purchase Agreement and the consummation of the transactions contemplated hereby and thereby will not result in a breach by such Selling Shareholder or General Partner, as the case may be, of, or constitute a default by such Selling Shareholder or General Partner, as the case may be, under,any material indenture, deed or trust, contract or other agreement or instrument or any decree, judgment or order to which such Selling Shareholder or General Partner, as the case may be, is a party or by which such Selling Shareholder or General Partner, as the case may be, may be bound. (iii) Such Selling Shareholder has and will have, at the Closing Time and on each Date of Delivery, good and marketable title to the U.S. Securities to be sold by such Selling Shareholder hereunder, free and clear of any pledge, lien, security interest, encumbrance, claim or equity, created by or arising through the Selling Shareholder other than pursuant to this Agreement; such Selling Shareholder has full right, power and authority to sell, transfer and deliver the U.S. Securities to be sold by such Selling Shareholder hereunder; and upon delivery of the U.S. Securities to be sold by such Selling Shareholder hereunder and payment of the purchase price therefor as herein contemplated, each of the U.S. Underwriters will receive good and marketable title to its ratable share of the U.S. Securities purchased by it from such Selling Shareholder, free and clear of any pledge, lien, security interest, encumbrance, claim or equity. (iv) Such Selling Shareholder has duly executed and delivered in the form heretofore furnished to the U.S. Underwriters, a power of attorney and custody agreement (the "U.S. Power of Attorney and Custody Agreement") with Ira Dansky, as the attorney-in-fact and the custodian (the "Attorney-in- Fact" and the "Custodian," respectively); the Attorney-in-Fact is authorized to execute and deliver this Agreement, and the certificates referred to in Section 5(d) or that may be required pursuant to Section 5(j) on behalf of such Selling -11- Shareholder, to determine the purchase price to be paid by the U.S. Underwriters to such Selling Shareholder as provided in Section 2(a) hereof, to authorize the delivery of the U.S. Securities to be sold by such Selling Shareholder hereunder, to duly endorse (in blank or otherwise) the certificate or certificates representing such U.S. Securities, to accept payment therefor, and otherwise to act on behalf of such Selling Shareholder in connection with this Agreement. (v) All authorizations, approvals, consents, licenses, orders, registrations, qualifications, decrees or permits necessary for the execution and delivery by such Selling Shareholder of the U.S. Power of Attorney and Custody Agreement and the International Power of Attorney and Custody Agreement, the execution and delivery by or on behalf of such Selling Shareholder or General Partner, as the case may be, of this Agreement and the International Purchase Agreement, and the sale and delivery of the Securities to be sold by such Selling Shareholder hereunder and thereunder (other than, at the time of the execution hereof, the issuance of the order of the Commission declaring the Registration Statement effective and such authorizations, approvals, consents, licenses, orders, registrations, qualifications, decrees or permits as may be necessary under state securities laws), have been obtained and are in full force and effect; and such Selling Shareholder or General Partner, as the case may be, has the full right, power and authority to enter into this Agreement and the International Purchase Agreement and such U.S. Power of Attorney and Custody Agreement and International Power of Attorney and Custody Agreement to sell, transfer and deliver the Securities to be sold by such Selling Shareholder hereunder. (vi) Such Selling Shareholder or General Partner, as the case may be, has not taken, and will not take, directly or indirectly, any action which is designed to or which has constituted or which might reasonably be expected to cause or result in stabilization or manipulation of the price of any security or the Company to facilitate the sale or resale of the Securities. (vii) Certificates in negotiable form for all Securities to be sold by such Selling Shareholder hereunder and under the International Purchase Agreement have been placed in custody with the Custodian by or for the benefit of such Selling Shareholder with irrevocable conditional instructions for the purposes of effecting delivery by such Selling Shareholder hereunder and under the International Purchase Agreement. (c) Any certificate signed by any officer of the Company or any of its subsidiaries and delivered to the Global Coordinator, U.S. Representatives or to counsel for the U.S. Underwriters shall be deemed a representation and warranty by the Company to each U.S. Underwriter as to the matters covered thereby; and any -12- certificate signed by or on behalf of the Selling Shareholder or General Partner, as the case may be, and delivered to the Global Coordinator, U.S. Representatives or to counsel for the U.S. Underwriters shall be deemed a representation and warranty by such Selling Shareholder or General Partner, as the case may be, to each U.S. Underwriter as to matters covered thereby. SECTION 2 SALE AND DELIVERY TO U.S. UNDERWRITERS; CLOSING. (a) INITIAL SECURITIES. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Selling Shareholder agrees to sell to each U.S. Underwriter, severally and not jointly, and each U.S. Underwriter, severally and not jointly, agrees to purchase from the Selling Shareholder, at the price per share set forth in Schedule C, the number of Initial U.S. Securities set forth in Schedule A opposite the name of such U.S. Underwriter, plus any additional number of Initial U.S. Securities which such Underwriter may become obligated to purchase pursuant to the provisions of Section 10 hereof. (b) OPTION SECURITIES. In addition, on the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Selling Shareholder hereby grants an option to the U.S. Underwriters, severally and not jointly, to purchase up to an additional 540,000 shares of Common Stock at the price per share set forth in Schedule C, less an amount per share equal to any dividends or distributions declared by the Company and payable on the Initial U.S. Securities but not payable on the U.S. Option Securities. The option hereby granted will expire 30 days after the date hereof and may be exercised in whole or in part from time to time only for the purpose of covering over-allotments which may be made in connection with the offering and distribution of the Initial U.S. Securities upon notice by the Global Coordinator to the Company and the Selling Shareholder setting forth the number of U.S. Option Securities as to which the several U.S. Underwriters are then exercising the option and the time and date of payment and delivery for such U.S. Option Securities. Any such time and date of delivery for the U.S. Option Securities (a "Date of Delivery") shall be determined by the Global Coordinator, but shall not be later than seven full business days after the exercise of said option, nor in any event prior to the Closing Time, as hereinafter defined. If the option is exercised as to all or any portion of the U.S. Option Securities, each of the U.S. Underwriters, acting severally and not jointly, will purchase that proportion of the total number of U.S. Option Securities then being purchased which the number of Initial U.S. Securities set forth in Schedule A opposite the name of such U.S. Underwriter bears to the total number of Initial U.S. Securities, subject in each case to such adjustments as the Global Coordinator in its discretion shall make to eliminate any sales or purchases of fractional shares. -13- (c) PAYMENT. Payment of the purchase price for, and delivery of certificates for, the Initial Securities shall be made at the offices of Willkie Farr & Gallagher, 153 East 53rd Street, New York, New York, or at such other place as shall be agreed upon by the Global Coordinator and the Company and the Selling Shareholder, at 9:00 A.M. (Eastern time) on the third (fourth, if the pricing occurs after 4:30 P.M. (Eastern time) on any given day) business day after the date hereof (unless postponed in accordance with the provisions of Section 10), or such other time not later than ten business days after such date as shall be agreed upon by the Global Coordinator, the Company and the Selling Shareholder (such time and date of payment and delivery being herein called "Closing Time"). In addition, in the event that any or all of the U.S. Option Securities are purchased by the U.S. Underwriters, payment of the purchase price for, and delivery of certificates for, such U.S. Option Securities shall be made at the above-mentioned offices, or at such other place as shall be agreed upon by the Global Coordinator, the Company and the Selling Shareholder, on each Date of Delivery as specified in the notice from the Global Coordinator to the Company and the Selling Shareholder. Payment shall be made to the Selling Shareholder by wire transfer of immediately available funds to a bank account designated by the Selling Shareholder or the Custodian pursuant to the Selling Shareholder's U.S. Power of Attorney and Custody Agreement, as the case may be, against delivery to the U.S. Representatives for the respective accounts of the U.S. Underwriters of certificates for the U.S. Securities to be purchased by them. It is understood that each U.S. Underwriter has authorized the U.S. Representatives, for its account, to accept delivery of, receipt for, and make payment of the purchase price for, the Initial U.S. Securities and the U.S. Option Securities, if any, which it has agreed to purchase. Merrill Lynch, individually and not as representative of the U.S. Underwriters, may (but shall not be obligated to) make payment of the purchase price for the Initial U.S. Securities or the U.S. Option Securities, if any, to be purchased by any U.S. Underwriter whose funds have not been received by the Closing Time or the relevant Date of Delivery, as the case may be, but such payment shall not relieve such U.S. Underwriter from its obligations hereunder. (d) DENOMINATIONS; REGISTRATION. Certificates for the Initial U.S. Securities and the U.S. Option Securities, if any, shall be in such denominations and registered in such names as the U.S. Representatives may request in writing at least one full business day before the Closing Time or the relevant Date of Delivery, as the case may be. The certificates for the Initial U.S. Securities and the U.S. Option Securities, if any, will be made available for examination and packaging by the U.S. Representatives in The City of New York not later than 10:00 A.M. (Eastern time) on the business day prior to the Closing Time or the relevant Date of Delivery, as the case may be. -14- SECTION 3. COVENANTS OF THE COMPANY. The Company covenants with each U.S. Underwriter as follows: (a) COMPLIANCE WITH SECURITIES REGULATIONS AND COMMISSION REQUESTS. The Company, subject to Section 3(b), will comply with the requirements of Rule 430A or Rule 434, as applicable and will notify the Global Coordinator immediately, and confirm the notice in writing, (i) when any post-effective amendment to the Registration Statement shall become effective, or any supplement to the Prospectuses or any amended Prospectuses shall have been filed, (ii) of the receipt of any comments from the Commission, (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectuses or for additional information, and (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of any order preventing or suspending the use of any preliminary prospectus, or of the suspension of the qualification of the Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any such purposes. The Company will promptly effect the filings necessary pursuant to Rule 424(b) and will take such steps as it deems necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. The Company will make every reasonable effort to prevent the issuance of any stop order and, if any stop order is issued, to obtain the lifting thereof at the earliest possible moment. (b) FILING OF AMENDMENTS. The Company will give the Global Coordinator notice of its intention to file or prepare any amendment to the Registration Statement (including any filing under Rule 462(b)), any Term Sheet or any amendment, supplement or revision to either the Prospectus included in the Registration Statement at the time it became effective or the Prospectuses, whether pursuant to the 1933 Act, the 1934 Act or otherwise, will furnish the Global Coordinator with copies of any such documents a reasonable amount of time prior to such proposed filing or use, as the case may be, and will not file or use any such document to which the U.S. Representatives or counsel for the U.S. Underwriters shall reasonably object. (c) DELIVERY OF REGISTRATION STATEMENTS. The Company will deliver to the U.S. Representatives and counsel for the U.S. Underwriters, without charge, signed copies of the Registration Statement as originally filed and of each amendment thereto (including exhibits filed therewith or incorporated by reference therein and documents incorporated or deemed to be incorporated by reference therein) and signed copies of all consents and certificates of experts; -15- and will also deliver to the U.S. Representatives, without charge, a conformed copy of the Registration Statement as originally filed and of each amendment thereto (without exhibits) for each of the U.S. Underwriters. The copies of the Registration Statement and each amendment thereto furnished to the U.S. Representatives or counsel for the U.S. Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (d) DELIVERY OF PROSPECTUSES. The Company has delivered to each U.S. Underwriter, without charge, as many copies of each preliminary prospectus as such U.S. Underwriter reasonably requested, and the Company hereby consents to the use of such copies for purposes permitted by the 1933 Act. The Company will furnish to each U.S. Underwriter, without charge, during the period when the U.S. Prospectus is required to be delivered under the 1933 Act or the 1934 Act, such number of copies of the U.S. Prospectus (as amended or supplemented) as such U.S. Underwriter may reasonably request. The U.S. Prospectus and any amendments or supplements thereto furnished to the U.S. Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (e) CONTINUED COMPLIANCE WITH SECURITIES LAWS. The Company will comply with the 1933 Act and the 1933 Act Regulations and the 1934 Act and the 1934 Act Regulations so as to permit the completion of the distribution of the Securities as contemplated in this Agreement, the International Purchase Agreement and in the Prospectuses. If at any time when a prospectus is required by the 1933 Act to be delivered in connection with sales of the Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the U.S. Underwriters or for the Company, to amend the Registration Statement or amend or supplement any Prospectus in order that the Prospectuses will not include any untrue statements of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, or if it shall be necessary, in the opinion of such counsel, at any such time to amend the Registration Statement or amend or supplement any Prospectus in order to comply with the requirements of the 1933 Act or the 1933 Act Regulations, the Company will promptly prepare and file with the Commission, subject to Section 3(b), such amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement or the Prospectuses comply with such requirements, and the Company will furnish to the U.S. -16- Underwriters such number of copies of such amendment or supplement as the U.S. Underwriters may reasonably request. (f) BLUE SKY QUALIFICATIONS. The Company will use its best efforts, in cooperation with the U.S. Underwriters, to qualify the Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Global Coordinator may designate and to maintain such qualifications in effect for a period of not less than one year from the later of the effective date of the Registration Statement and any Rule 462(b) Registration Statement; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. In each jurisdiction in which the Securities have been so qualified, the Company will file such statements and reports as may be required by the laws of such jurisdiction to continue such qualification in effect for a period of not less than one year from the effective date of the Registration Statement and any Rule 462(b) Registration Statement. (g) RULE 158. The Company will timely file such reports pursuant to the 1934 Act as are necessary in order to make generally available to its securityholders as soon as practicable an earnings statement for the purposes of, and to provide the benefits contemplated by, the last paragraph of Section 11(a) of the 1933 Act. (h) RESTRICTION ON SALE OF SECURITIES. During a period of 90 days from the date of the Prospectuses, the Company will not, without the prior written consent of the Global Coordinator, (i) directly or indirectly, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of any share of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or file any registration statement under the 1933 Act with respect to any of the foregoing or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Common Stock, whether any such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing sentence shall not apply to (A) the Securities to be sold hereunder or under the International Purchase Agreement, (B) any shares of Common Stock issued by the Company upon the exercise of an option or warrant or the -17- conversion of a security outstanding on the date hereof and referred to in the Prospectuses, (C) any shares of Common Stock issued or options to purchase Common Stock granted pursuant to existing employee benefit plans of the Company referred to in the Prospectuses or (D) any shares of Common Stock issued pursuant to any non-employee director stock plan or dividend reinvestment plan. (i) REPORTING REQUIREMENTS. The Company, during the period when the Prospectuses are required to be delivered under the 1933 Act or the 1934 Act, will file all documents required to be filed with the Commission pursuant to the 1934 Act within the time periods required by the 1934 Act and the 1934 Act Regulations. (j) LISTING. The Company will file with the New York Stock Exchange all documents and notices required by the New York Stock Exchange of companies that have securities listed on such exchange and will use every reasonable effort to maintain the listing of the Securities on the New York Stock Exchange. SECTION 4. PAYMENT OF EXPENSES. (a) The Company, the Selling Shareholder and the General Partner will pay all expenses incident to the performance of the obligations of the Company and the Selling Shareholder under this Agreement, including (i) the printing and filing of the Registration Statement (including financial statements and exhibits) as originally filed and of each amendment thereto, (ii) the preparation, printing and delivery to the Underwriters of this Agreement, any Agreement among Underwriters and such other documents as may be required in connection with the offering, purchase, sale, issuance or delivery of the Securities, (iii) the preparation and delivery of the certificates for the U.S. Securities to the U.S. Underwriters, including any stock or other transfer taxes and any stamp or other duties payable upon the sale or delivery of the Securities to the Underwriters and the transfer of the Securities between the U.S. Underwriters and the International Managers, (iv) the fees and disbursements of the Company's counsel, accountants and other advisors, (v) the qualification of the Securities under securities laws in accordance with the provisions of Section 3(f), including filing fees and the fees and disbursements of counsel for the U.S. Underwriters (which shall not exceed $10,000) in connection therewith and in connection with the preparation of the Blue Sky Survey and any supplement thereto, (vi) the printing and delivery to the Underwriters of copies of each preliminary prospectus, any Term Sheets and of the Prospectuses and any amendments or supplements thereto, (vii) the preparation, printing and delivery to the Underwriters of copies of the Blue Sky Survey and any supplement thereto, (viii) the fees and expenses of any transfer agent or registrar for the Securities and the Custodians, (ix) the filing fees incident to, and the reasonable fees and disbursements of counsel to the Underwriters in connection with, the review by the -18- National Association of Securities Dealers, Inc. (the "NASD") of the terms of the sale of the Securities and (x) the fees and expenses incurred in connection with the listing of the Securities on the New York Stock Exchange. (b) EXPENSES OF THE SELLING SHAREHOLDER AND GENERAL PARTNER. The Selling Shareholder and General Partner will pay all expenses incident to the performance of his obligations under, and the consummation of the transactions contemplated by this Agreement, including (i) any stamp duties, capital duties and stock transfer taxes, if any, payable upon the sale of the Securities to the Underwriters, and their transfer between the Underwriters pursuant to an agreement between such Underwriters or between the U.S. Underwriters and International Managers, and (ii) the fees and disbursements of his counsel and accountants, if any. (c) TERMINATION OF AGREEMENT. If this Agreement is terminated by the U.S. Representatives in accordance with the provisions of Section 5, Section 9(a)(i) or Section 11, the Company, the Selling Shareholder and General Partner shall reimburse the U.S. Underwriters for all of their out-of-pocket expenses, including the reasonable fees and disbursements of counsel for the U.S. Underwriters. (d) ALLOCATION OF EXPENSES. The provisions of this Section shall not affect any agreement that the Company, the Selling Shareholder and the General Partner may make for the sharing of such costs and expenses. SECTION 5. CONDITIONS OF THE U.S. UNDERWRITERS' OBLIGATIONS. The obligations of the several U.S. Underwriters hereunder are subject to the accuracy of the representations and warranties of the Company, the Selling Shareholder and the General Partner herein contained or in certificates of any officer of the Company or any of its subsidiaries or on behalf of the Selling Shareholder or General Partner delivered pursuant to the provisions hereof, to the performance by the Company, the Selling Shareholder and the General Partner of their respective covenants and obligations hereunder, and to the following further conditions: (a) EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration Statement, including any Rule 462(b) Registration Statement, has become effective and at Closing Time no stop order suspending the effectiveness of the Registration Statement shall have been issued under the 1933 Act or proceedings therefor initiated or threatened by the Commission, and any request on the part of the Commission for additional information shall have been complied with to the reasonable satisfaction of counsel to the U.S. Underwriters. A prospectus containing the Rule 430A Information shall have been filed with the Commission in accordance with Rule 424(b) (or a post-effective amendment providing such information shall have been filed and declared effective in accordance with the requirements of Rule 430A) or, if the Company has elected to rely upon Rule 434, a Term Sheet -19- shall have been filed with the Commission in accordance with Rule 424(b). (b) At Closing Time, the U.S. Representatives shall have received: (1) The favorable opinion, dated as of Closing Time, of Phillips Nizer Benjamin Krim & Ballon LLP, counsel for the Company, in form and substance satisfactory to counsel for the U.S. Underwriters, together with signed or reproduced copies of such letter for each of the other U.S. Underwriters to the effect that: (i) The Company is validly existing as a corporation in good standing under the laws of the Commonwealth of Pennsylvania. (ii) The Company has the corporate power and authority to own, lease and operate its properties and to conduct its business as now being conducted and as described in the Registration Statement and to enter into and perform its obligations under this Agreement and the International Purchase Agreement. (iii) To the best of their knowledge and information, the Company is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, except where the failure to so qualify or be in good standing would not result in a Material Adverse Effect. (iv) The authorized, issued and outstanding capital stock of the Company is as set forth in the Prospectuses under "Capitalization" (except for subsequent issuances, if any, pursuant to reservations, agreements, employee benefit plans referred to in the Prospectuses), and the shares of issued and outstanding Common Stock, including the Securities to be purchased by the U.S. Underwriters and the International Managers from the Selling Shareholder have been duly authorized and validly issued and are fully paid and nonassessable and no holder of the Securities is or will be subject to personal liability by reason of being such a holder. (v) The outstanding stock options relating to the Company's Common Stock have been duly authorized and validly issued and the description thereof contained in the Registration Statement and the Prospectuses is true and accurate. -20- (vi) This Agreement and the International Purchase Agreement have each been duly authorized, executed and delivered by the Company. (vii) The Registration Statement, including any Rule 462(b) Registration Statement, has been declared effective under the 1933 Act; any required filing of the Prospectuses pursuant to Rule 424(b) has been made in the manner and within the time period required by Rule 424(b); and, to the best of their knowledge, no stop order suspending the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement has been issued under the 1933 Act and no proceedings for that purpose have been instituted or are pending or threatened by the Commission. (viii) The Registration Statement, including any Rule 462(b) Registration Statement, the Rule 430A Information and the Rule 434 Information, as applicable, the Prospectuses, excluding the documents incorporated by reference therein, and each amendment or supplement to the Registration Statement and the Prospectuses, excluding the documents incorporated by reference therein, as of their respective effective or issue dates (other than the financial statements and supporting schedules included therein or omitted therefrom, as to which we need express no opinion) complied as to form in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations. (ix) The documents incorporated by reference in the Prospectuses (other than the financial statements and supporting schedules included therein or omitted therefrom, as to which we need express no opinion), when they were filed with the Commission complied as to form in all material respects with the requirements of the 1934 Act and the rules and regulations of the Commission thereunder. (x) To the best of their knowledge, there is not pending or threatened any action, suit, proceeding, inquiry or investigation, to which the Company or any subsidiary is a party, or to which the property of the Company or any subsidiary is subject, before or brought by any court or governmental agency or body, domestic or foreign, which might reasonably be expected to result in a Material Adverse Effect, or which might reasonably be expected to materially and adversely affect the properties or assets thereof or the consummation of the transactions contemplated in the U.S. Purchase Agreement and International -21- Purchase Agreement or the performance by the Company of its obligations thereunder. (xi) The Common Stock conforms to the description thereof contained in the Prospectuses, and the form of certificate used to evidence the Common Stock is in due and proper form and complies with all applicable statutory requirements and the requirements of the New York Stock Exchange. (xii) Each of the Company's operating subsidiaries is validly existing as a corporation in good standing under the laws of the jurisdiction of its organization, has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement, and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which it owns or leases real property except where the failure to so qualify would not have a Material Adverse Effect; all of the issued and outstanding capital stock of each such corporate subsidiary has been duly authorized and validly issued, is fully paid and non-assessable and is owned by the Company, directly or through subsidiaries, free and clear of any mortgage, pledge, lien, encumbrance, claim or equity. (xiii) The information in the Prospectuses under the heading "Certain United States Federal Tax Consequences to Non-U.S. Holders of Common Stock" and the description of the Company's capital stock incorporated by reference in the Registration Statement and in the Registration Statement under Item 15 to the extent that it constitutes summaries of legal matters, documents or proceedings, or legal conclusions, has been reviewed by them and is correct in all material respects. (xiv) To the best of their knowledge after due inquiry, there are no contracts, indentures, mortgages, loan agreements, notes, leases or other instruments or agreements required to be described or referred to in the Registration Statement or to be filed as exhibits thereto other than those described or referred to therein or filed as exhibits thereto; the descriptions thereof or references thereto are correct; and no default exists in the due performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other instrument or agreement so described, referred to or filed, which -22- default or defaults, singly or in the aggregate, are material to the condition, financial or otherwise, or earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise. (xv) No authorization, approval, consent or order of any court or governmental authority or agency is required in connection with the sale of the U.S. Securities to the U.S. Underwriters hereunder or the International Securities to the International Managers under the International Purchase Agreement, except such as may be required under the 1933 Act or the 1933 Act Regulations or state securities law; and, to the best of their knowledge and information, the execution and delivery of this Agreement and the International Purchase Agreement and the consummation of the transactions contemplated herein and therein will not conflict with or constitute a breach of, or default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, any contract, indenture, mortgage, loan agreement, note, lease or other instrument or agreement to which the Company or any of its subsidiaries is a party or by which any of them may be bound, or to which any of the property or assets of the Company or any of its subsidiaries is subject, nor will such action result in any violation of the provisions of the charter or by-laws of the Company, or any applicable law, rule, regulation, order or administrative or court decree. In rendering the foregoing opinion, Phillips Nizer Benjamin Krim & Ballon LLP may rely as to matters of law of the Commonwealth of Pennsylvania upon the opinion of Mesirov, Gelman, Jaffe, Cramer & Jamieson, which opinion shall state that Willkie Farr & Gallagher may rely on such opinion. Baker & McKenzie shall render an opinion relating to Vestamex S.A. de C.V. and Camisas de Juarez S.A. de C.V. as to matters of the laws of Mexico. Cassells Brock & Blackwell shall render an opinion relating to Jones Apparel Group Canada, Inc. as to matters of law of the Canadian province of Ontario. All such opinions shall be satisfactory in form and in substance to counsel for the U.S. Underwriters. (2) The favorable opinion, dated as of Closing Time, of Phillips Nizer Benjamin Krim & Ballon LLP, counsel for the Selling Shareholder and the General Partner, in form and substance satisfactory to counsel for the U.S. Underwriters, to the effect that: -23- (i) This Agreement and the International Purchase Agreement have been duly authorized, executed and delivered by or on behalf of the Selling Shareholder and the General Partner. (ii) The U.S. Power of Attorney and Custody Agreement has been duly authorized, executed and delivered by the Selling Shareholder and constitutes the valid and binding obligation of the Selling Shareholder in accordance with its terms. (iii) The U.S. Securities to be purchased by the U.S. Underwriters from the Selling Shareholder have been validly issued and are fully paid and non-assessable. (iv) To the best of their knowledge after due inquiry, the Selling Shareholder has good and marketable title to the U.S. Securities to be sold by such Selling Shareholder hereunder and full power, right and authority to sell such U.S. Securities as herein contemplated, each of the U.S. Underwriters will receive good and marketable title to the U.S. Securities purchased by it from the Selling Shareholder, free and clear of any mortgage, pledge, lien, security interest, encumbrance, claim or equity created by or arising through the Selling Shareholder. In rendering such opinion, counsel may assume that the U.S. Underwriters are without notice of any defect in the title of the Selling Shareholder to the Securities being purchased from such Selling Shareholder. (v) No authorization, approval, consent, or order of any court or governmental authority or agency is required in connection with the sale of the U.S. Securities from the Selling Shareholder to the U.S. Underwriters, except such as may be required under the 1933 Act of the 1933 Act Regulations or state securities law. (3) The favorable opinion, dated as of Closing Time, of Willkie Farr & Gallagher, counsel for the U.S. Underwriters, with respect to the matters set forth in (i), (vi) to (ix), inclusive, and (xi) of subsection (b)(1) of this Section and (i) and (iii) of subsection (b)(2) of this Section. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of the Company and its subsidiaries and certificates of public officials. In addition, in rendering the foregoing opinion, Willkie Farr & Gallagher may rely as to matters of law of the Commonwealth of Pennsylvania upon the opinion of Mesirov, Gelman, Jaffe, Cramer and Jamieson. -24- (4) In giving their opinions required by subsections (b) (1), (b) (2) and (b) (3) of this Section, Phillips Nizer Benjamin Krim & Ballon LLP and Willkie Farr & Gallagher shall each additionally state that nothing has come to their attention that would lead them to believe that the Registration Statement or any amendment thereto, including the Rule 430A Information and Rule 434 Information (if applicable), (except for financial statements and schedules and other financial data included or incorporated by reference therein or omitted therefrom, as to they need make no statement), at the time such Registration Statement or any such amendment became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectuses or any amendment or supplement thereto (except for financial statements and schedules and other financial data included or incorporated by reference therein or omitted therefrom, as to which they need make no statement), at the time the Prospectuses were issued, at the time any such amended or supplemented prospectus was issued or at the Closing Time, included or includes an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (c) At Closing Time, there shall not have been, since the date hereof or since the respective dates as of which information is given in the Registration Statement and the Prospectuses, any Material Adverse Effect, and the U.S. Representatives shall have received a certificate of the Chairman or President of the Company and of the chief financial or chief accounting officer of the Company, dated as of Closing Time, to the effect that (i) there has been no such Material Adverse Effect, (ii) the representations and warranties in Section 1(a) hereof are true and correct with the same force and effect as though expressly made at and as of Closing Time, (iii) the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to Closing Time, and (iv) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been initiated or threatened by the Commission. (d) At the Closing Time the U.S. Representatives shall have received a certificate of (x) the Attorney in Fact for the Selling Shareholder, dated as of Closing Time, to the effect that (i) the representations and warranties of the Selling Shareholder contained in Section 1(b) hereof are true and correct with the same force and effect as though expressly made at and as of Closing Time and (ii) the Selling Shareholder has complied with all agreements and satisfied all conditions on his part to be performed or satisfied hereunder at or prior to Closing Time and (y) of the General Partner to the same effect, but with respect to the General Partner. -25- The Attorney in Fact shall be entitled to rely upon a certificate of the Selling shareholder in giving its certificate. (e) At the time of the execution of this Agreement, the U.S. Representatives shall have received from BDO Seidman, LLP a letter dated such date, in form and substance satisfactory to the U.S. Representatives, together with signed or reproduced copies of such letter for each of the other U.S. Underwriters containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement and the Prospectuses. (f) At the Closing Time, the U.S. Representatives shall have received from BDO Seidman, LLP a letter, dated as of the Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (e) of this Section, except that the specified date referred to shall be a date not more than three business days prior to Closing Time. (g) At Closing Time, the Securities shall have been approved for listing on the New York Stock Exchange, subject only to official notice of issuance. (h) At the date of this Agreement, the U.S. Representatives shall have received an agreement substantially in the form of Exhibit A hereto signed by the persons listed on Schedule D hereto. (i) In the event the U.S. Underwriters and the General Partner exercise the option granted in Section 2(b) hereof to purchase all or any portion of the U.S. Option Securities, the representations and warranties of the Company, the Selling Shareholder and the General Partner contained herein and the statements in any certificates furnished by the Company, the Selling Shareholder or the General Partner hereunder shall be true and correct as of the relevant Date of Delivery, and the U.S. Representatives shall have received: (1) A certificate, dated such Date of Delivery, of the Chairman or President of the Company and of the chief financial or chief accounting officer of the Company confirming that the certificate delivered at Closing Time pursuant to Section 5(c) remains true as of the Date of Delivery. (2) A certificate, dated such Date of Delivery, of an Attorney in Fact on behalf of the Selling Shareholder confirming that the certificate delivered at Closing Time pursuant to Section 5(d) remains true and correct as of such Date of Delivery. (3) The favorable opinions of Phillips Nizer Benjamin Krim & Ballon LLP, counsel for the Company, the Selling Shareholder and General Partner, in the form and substance -26- reasonably satisfactory to counsel for the U.S. Underwriters, dated such Date of Delivery, relating to the U.S. Option Securities and otherwise to the same effect as the opinions required by Section 5(b)(1) and 5(b)(2). (4) The favorable opinion of Willkie Farr & Gallagher, counsel for the U.S. Underwriters, dated such Date of Delivery, relating to the U.S. Option Securities and otherwise to the same effect as the opinion required by Section 5(b)(3). (5) A letter from BDO Seidman, LLP, in form and substance satisfactory to the U.S. Underwriters and dated such Date of Delivery, substantially the same in scope and substance as the letter furnished to the U.S. Representatives pursuant to Section 5(f) except that any "specified date" in the letter furnished pursuant to this Section (5)(i)(5) shall be a date not more than three days prior to the Date of Delivery. (j) At Closing Time and at each Date of Delivery, if any, counsel for the U.S. Underwriters shall have been furnished with such documents and opinions as they may require for the purpose of enabling them to pass upon the issuance and sale of the Securities as contemplated herein, in the International Purchase Agreement and related proceedings, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the agreements or conditions, herein contained; and all proceedings taken by the Company, the Selling Shareholder and the General Partner in connection with the issuance and sale of the Securities as herein contemplated shall be satisfactory in form and substance to the U.S. Representatives and counsel for the U.S. Underwriters. (k) Contemporaneously with the purchase by the U.S. Underwriters of the Initial U.S. Securities under this Agreement, the International Managers shall have purchased the Initial International Securities under the International Purchase Agreement. (l) If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement, or in the case of any condition to the purchase of U.S. Option Securities on a Date of Delivery which is after the Closing Time, the obligations of the several U.S. Underwriters to purchase the relevant U.S. Option Securities, may be terminated by the U.S. Representatives by notice to the Company at any time at or prior to Closing Time or such Date of Delivery, as the case may be, and such termination shall be without liability of any party to any other party except as provided in Section 4 and except that Sections 1, 6, 7 and 8 hereof shall survive any such termination and remain in full force and effect. -27- SECTION 6. INDEMNIFICATION. (a) The Company, the Selling Shareholder and the General Partner agree to indemnify and hold harmless each U.S. Underwriter, its directors, officers and employees, and each person, it any who controls any U.S. Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act to the extent and in the manner set forth in clauses (i), (ii) and (iii) below. (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arisingof any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including the Rule 430A Information and Rule 434 Information, if applicable, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arisingof any untrue statement or alleged untrue statement of a material fact included in any preliminary prospectus or the Prospectuses (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, if such settlement is effected with the written consent of the Company; and (iii) against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by Merrill Lynch), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above; PROVIDED, HOWEVER, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arisingof any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by any U.S. Underwriter through the U.S. Representatives expressly for use in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information, if -28- applicable, or any preliminary prospectus or the U.S. Prospectus (or any amendment or supplement thereto). (b) Each U.S. Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, each of its officers who signed the Registration Statement, the Selling Shareholder, the General Partner and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information, if applicable, or any preliminary U.S. prospectus or the U.S. Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by such U.S. Underwriter through the U.S. Representatives expressly for use in the Registration Statement (or any amendment thereto) or such preliminary prospectus or the U.S. Prospectus (or any amendment or supplement thereto). (c) Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 6(a) above, counsel to the indemnified parties shall be selected by Merrill Lynch, and, in the case of parties indemnified pursuant to Section 6(b) above, counsel to the indemnified parties shall be selected by the Company. An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arisingof the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 6 or Section 7 hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such -29- settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arisingof such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) In the event of a claim for indemnity pursuant to the provisions of this Section 6, each indemnified party severally agrees to seek such indemnity in full from the Company. If, after seeking such indemnity, any indemnified party is unable, for any reason, to obtain such indemnity from the Company, such indemnified party may seek indemnity from the Selling Shareholder and the General Partner, whose obligations hereunder shall be joint and several, in accordance with the provisions of subsection (a) of this Section. (e) If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 6(a) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. (f) The provisions of this Section shall not affect any agreement between the Company, the Selling Shareholder and General Partner with respect to indemnification. SECTION 7. CONTRIBUTION. If the indemnification provided for in Section 6 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, Selling Shareholder and the General Partner on the one hand and the U.S. Underwriters on the other hand from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, the Selling Shareholder and the General Partner on the one hand and of the U.S. Underwriters on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. -30- The relative benefits received by the Company, the Selling Shareholder and the General Partner on the one hand and the U.S. Underwriters on the other hand in connection with the offering of the Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Securities pursuant to this Agreement (before deducting expenses) received by the Company, the Selling Shareholder and the General Partner and the total underwriting discount received by the U.S. Underwriters, in each case as set forth on the cover of the Prospectus, or, if Rule 434 is used, the corresponding location on the Term Sheet bear to the aggregate initial public offering price of the Securities as set forth on such cover. In addition, for purposes of this section, the General Partner shall be deemed to have received any net proceeds received by the Selling Shareholder. The relative fault of the Company, the Selling Shareholder and the General Partner on the one hand and the U.S. Underwriters on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company, the Selling Shareholder or the General Partner or by the U.S. Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Selling Shareholder, the General Partner and the U.S. Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the U.S. Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 7. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 7 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 7, no U.S. Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which such Underwriter has otherwise been required to pay by reason of any such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. -31- For purposes of this Section 7, each person, if any, who controls a U.S. Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as such U.S. Underwriter, and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company. The U.S. Underwriters' respective obligations to contribute pursuant to this Section 7 are several in proportion to the number of Initial Securities set forth opposite their respective names in Schedule A hereto and not joint. The provisions of this Section shall not affect any agreement between the Company, the Selling Shareholder and the General Partner with respect to contribution. SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY. All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Company or any of its subsidiaries or the Selling Shareholder or General Partner submitted pursuant hereto, shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any U.S. Underwriter or controlling person, or by or on behalf of the Company, the Selling Shareholder or General Partner and shall survive delivery of the Securities to the U.S. Underwriters. SECTION 9. TERMINATION OF AGREEMENT. (a) The U.S. Representatives may terminate this agreement, by notice to the Company and the Selling Shareholder, at any time at or prior to Closing Time (i) if there has been, since the time of execution of this Agreement or since the respective dates as of which information is given in the U.S. Prospectus, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, or (ii) if there has occurred any material adverse change in the financial markets in the United States or the international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of the U.S. Representatives, impracticable to market the Securities or to enforce contracts for the sale of the Securities, or (iii) if trading in any of the securities of the Company has been suspended or materially limited by the Commission or the New York Stock Exchange, or if trading generally on either the American Stock Exchange or the New York Stock Exchange or in the Nasdaq National Market has been suspended or materially limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of said Exchanges or by order of the Commission, -32- the NASD or any governmental authority, or if a banking moratorium has been declared by either Federal, New York or Pennsylvania authorities. (b) If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party except as provided in Section 4 hereof, and provided further that Sections 1, 6, 7 and 8 hereof shall survive such termination and remain in full force and effect. SECTION 10. DEFAULT BY ONE OR MORE OF THE U.S. UNDERWRITERS. If one or more of the U.S. Underwriters shall fail at Closing Time or a Date of Delivery to purchase the U.S. Securities which it or they are obligated to purchase under this Agreement (the "Defaulted Securities"), the U.S. Representatives shall have the right, within 24 hours thereafter, to make arrangements for one or more of the non-defaulting U.S. Underwriters, or any other underwriters, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth. If, however, the U.S. Representatives shall not have completed such arrangements within such 24-hour period, then: (a) if the number of Defaulted Securities does not exceed 10% of the number of U.S. Securities to be purchased on such date, each of the non-defaulting U.S. Underwriters shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non-defaulting U.S. Underwriters, or (b) if the number of Defaulted Securities exceeds 10% of the number of U.S. Securities to be purchased on such date, this Agreement or, with respect to any Date of Delivery which occurs after the Closing Time, the obligation of the U.S. Underwriters to purchase and of the Selling Shareholder to sell the U.S. Option Securities to be purchased and sold on such Date of Delivery, shall terminate without liability on the part of any non-defaulting U.S. Underwriter. No action taken pursuant to this Section shall relieve any defaulting U.S. Underwriter from liability in respect of its default. In the event of any such default which does not result in a termination of this Agreement or, in the case of a Date of Delivery which is after the Closing Time, which does not result in a termination of the obligation of the U.S. Underwriters to purchase and the Selling Shareholder to sell the relevant U.S. Option Securities, as the case may be, either the U.S. Representatives or the Company shall have the right to postpone Closing Time or the relevant Date of Delivery for a period not -33- exceeding seven days in order to effect any required changes in the Registration Statement or the Prospectuses or in any other documents or arrangements. As used herein, the term "U.S. Underwriter" includes any person substituted for a U.S. Underwriter under this Section 10. SECTION 11. DEFAULT BY THE SELLING SHAREHOLDER. If the Selling Shareholder shall fail at Closing Time or a Date of Delivery to sell and deliver the number of U.S. Securities which such Selling Shareholder is obligated to sell hereunder, then the U.S. Representatives may, at their option, by notice to the Company and the Selling Shareholder, terminate this Agreement without liability on the part of any non-defaulting party except that the provisions of Section 1, 4, 6, 7 and 8 shall remain in full force and effect. In the event of a default by the Selling Shareholder as referred to in this Section 11, the U.S. Underwriters shall have the right to postpone Closing Time or a Date of Delivery for a period not exceeding seven days in order to effect any required changes in the Registration Statement or the Prospectuses or in any other documents or arrangements. No action taken pursuant to this Section 11 shall relieve the Company or the Selling Shareholder from liability, if any, in respect of such default. SECTION 12. NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the U.S. Underwriters shall be directed to the U.S. Representatives c/o Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, North Tower, World Financial Center, New York, N.Y. 10281-1201, attention of Mary Beth Henson, Managing Director; and notices to the Company, the Selling Shareholder and the General Partner shall be directed to 1411 Broadway, New York, New York 10018, attention of Sidney Kimmel or Herbert J. Goodfriend. SECTION 13. PARTIES. This Agreement shall each inure to the benefit of and be binding upon the U.S. Underwriters, the Company, the Selling Shareholder and the General Partner and their respective successors, heirs and legal representatives. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the U.S. Underwriters, the Company, the Selling Shareholder and the General Partner and their respective successors, heirs and legal representatives and the controlling persons and officers and directors referred to in Sections 6 and 7 and their respective successors, heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein or therein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the U.S. Underwriters, the Company, the Selling -34- Shareholder and the General Partner and their respective successors, heirs and legal representatives, and said controlling persons and officers and directors and their respective successors, heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of U.S. Securities from any U.S. Underwriter shall be deemed to be a successor by reason merely of such purchase. SECTION 14. GOVERNING LAW AND TIME. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in said State. Specified times of day refer to New York City time. SECTION 15. EFFECT OF HEADINGS. The section headings herein contained are for convenience only and shall not affect the construction hereof. -35- If the foregoing is in accordance with your understanding of our agreement, please sign and return to each of the Company, the Selling Shareholder and the General Partner a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement between the U.S. Underwriters, the Company, the Selling Shareholder and the General Partner in accordance with its terms. Very truly yours, JONES APPAREL GROUP, INC. By:_______________________ Name: Title: SELLING SHAREHOLDER By:_______________________ Attorney in Fact, acting on behalf of Bristol Rittenhouse Investments, L.P. GENERAL PARTNER ___________________________ SIDNEY KIMMEL CONFIRMED AND ACCEPTED, as of the date first above written: MERRILL LYNCH & CO. MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED BEAR, STEARNS & CO. INC. GOLDMAN, SACHS & CO. By: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By: _________________________________ Authorized Signatory: For themselves and as U.S. Representatives of the other U.S. Underwriters named in Schedule A hereto. -36- SCHEDULE A NUMBER OF INITIAL U.S. NAME OF THE U.S. UNDERWRITER SECURITIES TO BE PURCHASED Merrill, Lynch, Pierce, Fenner & Smith Incorporated. . . . . . . . Bear, Stearns & Co. Inc. . . . . . . . . Goldman, Sachs & Co. . . . . . . . . . . Total. . . . . . . . . . . . . . . . . . 3,600,000 --------- --------- SCHEDULE B List of subsidiaries Melru Corporation Jones Apparel Group Canada Inc. Jones Investment Co., Inc. Jones Holding Corporation Camisas de Juarez S.A. De C.V. SCHEDULE C Jones Apparel Group, Inc. 3,600,000 Shares of Common Stock (Par Value $.01 Per Share) 1. The initial public offering price per share for the U.S. Securities, determined as provided in said Section 2, shall be $[___]. 2. The purchase price per share for the Securities to be paid by the several Underwriters shall be $__, being an amount equal to the initial public offering price set forth above less $__ per share; provided that the purchase price per share for any U.S. Option Securities purchased upon the exercise of the over-allotment option described in Section 2(b) shall be reduced by an amount per share equal to any dividends or distributions declared by the Company and payable on the Initial U.S. Securities but not payable on the U.S. Option Securities. SCHEDULE D NAME LOCK-UP PERIOD Jones Apparel Group, Inc. 90 days Sidney Kimmel 90 days The Sidney Kimmel Foundation 90 days Herbert J. Goodfriend 30 days Irwin Samelman 30 days Wesley R. Card 30 days Gary R. Klocek 30 days Geraldine Stutz 30 days Howard Gittis 30 days Rena Rowan 30 days [Form of lock-up from directors, officers or other stockholders] Exhibit A [October ___, 1997] MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated Bear, Stearns & Co. Inc. Goldman, Sachs & Co. as U.S. Representatives of the several U.S. Underwriters to be named in the within-mentioned U.S. Purchase Agreement Merrill Lynch International Bear, Stearns International Limited Goldman Sachs International as Lead Managers of the several International Managers to be named in the within-mentioned International Purchase Agreement c/o Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated North Tower World Financial Center New York, New York 10281-1209 Re: PROPOSED PUBLIC OFFERING BY JONES APPAREL GROUP, INC. Dear Sirs: The undersigned, a stockholder [and an officer and/or director] of Jones Apparel Group, Inc., Pennsylvania corporation (the "Company"), understands (i) that Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Bear, Stearns & Co. Inc. and Goldman, Sachs & Co., as U.S. Representatives of the several U.S. Underwriters to be named in Schedule A to the U.S. Purchase Agreement (as defined herein), propose to enter into a U.S. Purchase Agreement (the "U.S. Purchase Agreement") with the Company, Bristol Rittenhouse Investments, L.P., a Delaware limited partnership (the "Selling Shareholder") and Sidney Kimmel, sole general partner of the Selling Shareholder (the "General Partner") and (ii) that Merrill Lynch International, Bear, Stearns International Limited and Goldman Sachs International, as Lead Managers of the several International Managers to be named in Schedule A to the International Purchase Agreement (as defined herein), propose to enter into an International Purchase Agreement (the "International Purchase Agreement" and collectively with the U.S. Purchase Agreement, the "Purchase Agreements") with the Company, the Selling Shareholder and the General Partner, in each case providing for the public offering of shares (the "Securities") of the Company's common stock, par value $.01 per share (the "Common Stock"). The U.S. Underwriters and the International Managers to be named in Schedule A to each of the U.S. Purchase Agreement and the International Purchase Agreement, respectively, are collectively referred to herein as the "Underwriters." In recognition of the benefit that such an offering will confer upon the undersigned as a stockholder [and an officer and/or director] of the Company, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned agrees with each of the Underwriters that, during a period of [___________ days] [SEE SCHEDULE D TO U.S. PURCHASE AGREEMENT FOR NUMBER OF DAYS] from the date of the Purchase Agreements, the undersigned will not, without the prior written consent of Merrill Lynch, directly or indirectly, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of, directly or indirectly, any share of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock, whether now owned or hereafter acquired by the undersigned or with respect to which the undersigned has or hereafter acquires the power of disposition, or file any registration statement under the 1933 Act with respect to any of the foregoing or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Common Stock, whether any such swap or transaction described in clause is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. Very truly yours, Signature: _________________ Print Name:_________________ -2- EX-1.2 3 INTERNATIONAL PURCHASE AGREEMENT EXHIBIT 1.2 WF&G DRAFT 9/30/97 900,000 Shares JONES APPAREL GROUP, INC., (a Pennsylvania corporation) Common Stock (Par Value $.01 Per Share) INTERNATIONAL PURCHASE AGREEMENT [October __, 1997] Merrill Lynch International Bear, Stearns International Limited Goldman Sachs International as Lead Managers of the several International Managers c/o Merrill Lynch International Ropemaker Place 25 Ropemaker Street London EC2Y 9LY England Ladies and Gentlemen: Jones Apparel Group, Inc., a Pennsylvania corporation (the "Company"), Bristol Rittanhouse Investments, L.P., a Delaware limited partnership, (the "Selling Shareholder") and Sidney Kimmel, the sole general partner of the Selling Shareholder (the "General Partner"), confirm their respective agreements with Merrill Lynch International ("Merrill Lynch"), and each of the other international underwriters named in Schedule A hereto (collectively, the "International Managers," which term shall also include any underwriter substituted as hereinafter provided in Section 10 hereof), for whom Merrill Lynch, Bear, Stearns International Limited and Goldman Sachs International are acting as representatives (in such capacity, the "Lead Managers"), with respect to (i) the sale by the Selling Shareholder of 900,000 shares of Common Stock, par value $.01 per share, of the Company ("Common Stock") and the purchase by the International Managers, acting severally and not jointly, of the respective number of shares of Common Stock set forth in said Schedule A; and (ii) the grant by the Selling Shareholder to the International Managers, acting severally and not jointly, of the option described in Section 2(b) hereof to purchase all or any part of 135,000 additional shares of Common Stock solely to cover over-allotments, if any. The 900,000 shares of Common Stock (the "Initial International Securities") and all or any part of the 135,000 shares of Common Stock subject to the option described in Section 2(b) hereof (the "International Option Securities") to be purchased by the International Managers are collectively hereinafter called the "International Securities." It is understood that the Company, the Selling Shareholder and the General Partner are concurrently entering into an agreement dated the date hereof (the "U.S. Purchase Agreement") providing for the offering by the Selling Shareholder of 3,600,000 shares of Common Stock (the "Initial U.S. Securities") through arrangements with certain managers in the United States and Canada (the "U.S. Underwriters") for which Merrill Lynch, Pierce, Fenner & Smith Incorporated, Bear, Stearns & Co. Inc. and Goldman, Sachs & Co. are acting as representatives (the "U.S. Representatives") and the grant by the Selling Shareholder to the U.S. Underwriters, acting severally and not jointly, of an option to purchase all or any part of the U.S. Underwriters' pro rata portion of the 540,000 additional shares of Common Stock solely to cover over-allotments, if any (the "U.S. Option Securities" and, together with the International Option Securities, the "Option Securities"). The Initial U.S. Securities and the U.S. Option Securities are hereinafter called the "U.S. Securities." It is understood that the Selling Shareholder is not obligated to sell, and the International Managers are not obligated to purchase, any Initial International Securities unless all of the Initial U.S. Securities are contemporaneously purchased by the U.S. Underwriters. The International Managers and the U.S. Underwriters are hereinafter collectively called the "Underwriters," the Initial International Securities and the Initial U.S. Securities are hereinafter collectively called the "Initial Securities," and the International Securities and U.S. Securities are hereinafter collectively called the "Securities." The Company, the Selling Shareholder and the General Partner understand that the Underwriters will concurrently enter into an Intersyndicate Agreement of even date herewith (the "Intersyndicate Agreement") providing for the coordination of certain transactions among the Underwriters under the direction of Merrill Lynch (in such capacity, the "Global Coordinator"). The Company, the Selling Shareholder and the General Partner understand that the International Managers propose to make a public offering of the International Securities as soon as the Lead Managers deem advisable after this Agreement has been executed and delivered. The Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form S-3 (No. 333-36213) covering the registration of the Securities under the Securities Act of 1933, as amended (the "1933 Act"), including the related preliminary prospectus or prospectuses. Promptly after execution and delivery of this Agreement, the Company will either (i) prepare and file a prospectus in accordance with the provisions of Rule 430A ("Rule 430A") of the rules and regulations of the Commission under the 1933 Act (the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule 434 ("Rule 434") of the 1933 Act Regulations, prepare and file a -2- term sheet (a "Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b). Two forms of prospectus are to be used in connection with the offering and sale of the Securities: one relating to the International Securities (the "Form of International Prospectus") and one relating to the U.S. Securities (the "Form of U.S. Prospectus"). The Form of International Prospectus is identical to the Form of U.S. Prospectus, except for the front cover and back cover pages and the information under the caption "Underwriting." The information included in any such prospectus or in any such Term Sheet, as the case may be, that was omitted from such registration statement at the time it became effective but that is deemed to be part of such registration statement at the time it became effective (a) pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as "Rule 434 Information." Each Form of International Prospectus and Form of U.S. Prospectus used before such registration statement became effective, and any prospectus that omitted, as applicable, the Rule 430A Information or the Rule 434 Information, that was used after such effectiveness and prior to the execution and delivery of this Agreement, is herein called a "preliminary prospectus." Such registration statement, including the exhibits thereto, schedules thereto, if any, and the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933 Act, at the time it became effective and including the Rule 430A Information and the Rule 434 Information, as applicable, is herein called the "Registration Statement." Any registration statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein referred to as the "Rule 462(b) Registration Statement," and after such filing the term "Registration Statement" shall include the Rule 462(b) Registration Statement. The final Form of International Prospectus and the final Form of U.S. Prospectus, including the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the 1933 Act, in the forms first furnished to the Underwriters for use in connection with the offering of the Securities are herein called the "International Prospectus" and the "U.S. Prospectus," respectively, and collectively, the "Prospectuses." If Rule 434 is relied on, the terms "International Prospectus" and "U.S. Prospectus" shall refer to the preliminary International Prospectus dated [_____, 1997] and preliminary U.S. Prospectus dated [____, 1997,] respectively, each together with the applicable Term Sheet and all references in this Agreement to the date of such Prospectuses shall mean the date of the applicable Term Sheet. For purposes of this Agreement, all references to the Registration Statement, any preliminary prospectus, the International Prospectus, the U.S. Prospectus or any Term Sheet or any amendment or supplement to any of the foregoing shall be deemed to include the copy filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval system ("EDGAR"). All references in this Agreement to financial statements and schedules and other information which is "contained," "included" or "stated" in the Registration Statement, any preliminary prospectus -3- (including the Form of U.S. Prospectus and Form of International Prospectus) or the Prospectuses (or other references of like import) shall be deemed to mean and include all such financial statements and schedules and other information which is incorporated by reference in the Registration Statement, any preliminary prospectus (including the Form of U.S. Prospectus and Form of International Prospectus) or the Prospectuses, as the case may be; and all references in this Agreement to amendments or supplements to the Registration Statement, any preliminary prospectus or the Prospectuses shall be deemed to mean and include the filing of any document under the Securities Exchange Act of 1934 (the "1934 Act") which is incorporated by reference in the Registration Statement, such preliminary prospectus or the Prospectuses, as the case may be. SECTION 1. REPRESENTATIONS AND WARRANTIES. (a) The Company represents and warrants to each International Manager as of the date hereof, as of the Closing Time referred to in Section 2(c) hereof, and as of each Date of Delivery (if any) referred to in Section 2(b) hereof, and agrees with each International Manager, as follows: (i) COMPLIANCE WITH REGISTRATION REQUIREMENTS. The Company meets the requirements for use of Form S-3 under the 1933 Act. Each of the Registration Statement and any Rule 462(b) Registration Statement has become effective under the 1933 Act and no stop order suspending the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement has been issued under the 1933 Act and no proceedings for that purpose have been instituted or are pending or, to the knowledge of the Company, are contemplated by the Commission, and any request on the part of the Commission for additional information has been complied with. At the respective times the Registration Statement, any Rule 462(b) Registration Statement and any post-effective amendments thereto became effective and at the Closing Time (and, if any International Option Securities are purchased, at the Date of Delivery), the Registration Statement, the Rule 462(b) Registration Statement and any amendments and supplements thereto complied and will comply in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations and did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Neither of the Prospectuses nor any amendments or supplements thereto, at the time the Prospectuses or any amendments or supplements thereto were issued and at the Closing Time (and, if any International Option Securities are purchased, at the Date of Delivery), included or will include an untrue statement of a material fact or omitted or will omit to state a material fact necessary in order to make the statements therein, in the -4- light of the circumstances under which they were made, not misleading. If Rule 434 is used, the Company will comply with the requirements of Rule 434. The representations and warranties in this subsection shall not apply to statements in or omissions from the Registration Statement or the International Prospectus made in reliance upon and in conformity with information furnished to the Company in writing by any International Manager through the Lead Managers expressly for use in the Registration Statement or the International Prospectus. Each preliminary prospectus and the prospectuses filed as part of the Registration Statement as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so filed in all material respects with the 1933 Act Regulations and each preliminary prospectus and the Prospectuses delivered to the Underwriters for use in connection with this offering was identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (ii) INCORPORATED DOCUMENTS. The documents incorporated or deemed to be incorporated by reference in the Registration Statement and the Prospectuses, at the time they were or hereafter are filed with the Commission, complied and will comply in all material respects with the requirements of the 1934 Act and the rules and regulations of the Commission thereunder (the "1934 Act Regulations"), and, when read together with the other information in the Prospectuses, at the time the Registration Statement became effective, at the time the Prospectuses were issued and at the Closing Time (and, if any International Option Securities are purchased, at the Date of Delivery), did not and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (iii) INDEPENDENT ACCOUNTANTS. The accountants who certified the financial statements and supporting schedules included in the Registration Statement are independent public accountants as required by the 1933 Act and the 1933 Act Regulations. (iv) FINANCIAL STATEMENTS. The financial statements included in the Registration Statement and the Prospectuses, together with the related schedules and notes, present fairly the financial position of the Company and its subsidiaries as of the dates indicated and the statement of operations, stockholders' equity and cash flows of the Company and its subsidiaries for the periods specified; except as otherwise stated in the Registration Statement, said financial statements have been prepared in conformity -5- with generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods involved. The supporting schedules, if any, included in the Registration Statement present fairly in accordance with GAAP the information required to be stated therein. The selected financial data and the summary financial information included in the Prospectuses present fairly the information shown therein and have been compiled on a basis consistent with that of the audited financial statements included in the Registration Statement. (v) NO MATERIAL ADVERSE CHANGE IN BUSINESS. Since the respective dates as of which information is given in the Registration Statement and the Prospectuses, except as otherwise stated therein; (A) there has been no material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business (a "Material Adverse Effect"); (B) there have been no transactions entered into by the Company or any of its subsidiaries, other than those in the ordinary course of business, which are material with respect to the Company and its subsidiaries considered as one enterprise; and (C) there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock. (vi) GOOD STANDING OF THE COMPANY. The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the Commonwealth of Pennsylvania with corporate power and authority to own, lease and operate its properties and to conduct its business as now being conducted and as described in the Prospectuses and to enter into and perform its obligations under this Agreement; and the Company is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify or be in good standing would not have a Material Adverse Effect. (vii) GOOD STANDING OF SUBSIDIARIES. Each of the operating subsidiaries of the Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Prospectuses and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the -6- failure to so qualify or be in good standing would not have a Material Adverse Effect; all of the issued and outstanding capital stock of each such operating subsidiary has been duly authorized and validly issued, is fully paid and non-assessable; the capital stock of each of the operating subsidiaries owned by the Company, directly or through subsidiaries, is owned free and clear of any security interest, mortgage, pledge, lien, encumbrance, claim or equity; and none of the outstanding securities of any subsidiary was issued in violation of the preemptive or similar rights of any securityholder of such subsidiary. The only subsidiaries of the Company are (a) the subsidiaries (the "Operating Subsidiaries") listed on Schedule B hereto and (b) certain other subsidiaries which, considered in the aggregate as a single Subsidiary, do not constitute a "significant subsidiary" as defined in Rule 1-02 of Regulation S-X. (viii) CAPITALIZATION. The authorized, issued and outstanding capital stock of the Company is as set forth in the Prospectuses under "Capitalization" (except for subsequent issuances, if any, pursuant to reservations, agreements or employee benefit plans); the shares of issued and outstanding capital stock of the Company including the Securities to be purchased by the International Managers and the U.S. Underwriters from the Selling Shareholder, have been duly authorized and validly issued and are fully paid and non-assessable; none of the outstanding shares of capital stock, including the Securities to be purchased by the International Managers, of the Company was issued in violation of the preemptive or other similar rights of any security holder of the Company; the Common Stock conforms to all statements relating thereto contained in the Prospectuses and such description conforms to the rights set forth in the instruments defining the same; the outstanding stock options relating to the Company's Common Stock have been duly authorized and validly issued and the description thereof contained in the Registration Statement and the Prospectuses is true and accurate; no holder of the Securities will be subject to personal liability by reason of being such a holder. (ix) AUTHORIZATION OF AGREEMENT. This Agreement and the U.S. Purchase Agreement have been duly authorized, executed and delivered by the Company. (x) ABSENCE OF DEFAULTS AND CONFLICTS. Neither the Company nor any of its subsidiaries is in violation of its charter or by-laws or in default in the performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, deed of trust, loan or credit agreement, note, lease or other instrument or agreement to which the Company or any of its subsidiaries is a party or by which it or any of them -7- may be bound, or to which any of the property or assets of the Company or any of its subsidiaries is subject (collectively, "Agreements and Instruments"), except for such defaults that would not result in a Material Adverse Effect; and the execution, delivery and performance of this Agreement and the U.S. Purchase Agreement and the consummation of the transactions contemplated in this Agreement and the U.S. Purchase Agreement and in the Registration Statement have been duly authorized by all necessary corporate action and do not and will not, whether with or without the giving of notice or passage of time or both, conflict with or constitute a breach of, or default or Repayment Event (as defined below) under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, the Agreements and Instruments (except for such conflicts, breaches or defaults or liens, charges or encumbrances that would not result in a Material Adverse Effect), nor will such action result in any violation of the provisions of the charter or by-laws of the Company or any of its subsidiaries or any applicable law, statute, rule, regulation, judgment, order, writ or decree of any government, government instrumentality or court, domestic or foreign, having jurisdiction over the Company or any of its subsidiaries or any of their assets, properties or operations. As used herein, a "Repayment Event" means any event or condition which gives the holder of any note, debenture or other evidence of indebtedness (or any person acting on such holder's behalf) the right to require the repurchase, redemption or repayment of all or a portion of such indebtedness by the Company or any of its subsidiaries. (xi) ABSENCE OF LABOR DISPUTE. No labor dispute with the employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, is imminent; and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its or any of its subsidiaries' principal suppliers, manufacturers, customers or contractors which, in either case, may reasonably be expected to result in a Material Adverse Effect. (xii) ABSENCE OF PROCEEDINGS. There is no action, suit, proceeding, inquiry or investigation before or brought by any court or governmental agency or body, domestic or foreign, now pending, or, to the knowledge of the Company, threatened, against or affecting the Company or any of its subsidiaries, that is required to be disclosed in the Registration Statement, or that might result in a Material Adverse Effect, or that might materially and adversely affect the properties or assets thereof or that might materially and adversely affect the consummation of the transactions contemplated by this Agreement and the U.S. Purchase Agreement or the performance by the Company of its obligations hereunder or thereunder; the aggregate of all -8- pending legal or governmental proceedings to which the Company or any of its subsidiaries is a party or of which any of their respective properties or assets is the subject that are not described in the Registration Statement, including ordinary routine litigation incidental to the business, could not reasonably be expected to result in a Material Adverse Effect. (xiii) ACCURACY OF EXHIBITS. There are no contracts or documents which are required to be described in the Registration Statement, the Prospectuses or the documents incorporated by reference therein or to be filed as exhibits thereto which have not been so described and filed as required. (xiv) POSSESSION OF INTELLECTUAL PROPERTY. The Company and its subsidiaries own or possess, or can acquire on reasonable terms, the patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names and other intellectual property presently employed by them in connection with the business now operated by them or necessary in order to conduct such business, and neither the Company nor any of its subsidiaries has received any notice of infringement of or conflict with asserted rights of others with respect to any of the foregoing which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect. (xv) ABSENCE OF FURTHER REQUIREMENTS. No filing with, authorization, approval, consent, license, order, registration, qualification or decree of any court or governmental authority or agency is necessary or required for the performance by the Company or any of its subsidiaries in connection with the offering or sale of the Securities under this Agreement and the U.S. Purchase Agreement or the transactions contemplated by this Agreement and the U.S. Purchase Agreement, except such as may be required under the 1933 Act or the 1933 Act Regulations and foreign or state securities or blue sky laws. (xvi) POSSESSION OF LICENSES AND PERMITS. The Company and its subsidiaries possess such authorizations, approvals, consents, licenses, orders, registrations, qualifications, decrees or permits (collectively, "Governmental Licenses") issued by the appropriate state, federal or foreign regulatory agencies or bodies, necessary to conduct the business now operated by them, and neither the Company nor any of its subsidiaries has received any notice of proceedings relating to the revocation or modification of any such Governmental Licenses which, singly -9- or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would result in a Material Adverse Effect. (xvii) NO REGISTRATION RIGHTS. No holder of securities of the Company has rights to the registration of securities of the Company because of the filing of the Registration Statement. (xviii)ACCOUNTING CONTROLS. The Company and its subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurances that (A) transactions are executed in accordance with management's general or specific authorization; (B) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (C) access to assets is permitted only in accordance with management's general or specific authorization; and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (xix) COMPLIANCE WITH CUBA ACT. The Company has complied with, and is and will be in compliance with, the provisions of that certain Florida act relating to disclosure of doing business with Cuba, codified as Section 517.075 of the Florida statutes, and the rules and regulations thereunder (collectively, the "Cuba Act") or is exempt therefrom. (xx) INVESTMENT COMPANY ACT. The Company is not, and upon the issuance and sale of the Securities as herein contemplated and the application of the net proceeds therefrom as described in the Prospectuses will not be, an "investment company" or an entity "controlled" by an "investment company" as such terms are defined in the Investment Company Act of 1940, as amended (the "1940 Act"). (b) The Selling Shareholder and the General Partner, jointly and severally, represent and warrant to, and agree with, each International Manager as of the date hereof, as of the Closing Time and as of each Date of Delivery, each of subparagraphs (i) through (xx), inclusive, of subsection (a) of this Section 1 and each of subparagraphs (i) through (vii), inclusive, of this subsection (b) as follows: (i) For a period 90 days from the date of the Prospectuses, such Selling Shareholder or General Partner, as the case may be, will not, without the prior written consent of Merrill Lynch (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer -10- or dispose of, directly or indirectly, any share of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or file any registration statement under the 1933 Act with respect to any of the foregoing or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Common Stock, whether any such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing sentence shall not apply to the Securities to be sold hereunder or under the U.S. Purchase Agreement. (ii) The execution and delivery of this Agreement and the U.S. Purchase Agreement and the consummation of the transactions contemplated hereby and thereby will not result in a breach by such Selling Shareholder or General Partner, as the case may be, of, or constitute a default by such Selling Shareholder or General Partner, as the case may be, under, any material indenture, deed or trust, contract or other agreement or instrument or any decree, judgment or order to which such Selling Shareholder or General Partner, as the case may be, is a party or by which such Selling Shareholder or General Partner, as the case may be, may be bound. (iii) Such Selling Shareholder has and will have, at the Closing Time and on each Date of Delivery, good and marketable title to the International Securities to be sold by such Selling Shareholder hereunder, free and clear of any pledge, lien, security interest, encumbrance, claim or equity, created by or arising through the Selling Shareholder other than pursuant to this Agreement; such Selling Shareholder has full right, power and authority to sell, transfer and deliver the International Securities to be sold by such Selling Shareholder hereunder; and upon delivery of the International Securities to be sold by such Selling Shareholder hereunder and payment of the purchase price therefor as herein contemplated, each of the International Managers will receive good and marketable title to its ratable share of the International Securities purchased by it from such Selling Shareholder, free and clear of any pledge, lien, security interest, encumbrance, claim or equity. (iv) Such Selling Shareholder has duly executed and delivered in the form heretofore furnished to the International Managers, a power of attorney and custody agreement (the "International Power of Attorney and Custody Agreement") with Ira Dansky, as the attorney-in-fact and the custodian (the "Attorney-in-Fact" and the "Custodian," respectively); the Attorney-in-Fact is authorized to execute and deliver this Agreement, and the certificates referred to in Section 5(d) or that may be required pursuant to Section 5(j) on behalf of such Selling Shareholder, to determine the purchase price to be -11- paid by the International Managers to such Selling Shareholder as provided in Section 2(a) hereof, to authorize the delivery of the International Securities to be sold by such Selling Shareholder hereunder, to duly endorse (in blank or otherwise) the certificate or certificates representing such International Securities, to accept payment therefor, and otherwise to act on behalf of such Selling Shareholder in connection with this Agreement. (v) All authorizations, approvals, consents, licenses, orders, registrations, qualifications, decrees or permits necessary for the execution and delivery by such Selling Shareholder of the International Power of Attorney and Custody Agreement and the U.S. Power of Attorney and Custody Agreement, the execution and delivery by or on behalf of such Selling Shareholder or General Partner, as the case may be, of this Agreement and the U.S. Purchase Agreement, and the sale and delivery of the Securities to be sold by such Selling Shareholder hereunder and thereunder (other than, at the time of the execution hereof, the issuance of the order of the Commission declaring the Registration Statement effective and such authorizations, approvals, consents, licenses, orders, registrations, qualifications, decrees or permits as may be necessary under state securities laws), have been obtained and are in full force and effect; and such Selling Shareholder or General Partner, as the case may be, has the full right, power and authority to enter into this Agreement and the U.S. Purchase Agreement and such International Power of Attorney and Custody Agreement and U.S. Power of Attorney and Custody Agreement to sell, transfer and deliver the Securities to be sold by such Selling Shareholder hereunder. (vi) Such Selling Shareholder or General Partner, as the case may be, has not taken, and will not take, directly or indirectly, any action which is designed to or which has constituted or which might reasonably be expected to cause or result in stabilization or manipulation of the price of any security or the Company to facilitate the sale or resale of the Securities. (vii) Certificates in negotiable form for all Securities to be sold by such Selling Shareholder hereunder and under the U.S. Purchase Agreement have been placed in custody with the Custodian by or for the benefit of such Selling Shareholder with irrevocable conditional instructions for the purposes of effecting delivery by such Selling Shareholder hereunder and under the U.S. Purchase Agreement. (c) Any certificate signed by any officer of the Company or any of its subsidiaries and delivered to the Global Coordinator, Lead Managers or to counsel for the International Managers shall be deemed a representation and warranty by the Company to each International Manager as to the matters covered thereby; and any certificate signed by or on behalf of the Selling Shareholder or the General Partner, as the case may be, and -12- delivered to the Global Coordinator, Lead Managers or to counsel for the International Managers shall be deemed a representation and warranty by such Selling Shareholder or General Partner, as the case may be, to each International Manager as to matters covered thereby. SECTION 2. SALE AND DELIVERY TO U.S. UNDERWRITERS; CLOSING. (a) INITIAL SECURITIES. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Selling Shareholder agrees to sell to each International Manager, severally and not jointly, and each International Manager, severally and not jointly, agrees to purchase from the Selling Shareholder, at the price per share set forth in Schedule C, the number of Initial International Securities set forth in Schedule A opposite the name of such International Manager, plus any additional number of Initial International Securities which such International Manager may become obligated to purchase pursuant to the provisions of Section 10 hereof. (b) Option Securities. In addition, on the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Selling Shareholder hereby grants an option to the International Managers, severally and not jointly, to purchase up to an additional 135,000 shares of Common Stock at the price per share set forth in Schedule C, less an amount per share equal to any dividends or distributions declared by the Company and payable on the Initial International Securities but not payable on the International Option Securities. The option hereby granted will expire 30 days after the date hereof and may be exercised in whole or in part from time to time only for the purpose of covering over-allotments which may be made in connection with the offering and distribution of the Initial International Securities upon notice by the Global Coordinator to the Company and the Selling Shareholder setting forth the number of International Option Securities as to which the several International Managers are then exercising the option and the time and date of payment and delivery for such International Option Securities. Any such time and date of delivery for the International Option Securities (a "Date of Delivery") shall be determined by the Global Coordinator, but shall not be later than seven full business days after the exercise of said option, nor in any event prior to the Closing Time, as hereinafter defined. If the option is exercised as to all or any portion of the International Option Securities, each of the International Managers, acting severally and not jointly, will purchase that proportion of the total number of International Option Securities then being purchased which the number of Initial International Securities set forth in Schedule A opposite the name of such International Manager bears to the total number of Initial International Securities, subject in each case to such adjustments as the Global Coordinator in its discretion shall make to eliminate any sales or purchases of fractional shares. -13- (c) PAYMENT. Payment of the purchase price for, and delivery of certificates for, the Initial Securities shall be made at the offices of Willkie Farr & Gallagher, 153 East 53rd Street, New York, New York, or at such other place as shall be agreed upon by the Global Coordinator and the Company and the Selling Shareholder, at 9:00 A.M. (Eastern time) on the third (fourth, if the pricing occurs after 4:30 P.M. (Eastern time) on any given day) business day after the date hereof (unless postponed in accordance with the provisions of Section 10), or such other time not later than ten business days after such date as shall be agreed upon by the Global Coordinator, the Company and the Selling Shareholder (such time and date of payment and delivery being herein called "Closing Time"). In addition, in the event that any or all of the International Option Securities are purchased by the International Managers, payment of the purchase price for, and delivery of certificates for, such International Option Securities shall be made at the above-mentioned offices, or at such other place as shall be agreed upon by the Global Coordinator, the Company and the Selling Shareholder, on each Date of Delivery as specified in the notice from the Global Coordinator to the Company and the Selling Shareholder. Payment shall be made to the Selling Shareholder by wire transfer of immediately available funds to a bank account designated by the Selling Shareholder or the Custodian pursuant to the Selling Shareholder's International Power of Attorney and Custody Agreement, as the case may be, against delivery to the Lead Managers for the respective accounts of the International Managers of certificates for the International Securities to be purchased by them. It is understood that each International Manager has authorized the Lead Managers, for its account, to accept delivery of, receipt for, and make payment of the purchase price for, the Initial International Securities and the International Option Securities, if any, which it has agreed to purchase. Merrill Lynch, individually and not as representative of the International Managers, may (but shall not be obligated to) make payment of the purchase price for the Initial International Securities or the International Option Securities, if any, to be purchased by any International Manager whose funds have not been received by the Closing Time or the relevant Date of Delivery, as the case may be, but such payment shall not relieve such International Manager from its obligations hereunder. (d) DENOMINATIONS; REGISTRATION. Certificates for the Initial International Securities and the International Option Securities, if any, shall be in such denominations and registered in such names as the Lead Managers may request in writing at least one full business day before the Closing Time or the relevant Date of Delivery, as the case may be. The certificates for the Initial International Securities and the International Option Securities, if any, will be made available for examination and packaging by the Lead Managers in The City of New York not -14- later than 10:00 A.M. (Eastern time) on the business day prior to the Closing Time or the relevant Date of Delivery, as the case may be. SECTION 3. COVENANTS OF THE COMPANY. The Company covenants with each International Manager as follows: (a) COMPLIANCE WITH SECURITIES REGULATIONS AND COMMISSION REQUESTS. The Company, subject to Section 3(b), will comply with the requirements of Rule 430A or Rule 434, as applicable and will notify the Global Coordinator immediately, and confirm the notice in writing, (i) when any post-effective amendment to the Registration Statement shall become effective, or any supplement to the Prospectuses or any amended Prospectuses shall have been filed, (ii) of the receipt of any comments from the Commission, (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectuses or for additional information, and (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of any order preventing or suspending the use of any preliminary prospectus, or of the suspension of the qualification of the Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any such purposes. The Company will promptly effect the filings necessary pursuant to Rule 424(b) and will take such steps as it deems necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. The Company will make every reasonable effort to prevent the issuance of any stop order and, if any stop order is issued, to obtain the lifting thereof at the earliest possible moment. (b) FILING OF AMENDMENTS. The Company will give the Global Coordinator notice of its intention to file or prepare any amendment to the Registration Statement (including any filing under Rule 462(b)), any Term Sheet or any amendment, supplement or revision to either the Prospectus included in the Registration Statement at the time it became effective or the Prospectuses, whether pursuant to the 1933 Act, the 1934 Act or otherwise, will furnish the Global Coordinator with copies of any such documents a reasonable amount of time prior to such proposed filing or use, as the case may be, and will not file or use any such document to which the Global Coordinator or counsel for the International Managers shall reasonably object. (c) DELIVERY OF REGISTRATION STATEMENTS. The Company will deliver to the Lead Managers and counsel for the International Managers, without charge, signed copies of the Registration Statement as originally filed and of each -15- amendment thereto (including exhibits filed therewith or incorporated by reference therein and documents incorporated or deemed to be incorporated by reference therein) and signed copies of all consents and certificates of experts; and will also deliver to the Lead Managers, without charge, a conformed copy of the Registration Statement as originally filed and of each amendment thereto (without exhibits) for each of the International Managers. The copies of the Registration Statement and each amendment thereto furnished to the Lead Managers or counsel for the International Managers will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (d) DELIVERY OF PROSPECTUSES The Company has delivered to each International Manager, without charge, as many copies of each preliminary prospectus as such International Manager reasonably requested, and the Company hereby consents to the use of such copies for purposes permitted by the 1933 Act. The Company will furnish to each International Manager, without charge, during the period when the International Prospectus is required to be delivered under the 1933 Act or the 1934 Act, such number of copies of the International Prospectus (as amended or supplemented) as such International Manager may reasonably request. The International Prospectus and any amendments or supplements thereto furnished to the International Managers will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T. (e) CONTINUED COMPLIANCE WITH SECURITIES LAWS. The Company will comply with the 1933 Act and the 1933 Act Regulations and the 1934 Act and the 1934 Act Regulations so as to permit the completion of the distribution of the Securities as contemplated in this Agreement, the U.S. Purchase Agreement and in the Prospectuses. If at any time when a prospectus is required by the 1933 Act to be delivered in connection with sales of the Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the International Managers or for the Company, to amend the Registration Statement or amend or supplement any Prospectus in order that the Prospectuses will not include any untrue statements of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser, or if it shall be necessary, in the opinion of such counsel, at any such time to amend the Registration Statement or amend or supplement any Prospectus in order to comply with the requirements of the 1933 Act or the 1933 Act Regulations, the Company will promptly prepare and file with the Commission, subject to Section 3(b), such amendment or supplement as may be -16- necessary to correct such statement or omission or to make the Registration Statement or the Prospectuses comply with such requirements, and the Company will furnish to the International Managers such number of copies of such amendment or supplement as the International Managers may reasonably request. (f) BLUE SKY QUALIFICATIONS. The Company will use its best efforts, in cooperation with the International Managers, to qualify the Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Global Coordinator may designate and to maintain such qualifications in effect for a period of not less than one year from the later of the effective date of the Registration Statement and any Rule 462(b) Registration Statement; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject. In each jurisdiction in which the Securities have been so qualified, the Company will file such statements and reports as may be required by the laws of such jurisdiction to continue such qualification in effect for a period of not less than one year from the effective date of the Registration Statement and any Rule 462(b) Registration Statement. (g) RULE 158. The Company will timely file such reports pursuant to the 1934 Act as are necessary in order to make generally available to its securityholders as soon as practicable an earnings statement for the purposes of, and to provide the benefits contemplated by, the last paragraph of Section 11(a) of the 1933 Act. (h) RESTRICTION ON SALE OF SECURITIES. During a period of 90 days from the date of the Prospectuses, the Company will not, without the prior written consent of the Global Coordinator, (i) directly or indirectly, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of any share of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or file any registration statement under the 1933 Act with respect to any of the foregoing or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Common Stock, whether any such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. -17- The foregoing sentence shall not apply to (A) the Securities to be sold hereunder or under the U.S. Purchase Agreement, (B) any shares of Common Stock issued by the Company upon the exercise of an option or warrant or the conversion of a security outstanding on the date hereof and referred to in the Prospectuses, (C) any shares of Common Stock issued or options to purchase Common Stock granted pursuant to existing employee benefit plans of the Company referred to in the Prospectuses or (D) any shares of Common Stock issued pursuant to any non-employee director stock plan or dividend reinvestment plan. (i) REPORTING REQUIREMENTS. The Company, during the period when the Prospectuses are required to be delivered under the 1933 Act or the 1934 Act, will file all documents required to be filed with the Commission pursuant to the 1934 Act within the time periods required by the 1934 Act and the 1934 Act Regulations. (j) LISTING. The Company will file with the New York Stock Exchange all documents and notices required by the New York Stock Exchange of companies that have securities listed on such exchange and will use every reasonable effort to maintain the listing of the Securities on the New York Stock Exchange. SECTION 4. PAYMENT OF EXPENSES. (a) The Company, the Selling Shareholder and the General Partner will pay all expenses incident to the performance of the obligations of the Company and the Selling Shareholder under this Agreement, including (i) the printing and filing of the Registration Statement (including financial statements and exhibits) as originally filed and of each amendment thereto, (ii) the preparation, printing and delivery to the Underwriters of this Agreement, any Agreement among Underwriters and such other documents as may be required in connection with the offering, purchase, sale, issuance or delivery of the Securities, (iii) the preparation and delivery of the certificates for the International Securities to the International Managers, including any stock or other transfer taxes and any stamp or other duties payable upon the sale or delivery of the Securities to the Underwriters and the transfer of the Securities between the U.S. Underwriters and the International Managers, (iv) the fees and disbursements of the Company's counsel, accountants and other advisors, (v) the qualification of the Securities under securities laws in accordance with the provisions of Section 3(f), including filing fees and the fees and disbursements of counsel for the International Managers (which shall not exceed $10,000) in connection therewith and in connection with the preparation of the Blue Sky Survey and any supplement thereto, (vi) the printing and delivery to the Underwriters of copies of each preliminary prospectus, any Term Sheets and of the Prospectuses and any amendments or supplements thereto, (vii) the preparation, printing and delivery to the Underwriters of copies of the Blue -18- Sky Survey and any supplement thereto, (viii) the fees and expenses of any transfer agent or registrar for the Securities and the Custodians, (ix) the filing fees incident to, and the reasonable fees and disbursements of counsel to the International Managers in connection with, the review by the National Association of Securities Dealers, Inc. (the "NASD") of the terms of the sale of the Securities and (x) the fees and expenses incurred in connection with the listing of the Securities on the New York Stock Exchange. (b) EXPENSES OF THE SELLING SHAREHOLDER AND THE GENERAL PARTNER. The Selling Shareholder and the General Partner will pay all expenses incident to the performance of his obligations under, and the consummation of the transactions contemplated by this Agreement, including (i) any stamp duties, capital duties and stock transfer taxes, if any, payable upon the sale of the Securities to the Underwriters, and their transfer between the Underwriters pursuant to an agreement between such Underwriters or between the International Managers and the U.S. Underwriters, and (ii) the fees and disbursements of his counsel and accountants, if any. (c) TERMINATION OF AGREEMENT. If this Agreement is terminated by the Lead Managers in accordance with the provisions of Section 5, Section 9(a)(i) or Section 11, the Company, the Selling Shareholder and the General Partner shall reimburse the International Managers for all of their out-of-pocket expenses, including the reasonable fees and disbursements of counsel for the International Managers. (d) ALLOCATION OF EXPENSES. The provisions of this Section shall not affect any agreement that the Company, the Selling Shareholder and the General Partner may make for the sharing of such costs and expenses. SECTION 5. CONDITIONS OF THE INTERNATIONAL MANAGERS' OBLIGATIONS. The obligations of the several International Managers hereunder are subject to the accuracy of the representations and warranties of the Company, the Selling Shareholder and the General Partner herein contained or in certificates of any officer of the Company or any of its subsidiaries or on behalf of the Selling Shareholder or General Partner delivered pursuant to the provisions hereof, to the performance by the Company, the Selling Shareholder and the General Partner of their respective covenants and obligations hereunder, and to the following further conditions: (a) EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration Statement, including any Rule 462(b) Registration Statement, has become effective and at Closing Time no stop order suspending the effectiveness of the Registration Statement shall have been issued under the 1933 Act or proceedings therefor initiated or threatened by the Commission, and any request on the part of the Commission for additional information shall have been complied with to the reasonable satisfaction of counsel to the International Managers. A prospectus containing the Rule 430A Information shall have been filed with the Commission in -19- accordance with Rule 424(b) (or a post-effective amendment providing such information shall have been filed and declared effective in accordance with the requirements of Rule 430A) or, if the Company has elected to rely upon Rule 434, a Term Sheet shall have been filed with the Commission in accordance with Rule 424(b). (b) At Closing Time, the Lead Managers shall have received: (1) The favorable opinion, dated as of Closing Time, of Phillips Nizer Benjamin Krim & Ballon LLP, counsel for the Company, in form and substance satisfactory to counsel for the International Managers, together with signed or reproduced copies of such letter for each of the other International Managers to the effect that: (i) The Company is validly existing as a corporation in good standing under the laws of the Commonwealth of Pennsylvania. (ii) The Company has the corporate power and authority to own, lease and operate its properties and to conduct its business as now being conducted and as described in the Registration Statement and to enter into and perform its obligations under this Agreement and the U.S. Purchase Agreement. (iii) To the best of their knowledge and information, the Company is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, except where the failure to so qualify or be in good standing would not result in a Material Adverse Effect. (iv) The authorized, issued and outstanding capital stock of the Company is as set forth in the Prospectuses under "Capitalization" (except for subsequent issuances, if any, pursuant to reservations, agreements, employee benefit plans referred to in the Prospectuses), and the shares of issued and outstanding Common Stock, including the Securities to be purchased by the International Managers and the U.S. Underwriters from the Selling Shareholder have been duly authorized and validly issued and are fully paid and nonassessable and no holder of the Securities is or will be subject to personal liability by reason of being such a holder. (v) The outstanding stock options relating to the Company's Common Stock have been duly authorized and validly issued and the description thereof contained in the Registration Statement and the Prospectuses is true and accurate. -20- (vi) This Agreement and the U.S. Purchase Agreement have each been duly authorized, executed and delivered by the Company. (vii) The Registration Statement, including any Rule 462(b) Registration Statement, has been declared effective under the 1933 Act; any required filing of the Prospectuses pursuant to Rule 424(b) has been made in the manner and within the time period required by Rule 424(b); and, to the best of their knowledge, no stop order suspending the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement has been issued under the 1933 Act and no proceedings for that purpose have been instituted or are pending or threatened by the Commission. (viii) The Registration Statement, including any Rule 462(b) Registration Statement, the Rule 430A Information and the Rule 434 Information, as applicable, the Prospectuses, excluding the documents incorporated by reference therein, and each amendment or supplement to the Registration Statement and the Prospectuses, excluding the documents incorporated by reference therein, as of their respective effective or issue dates (other than the financial statements and supporting schedules included therein or omitted therefrom, as to which we need express no opinion) complied as to form in all material respects with the requirements of the 1933 Act and the 1933 Act Regulations. (ix) The documents incorporated by reference in the Prospectuses (other than the financial statements and supporting schedules included therein or omitted therefrom, as to which we need express no opinion), when they were filed with the Commission complied as to form in all material respects with the requirements of the 1934 Act and the rules and regulations of the Commission thereunder. (x) To the best of their knowledge, there is not pending or threatened any action, suit, proceeding, inquiry or investigation, to which the Company or any subsidiary is a party, or to which the property of the Company or any subsidiary is subject, before or brought by any court or governmental agency or body, domestic or foreign, which might reasonably be expected to result in a Material Adverse Effect, or which might reasonably be expected to materially and adversely affect the properties or assets thereof or the consummation of the transactions contemplated in the International Purchase Agreement and the U.S. -21- Purchase Agreement or the performance by the Company of its obligations thereunder. (xi) The Common Stock conforms to the description thereof contained in the Prospectuses, and the form of certificate used to evidence the Common Stock is in due and proper form and complies with all applicable statutory requirements and the requirements of the New York Stock Exchange. (xii) Each of the Company's operating subsidiaries is validly existing as a corporation in good standing under the laws of the jurisdiction of its organization, has corporate power and authority to own, lease and operate its properties and to conduct its business as described in the Registration Statement, and is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which it owns or leases real property except where the failure to so qualify would not have a Material Adverse Effect; all of the issued and outstanding capital stock of each such corporate subsidiary has been duly authorized and validly issued, is fully paid and non-assessable and is owned by the Company, directly or through subsidiaries, free and clear of any mortgage, pledge, lien, encumbrance, claim or equity. (xiii) The information in the Prospectuses under the heading "Certain United States Federal Tax Consequences to Non-U.S. Holders of Common Stock" and the description of the Company's capital stock incorporated by reference in the Registration Statement and in the Registration Statement under Item 15 to the extent that it constitutes summaries of legal matters, documents or proceedings, or legal conclusions, has been reviewed by them and is correct in all material respects. (xiv) To the best of their knowledge after due inquiry, there are no contracts, indentures, mortgages, loan agreements, notes, leases or other instruments or agreements required to be described or referred to in the Registration Statement or to be filed as exhibits thereto other than those described or referred to therein or filed as exhibits thereto; the descriptions thereof or references thereto are correct; and no default exists in the due performance or observance of any obligation, agreement, covenant or condition contained in any contract, indenture, mortgage, loan agreement, note, lease or other instrument or agreement so described, referred to or filed, which -22- default or defaults, singly or in the aggregate, are material to the condition, financial or otherwise, or earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise. (xv) No authorization, approval, consent or order of any court or governmental authority or agency is required in connection with the sale of the International Securities to the International Managers hereunder or the U.S. Securities to the U.S. Underwriters under the U.S. Purchase Agreement, except such as may be required under the 1933 Act or the 1933 Act Regulations or state securities law; and, to the best of their knowledge and information, the execution and delivery of this Agreement and the U.S. Purchase Agreement and the consummation of the transactions contemplated herein and therein will not conflict with or constitute a breach of, or default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, any contract, indenture, mortgage, loan agreement, note, lease or other instrument or agreement to which the Company or any of its subsidiaries is a party or by which any of them may be bound, or to which any of the property or assets of the Company or any of its subsidiaries is subject, nor will such action result in any violation of the provisions of the charter or by-laws of the Company, or any applicable law, rule, regulation, order or administrative or court decree. In rendering the foregoing opinion, Phillips Nizer Benjamin Krim & Ballon LLP may rely as to matters of law of the Commonwealth of Pennsylvania upon the opinion of Mesirov, Gelman, Jaffe, Cramer & Jamieson, which opinion shall state that Willkie Farr & Gallagher may rely on such opinion. Baker & McKenzie shall render an opinion relating to Camisas de Juarez S.A. de C.V. as to matters of the laws of Mexico. Cassells Brock & Blackwell shall render an opinion relating to Jones Apparel Group Canada, Inc. as to matters of law of the Canadian province of Ontario. All such opinions shall be satisfactory in form and in substance to counsel for the International Managers. (2) The favorable opinion, dated as of Closing Time, of Phillips Nizer Benjamin Krim & Ballon LLP, counsel for the Selling Shareholder and the General Partner, in form and substance satisfactory to counsel for the International Managers, to the effect that: -23- (i) This Agreement and the U.S. Purchase Agreement have been duly authorized, executed and delivered by or an behalf of the Selling Shareholder and the General Partner. (ii) The International Power of Attorney and Custody Agreement has been duly authorized, executed and delivered by the Selling Shareholder and constitutes the valid and binding obligation of the Selling Shareholder in accordance with its terms. (iii) The International Securities to be purchased by the International Managers from the Selling Shareholder have been validly issued and are fully paid and non-assessable. (iv) To the best of their knowledge after due inquiry, the Selling Shareholder has good and marketable title to the International Securities to be sold by such Selling Shareholder hereunder and full power, right and authority to sell such International Securities as herein contemplated, each of the International Managers will receive good and marketable title to the International Securities purchased by it from the Selling Shareholder, free and clear of any mortgage, pledge, lien, security interest, encumbrance, claim or equity created by or arising through the Selling Shareholder. In rendering such opinion, counsel may assume that the International Managers are without notice of any defect in the title of the Selling Shareholder to the Securities being purchased from such Selling Shareholder. (v) No authorization, approval, consent, or order of any court or governmental authority or agency is required in connection with the sale of the International Securities from the Selling Shareholder to the International Managers, except such as may be required under the 1933 Act of the 1933 Act Regulations or state securities law. (3) The favorable opinion, dated as of Closing Time, of Willkie Farr & Gallagher, counsel for the International Managers, with respect to the matters set forth in (i), (vi) to (ix), inclusive, and (xi) of subsection (b)(1) of this Section and (i) and (iii) of subsection (b)(2) of this Section. Such counsel may also state that, insofar as such opinion involves factual matters, they have relied, to the extent they deem proper, upon certificates of the Company and its subsidiaries and certificates of public officials. In addition, in rendering the foregoing opinion, Willkie Farr & Gallagher may rely as to matters of law of the -24- Commonwealth of Pennsylvania upon the opinion of Mesirov, Gelman, Jaffe, Cramer and Jamieson. (4) In giving their opinions required by subsections (b) (1), (b) (2) and (b) (3) of this Section, Phillips Nizer Benjamin Krim & Ballon LLP and Willkie Farr & Gallagher shall each additionally state that nothing has come to their attention that would lead them to believe that the Registration Statement or any amendment thereto, including the Rule 430A Information and Rule 434 Information (if applicable), (except for financial statements and schedules and other financial data included or incorporated by reference therein or omitted therefrom, as to they need make no statement), at the time such Registration Statement or any such amendment became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectuses or any amendment or supplement thereto (except for financial statements and schedules and other financial data included or incorporated by reference therein or omitted therefrom, as to which they need make no statement), at the time the Prospectuses were issued, at the time any such amended or supplemented prospectus was issued or at the Closing Time, included or includes an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (c) At Closing Time, there shall not have been, since the date hereof or since the respective dates as of which information is given in the Registration Statement and the Prospectuses, any Material Adverse Effect, and the Lead Managers shall have received a certificate of the Chairman or President of the Company and of the chief financial or chief accounting officer of the Company, dated as of Closing Time, to the effect that (i) there has been no such Material Adverse Effect, (ii) the representations and warranties in Section 1(a) hereof are true and correct with the same force and effect as though expressly made at and as of Closing Time, (iii) the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied at or prior to Closing Time, and (iv) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been initiated or threatened by the Commission. (d) At Closing Time, the Lead Managers shall have received a certificate of (x) the Attorney in Fact for the Selling Shareholder, dated as of Closing Time, to the effect that (i) the representations and warranties of the Selling Shareholder contained in Section 1(b) hereof are true and correct with the same force and effect as though expressly made at and as of -25- Closing Time and (ii) the Selling Shareholder has complied with all agreements and satisfied all conditions on his part to be performed or satisfied hereunder at or prior to Closing Time and (y) of the General Partner to the same effect, but with respect to the General Partner. The Attorney in Fact shall be entitled to rely upon a certificate of the Selling Shareholder in giving its certificate. (e) At the time of the execution of this Agreement, the Lead Managers shall have received from BDO Seidman, LLP a letter dated such date, in form and substance satisfactory to the Lead Managers, together with signed or reproduced copies of such letter for each of the other International Managers containing statements and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial information contained in the Registration Statement and the Prospectuses. (f) At Closing Time, the Lead Managers shall have received from BDO Seidman, LLP a letter, dated as of the Closing Time, to the effect that they reaffirm the statements made in the letter furnished pursuant to subsection (e) of this Section, except that the specified date referred to shall be a date not more than three business days prior to Closing Time. (g) At Closing Time, the Securities shall have been approved for listing on the New York Stock Exchange, subject only to official notice of issuance. (h) At the date of this Agreement, the Lead Managers shall have received an agreement substantially in the form of Exhibit A hereto signed by the persons listed on Schedule D hereto. (i) In the event the International Managers exercise the option granted in Section 2(b) hereof to purchase all or any portion of the International Option Securities, the representations and warranties of the Company, the Selling Shareholder and the General Partner contained herein and the statements in any certificates furnished by the Company, the Selling Shareholder or the General Partner hereunder shall be true and correct as of the relevant Date of Delivery, and the Lead Managers shall have received: (1) A certificate, dated such Date of Delivery, of the Chairman or President of the Company and of the chief financial or chief accounting officer of the Company confirming that the certificate delivered at Closing Time pursuant to Section 5(c) remains true as of the Date of Delivery. (2) A certificate, dated such Date of Delivery, of an Attorney in Fact on behalf of the Selling Shareholder confirming that the certificate delivered at Closing Time pursuant to Section 5(d) remains true and correct as of such Date of Delivery. -26- (3) The favorable opinions of Phillips Nizer Benjamin Krim & Ballon LLP, counsel for the Company, for the Selling Shareholder and the General Partner, in the form and substance reasonably satisfactory to counsel for the International Managers, dated such Date of Delivery, relating to the International Option Securities and otherwise to the same effect as the opinions required by Section 5(b)(1) and 5(b)(2). (4) The favorable opinion of Willkie Farr & Gallagher, counsel for the International Managers, dated such Date of Delivery, relating to the International Option Securities and otherwise to the same effect as the opinion required by Section 5(b)(3). (5) A letter from BDO Seidman, LLP, in form and substance satisfactory to the International Managers and dated such Date of Delivery, substantially the same in scope and substance as the letter furnished to the International Managers pursuant to Section 5(f) except that any "specified date" in the letter furnished pursuant to this Section (5)(i)(5) shall be a date not more than three days prior to the Date of Delivery. (j) At Closing Time and at each Date of Delivery, if any, counsel for the International Managers shall have been furnished with such documents and opinions as they may require for the purpose of enabling them to pass upon the issuance and sale of the Securities as contemplated herein, in the U.S. Purchase Agreement and related proceedings, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the agreements or conditions, herein contained; and all proceedings taken by the Company, the Selling Shareholder and the General Partner in connection with the issuance and sale of the Securities as herein contemplated shall be satisfactory in form and substance to the Lead Managers and counsel for the International Managers. (k) Contemporaneously with the purchase by the International Managers of the Initial International Securities under this Agreement, the U.S. Underwriters shall have purchased the Initial U.S. Securities under the U.S. Purchase Agreement. (l) If any condition specified in this Section shall not have been fulfilled when and as required to be fulfilled, this Agreement, or in the case of any condition to the purchase of International Option Securities on a Date of Delivery which is after the Closing Time, the obligations of the several International Managers to purchase the relevant International Option Securities, may be terminated by the Lead Managers by notice to the Company at any time at or prior to Closing Time or such Date of Delivery, as the case may be, and such termination shall be without liability of any party to any other party except as provided in Section 4 and except that Sections 1, 6, 7 and 8 -27- hereof shall survive any such termination and remain in full force and effect. SECTION 6. INDEMNIFICATION. (a) The Company, the Selling Shareholder and the General Partner agree to indemnify and hold harmless each International Manager, its directors, officers and employees, and each person, if any who controls any International Manager within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act to the extent and in the manner set forth in clauses (i), (ii) and (iii) below. (i) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, arising out of any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or any amendment thereto), including the Rule 430A Information and Rule 434 Information, if applicable, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading or arising out of any untrue statement or alleged untrue statement of a material fact included in any preliminary prospectus or the Prospectuses (or any amendment or supplement thereto) or the omission or alleged omission therefrom of a material fact necessary in order to make the statements therein in the light of the circumstances under which they were made, not misleading; (ii) against any and all loss, liability, claim, damage and expense whatsoever, as incurred, to the extent of the aggregate amount paid in settlement of any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, if such settlement is effected with the written consent of the Company; and (iii) against any and all expense whatsoever, as incurred (including the fees and disbursements of counsel chosen by Merrill Lynch), reasonably incurred in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement or omission, or any such alleged untrue statement or omission, to the extent that any such expense is not paid under (i) or (ii) above; PROVIDED, HOWEVER, that this indemnity agreement shall not apply to any loss, liability, claim, damage or expense to the extent arising out of any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Company by any International Manager through the Lead Managers expressly for use -28- in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information, if applicable, or any preliminary prospectus or the U.S. Prospectus (or any amendment or supplement thereto). (b) Each International Manager agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, each of its officers who signed the Registration Statement, the Selling Shareholder, the General Partner and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act against any and all loss, liability, claim, damage and expense described in the indemnity contained in subsection (a) of this Section, as incurred, but only with respect to untrue statements or omissions, or alleged untrue statements or omissions, made in the Registration Statement (or any amendment thereto), including the Rule 430A Information and the Rule 434 Information, if applicable, or any preliminary international prospectus or the International Prospectus (or any amendment or supplement thereto) in reliance upon and in conformity with written information furnished to the Company by such International Manager through the Lead Managers expressly for use in the Registration Statement (or any amendment thereto) or such preliminary prospectus or the U.S. Prospectus (or any amendment or supplement thereto). (c) Each indemnified party shall give notice as promptly as reasonably practicable to each indemnifying party of any action commenced against it in respect of which indemnity may be sought hereunder, but failure to so notify an indemnifying party shall not relieve such indemnifying party from any liability hereunder to the extent it is not materially prejudiced as a result thereof and in any event shall not relieve it from any liability which it may have otherwise than on account of this indemnity agreement. In the case of parties indemnified pursuant to Section 6(a) above, counsel to the indemnified parties shall be selected by Merrill Lynch, and, in the case of parties indemnified pursuant to Section 6(b) above, counsel to the indemnified parties shall be selected by the Company. An indemnifying party may participate at its own expense in the defense of any such action; provided, however, that counsel to the indemnifying party shall not (except with the consent of the indemnified party) also be counsel to the indemnified party. In no event shall the indemnifying parties be liable for fees and expenses of more than one counsel (in addition to any local counsel) separate from their own counsel for all indemnified parties in connection with any one action or separate but similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances. No indemnifying party shall, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever in respect of which indemnification or contribution could be sought under this Section 6 or Section 7 -29- hereof (whether or not the indemnified parties are actual or potential parties thereto), unless such settlement, compromise or consent (i) includes an unconditional release of each indemnified party from all liability arising out of such litigation, investigation, proceeding or claim and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act by or on behalf of any indemnified party. (d) In the event of a claim for indemnity pursuant to the provisions of this Section 6, each indemnified party severally agrees to seek such indemnity in full from the Company. If, after seeking such indemnity, any indemnified party is unable, for any reason, to obtain such indemnity from the Company, such indemnified party may seek indemnity from the Selling Shareholder and the General Partner, whose obligations hereunder shall be joint and several, in accordance with the provisions of subsection (a) of this Section. (e) If at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by Section 6(a) effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the aforesaid request, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement. (f) The provisions of this Section shall not affect any agreement between the Company, the Selling Shareholder and the General Partner with respect to indemnification. SECTION 7. CONTRIBUTION. If the indemnification provided for in Section 6 hereof is for any reason unavailable to or insufficient to hold harmless an indemnified party in respect of any losses, liabilities, claims, damages or expenses referred to therein, then each indemnifying party shall contribute to the aggregate amount of such losses, liabilities, claims, damages and expenses incurred by such indemnified party, as incurred, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, Selling Shareholder and the General Partner on the one hand and the International Managers on the other hand from the offering of the Securities pursuant to this Agreement or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, the Selling Shareholder and the General Partner on the one hand and of the International Managers on the other hand in connection with the statements or omissions which resulted in such losses, liabilities, claims, damages or expenses, as well as any other relevant equitable considerations. -30- The relative benefits received by the Company, the Selling Shareholder and the General Partner on the one hand and the International Managers on the other hand in connection with the offering of the International Securities pursuant to this Agreement shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the International Securities pursuant to this Agreement (before deducting expenses) received by the Company, the Selling Shareholder and the General Partner and the total underwriting discount received by the International Managers, in each case as set forth on the cover of the International Prospectus, or, if Rule 434 is used, the corresponding location on the Term Sheet bear to the aggregate initial public offering price of the International Securities as set forth on such cover. In addition, for purposes of this section, the General Partner shall be deemed to have received any net proceeds received by the Selling Shareholder. The relative fault of the Company, the Selling Shareholder and the General Partner on the one hand and the International Managers on the other hand shall be determined by reference to, among other things, whether any such untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company, the Selling Shareholder or the General Partner or by the International Managers and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Selling Shareholder, the General Partner and the International Managers agree that it would not be just and equitable if contribution pursuant to this Section 7 were determined by pro rata allocation (even if the International Managers were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 7. The aggregate amount of losses, liabilities, claims, damages and expenses incurred by an indemnified party and referred to above in this Section 7 shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in investigating, preparing or defending against any litigation, or any investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue or alleged untrue statement or omission or alleged omission. Notwithstanding the provisions of this Section 7, no International Manager shall be required to contribute any amount in excess of the amount by which the total price at which the International Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages which International Manager has otherwise been required to pay by reason of any such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. -31- For purposes of this Section 7, each person, if any, who controls an International Manager within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as such International Manager, and each director of the Company, each officer of the Company who signed the Registration Statement, and each person, if any, who controls the Company within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to contribution as the Company. The International Managers' respective obligations to contribute pursuant to this Section 7 are several in proportion to the number of Initial International Securities set forth opposite their respective names in Schedule A hereto and not joint. The provisions of this Section shall not affect any agreement between the Company, the Selling Shareholder and the General Partner with respect to contribution. SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY. All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Company or any of its subsidiaries or the Selling Shareholder submitted pursuant hereto, shall remain operative and in full force and effect, regardless of any investigation made by or on behalf of any International Manager or controlling person, or by or on behalf of the Company, the Selling Shareholder or the General Partner and shall survive delivery of the Securities to the International Managers. SECTION 9. TERMINATION OF AGREEMENT. (a) The Lead Managers may terminate this agreement, by notice to the Company and the Selling Shareholder, at any time at or prior to Closing Time (i) if there has been, since the time of execution of this Agreement or since the respective dates as of which information is given in the International Prospectus, any material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company and its subsidiaries considered as one enterprise, whether or not arising in the ordinary course of business, or (ii) if there has occurred any material adverse change in the financial markets in the United States or the international financial markets, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the effect of which is such as to make it, in the judgment of the Lead Managers, impracticable to market the Securities or to enforce contracts for the sale of the Securities, or (iii) if trading in any of the securities of the Company has been suspended or materially limited by the Commission or the New York Stock Exchange, or if trading generally on either the American Stock Exchange or the New York Stock Exchange or in the Nasdaq National Market has been suspended or materially limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been required, by any of said Exchanges or by order of the Commission, -32- the NASD or any governmental authority, or if a banking moratorium has been declared by either Federal, New York or Pennsylvania authorities. (b) If this Agreement is terminated pursuant to this Section, such termination shall be without liability of any party to any other party except as provided in Section 4 hereof, and provided further that Sections 1, 6, 7 and 8 hereof shall survive such termination and remain in full force and effect. SECTION 10. DEFAULT BY ONE OR MORE OF THE INTERNATIONAL MANAGERS. If one or more of the International Managers shall fail at Closing Time or a Date of Delivery to purchase the Securities which it or they are obligated to purchase under this Agreement (the "Defaulted Securities"), the Lead Managers shall have the right, within 24 hours thereafter, to make arrangements for one or more of the non-defaulting International Managers, or any other underwriters, to purchase all, but not less than all, of the Defaulted Securities in such amounts as may be agreed upon and upon the terms herein set forth. If, however, the Lead Managers shall not have completed such arrangements within such 24-hour period, then: (a) if the number of Defaulted Securities does not exceed 10% of the number of International Securities to be purchased on such date, each of the non-defaulting International Managers shall be obligated, severally and not jointly, to purchase the full amount thereof in the proportions that their respective underwriting obligations hereunder bear to the underwriting obligations of all non-defaulting International Managers, or (b) if the number of Defaulted Securities exceeds 10% of the number of International Securities to be purchased on such date, this Agreement or, with respect to any Date of Delivery which occurs after the Closing Time, the obligation of the International Managers to purchase and of the Selling Shareholder to sell the International Option Securities to be purchased and sold on such Date of Delivery, shall terminate without liability on the part of any non-defaulting International Manager. No action taken pursuant to this Section shall relieve any defaulting International Manager from liability in respect of its default. In the event of any such default which does not result in a termination of this Agreement or, in the case of a Date of Delivery which is after the Closing Time, which does not result in a termination of the obligation of the International Managers to purchase and the Selling Shareholder to sell the relevant International Option Securities, as the case may be, either the Lead Managers or the Company shall have the right to postpone Closing Time or the relevant Date of Delivery for a period not -33- exceeding seven days in order to effect any required changes in the Registration Statement or the Prospectuses or in any other documents or arrangements. As used herein, the term "International Manager" includes any person substituted for an International Manager under this Section 10. SECTION 11. DEFAULT BY THE SELLING SHAREHOLDER. If the Selling Shareholder shall fail at Closing Time or a Date of Delivery to sell and deliver the number of International Securities which such Selling Shareholder is obligated to sell hereunder, then the Lead Managers may, at their option, by notice to the Company and the Selling Shareholder, terminate this Agreement without liability on the part of any non-defaulting party except that the provisions of Section 1, 4, 6, 7 and 8 shall remain in full force and effect. In the event of a default by the Selling Shareholder as referred to in this Section 11, the International Managers shall have the right to postpone Closing Time or a Date of Delivery for a period not exceeding seven days in order to effect any required changes in the Registration Statement or the Prospectuses or in any other documents or arrangements. No action taken pursuant to this Section 11 shall relieve the Company or the Selling Shareholder from liability, if any, in respect of such default. SECTION 12. NOTICES. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the International Managers shall be directed to the Lead Managers c/o Merrill Lynch & Co., Merrill Lynch International, North Tower, World Financial Center, New York, N.Y. 10281-1201, attention of Mary Beth Henson, Managing Director; and notices to the Company, the Selling Shareholder and the General Partner shall be directed to 1411 Broadway, New York, New York 10018, attention of Sidney Kimmel or Herbert J. Goodfriend. SECTION 13. PARTIES. This Agreement shall each inure to the benefit of and be binding upon the International Managers, the Company, the Selling Shareholder and the General Partner and their respective successors, heirs and legal representatives. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the International Managers, the Company, the Selling Shareholder and the General Partner and their respective successors, heirs and legal representatives and the controlling persons and officers and directors referred to in Sections 6 and 7 and their respective successors, heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein or therein contained. This Agreement and all conditions and provisions hereof are intended to be for the sole and exclusive benefit of the International Managers, the Company, the Selling Shareholder and the General Partner and their respective successors, heirs -34- and legal representatives, and said controlling persons and officers and directors and their respective successors, heirs and legal representatives, and for the benefit of no other person, firm or corporation. No purchaser of International Securities from any International Manager shall be deemed to be a successor by reason merely of such purchase. SECTION 14. GOVERNING LAW AND TIME. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in said State. Specified times of day refer to New York City time. SECTION 15. EFFECT OF HEADINGS. The section headings herein contained are for convenience only and shall not affect the construction hereof. -35- If the foregoing is in accordance with your understanding of our agreement, please sign and return to each of the Company, the Selling Shareholder and the General Partner a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement between the International Managers, the Company, the Selling Shareholder and the General Partner in accordance with its terms. Very truly yours, JONES APPAREL GROUP, INC. By: ______________________ Name: Title: SELLING SHAREHOLDER By:_______________________ Attorney in Fact, acting on behalf of Bristol Rittenhouse Investments, L.P. GENERAL PARTNER ___________________________ Sidney Kimmel CONFIRMED AND ACCEPTED, as of the date first above written: MERRILL LYNCH INTERNATIONAL BEAR, STEARNS INTERNATIONAL LIMITED GOLDMAN SACHS INTERNATIONAL By: MERRILL LYNCH INTERNATIONAL By: _________________________________ Authorized Signatory For themselves and as Lead Managers of the other International Managers named in Schedule A hereto. -36- SCHEDULE A NUMBER OF INITIAL INTERNATIONAL NAME OF THE INTERNATIONAL MANAGER SECURITIES TO BE PURCHASED Merrill Lynch International...... Bear, Stearns International Limited ......................... Goldman Sachs International...... Total............................ 900,000 ======= SCHEDULE B List of subsidiaries Melru Corporation Jones Apparel Group Canada Inc. Jones Investment Co., Inc. Jones Holding Corporation Camisas de Juarez S.A. De C.V. SCHEDULE C Jones Apparel Group, Inc. 900,000 Shares of Common Stock (Par Value $.01 Per Share) 1. The initial public offering price per share for the International Securities, determined as provided in said Section 2, shall be $[___]. 2. The purchase price per share for the International Securities to be paid by the several International Managers shall be $__, being an amount equal to the initial public offering price set forth above less $__ per share; provided that the purchase price per share for any International Option Securities purchased upon the exercise of the over-allotment option described in Section 2(b) shall be reduced by an amount per share equal to any dividends or distributions declared by the Company and payable on the Initial International Securities but not payable on the International Option Securities. SCHEDULE D NAME LOCK-UP PERIOD - ---- -------------- Jones Apparel Group, Inc. 90 days Sidney Kimmel 90 days The Sidney Kimmel Foundation 90 days Herbert J. Goodfriend 30 days Irwin Samelman 30 days Wesley R. Card 30 days Gary R. Klocek 30 days Geraldine Stutz 30 days Howard Gittis 30 days Rena Rowan 30 days [Form of lock-up from directors, officers or other stockholders] Exhibit A [October __, 1997] MERRILL LYNCH & CO. Merrill Lynch, Pierce, Fenner & Smith Incorporated Bear, Stearns & Co. Inc. Goldman, Sachs & Co. as U.S. Representatives of the several U.S. Underwriters to be named in the within-mentioned U.S. Purchase Agreement Merrill Lynch International Bear, Stearns International Limited Goldman Sachs International as Lead Managers of the several International Managers to be named in the within-mentioned International Purchase Agreement c/o Merrill Lynch & Co. Merrill Lynch, Pierce, Fenner & Smith Incorporated North Tower World Financial Center New York, New York 10281-1209 Re: PROPOSED PUBLIC OFFERING BY JONES APPAREL GROUP, INC. Dear Sirs: The undersigned, a stockholder [and an officer and/or director] of Jones Apparel Group, Inc., Pennsylvania corporation (the "Company"), understands (i) that Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), Bear, Stearns & Co. Inc. and Goldman, Sachs & Co., as U.S. Representatives of the several U.S. Underwriters to be named in Schedule A to the U.S. Purchase Agreement (as defined herein), propose to enter into a U.S. Purchase Agreement (the "U.S. Purchase Agreement") with the Company, Bristol Rittenhouse Investments, L.P., a Delaware limited partnership (the "Selling Shareholder") and Sidney Kimmel, the sole general partner of the Selling Shareholder (the "General Partner"), and (ii) that Merrill Lynch International, Bear, Stearns International Limited and Goldman Sachs International, as Lead Managers of the several International Managers to be named in Schedule A to the International Purchase Agreement (as defined herein), propose to enter into an International Purchase Agreement (the "International Purchase Agreement" and collectively with the U.S. Purchase Agreement, the "Purchase Agreements") with the Company the Selling Shareholder and the General Partner, in each case providing for the public offering of shares (the "Securities") of the Company's common stock, par value $.01 per share (the "Common Stock"). The U.S. Underwriters and the International Managers to be named in Schedule A to each of the U.S. Purchase Agreement and the International Purchase Agreement, respectively, are collectively referred to herein as the "Underwriters." In recognition of the benefit that such an offering will confer upon the undersigned as a stockholder [and an officer and/or director] of the Company, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned agrees with each of the Underwriters that, during a period of [___________ days] [SEE SCHEDULE D TO INTERNATIONAL PURCHASE AGREEMENT FOR NUMBER OF DAYS] from the date of the Purchase Agreements, the undersigned will not, without the prior written consent of Merrill Lynch, directly or indirectly, (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of, directly or indirectly, any share of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock, whether now owned or hereafter acquired by the undersigned or with respect to which the undersigned has or hereafter acquires the power of disposition, or file any registration statement under the 1933 Act with respect to any of the foregoing or (ii) enter into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of the Common Stock, whether any such swap or transaction described in clause is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. Very truly yours, Signature: ------------------ Print Name: ------------------ -2- EX-5.1 4 OPINION OF MESIROV GELMAN JAFFE CRAMER & JAMIESON EXHIBIT 5.1 MESIROV GELMAN JAFFE CRAMER & JAMIESON October 14, 1997 Securities and Exchange Commission Judiciary Plaza 450 Fifth Street, N.W. Washington, D.C. 20549 RE: JONES APPAREL GROUP, INC. REGISTRATION STATEMENT ON FORM S-3 Dear Sirs: As special counsel to Jones Apparel Group, Inc., a Pennsylvania corporation (the "Company"), we have been requested to render this opinion for filing as Exhibit 5.1 to the Company's Registration Statement on Form S-3, which was filed with the Securities and Exchange Commission on September 24, 1997 (the "Registration Statement"). The Registration Statement covers 4,500,000 shares (the "Selling Shareholder's Shares") of Common Stock of the Company to be sold by Bristol Rittenhouse Investments, L.P., a Delaware limited partnership (the "Selling Shareholder"), as set forth in the Prospectuses comprising part of the Registration Statement under the caption "Selling Shareholder", and an additional 675,000 shares (the "Over-Allotment Shares") of Common Stock which may be sold by the Selling Shareholder if the Underwriters' over-allotment option is exercised. We have examined the Company's Articles of Incorporation, as amended, the Company's By-Laws, as amended, and such other documents as we deem necessary for the purpose of this opinion. Based upon the foregoing, we are of the opinion that the Selling Shareholder's Shares and the Over-Allotment Shares, if any, are validly issued, fully paid and non-assessable. We hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement. We also consent to the reference to this firm under the heading "Legal Matters" in the Prospectuses constituting a part of the Registration Statement. Very truly yours, /s/ Richard P. Jaffe EX-23.3 5 CONSENT OF PHILLIPS NIZER BENJAMIN KRIM & BALLON EXHIBIT 23.3 PHILLIPS NIZER BENJAMIN KRIM & BALLON LLP Jones Apparel Group, Inc. 1411 Broadway New York, New York Re: Registration Statement on Form S-3 ------------------------------------------------- Dear Sirs: We hereby consent to the reference to our firm under "Legal Matters" in the Prospectus which forms a part of the above-referenced Registration Statement. Very truly yours, PHILLIPS NIZER BENJAMIN KRIM & BALLON LLP By /s/_Alan Shapiro__________________ Alan Shapiro October 14, 1997 EX-24.2 6 CERTIFICATE OF ASSISTANT SECRETARY WITH EXH A EXHIBIT 24.2 CERTIFICATE OF GENERAL COUNSEL I, Ira Dansky, do hereby certify that I am the General Counsel of Jones Apparel Group, Inc., a Pennsylvania corporation (the "Company"), and do hereby further certify that: Attached hereto as EXHIBIT A are true and correct copies of resolutions duly adopted by written consent of the Board of Directors of the Company dated as of September 23, 1997. Such resolutions remain in full force and effect in the form adopted, not having been rescinded or amended in any manner whatsoever. IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of Jones Apparel Group, Inc. this 14th day of October, 1997. /s/ Ira Dansky General Counsel EXHIBIT A RESOLVED: that the Company is authorized to register with the Securities and Exchange Commission ("SEC") up to 5,175,000 shares (the "Shares") of Common Stock, $.01 par value per share (the "Common Stock"), for sale by Sidney Kimmel or any entity controlled by Sidney Kimmel (the "Selling Shareholder"), pursuant to a registration statement on Form S-3 (the "Registration Statement") under the Securities Act of 1933 (the "1933 Act"), including a related Registration Statement pursuant to Rule 462(b) under the 1933 Act. RESOLVED: that the preparation and execution on behalf of the Company by the officers and directors of the Company and the filing by them of the Registration Statement to register the Shares for sale by the Selling Shareholder, be and it hereby is, ratified, confirmed and approved. RESOLVED: that each officer and/or director of the Company authorized under the 1933 Act to sign the Registration Statement on behalf of the Company be, and he hereby is, authorized to sign such Registration Statement, including any pre-effective or post-effective amendments thereto, by his attorney-in-fact or agent thereunder duly empowered by power of attorney, executed by such officer and/or director. RESOLVED: that the Chairman of the Board, the Vice Chairman, the President, the Executive Vice President, the Chief Financial Officer, the General Counsel and Secretary of the Company (the "Authorized Persons"), are each authorized to execute and deliver such additional documents, including further amendments, including without limitation post-effective amendments to, or other filings in connection with, the Registration Statement, including a related Registration Statement pursuant to Rule 462(b) under the 1933 Act, and to take such additional action, as they may deem necessary or appropriate, with such further changes in and additions thereto as the Authorized Persons may approve, such approval to be conclusively evidenced by the execution of any such document. RESOLVED: that the Chairman of the Board, the Chief Financial Officer and the General Counsel of the Company, are designated as the persons authorized to receive notices and communications from the SEC with respect to the Registration Statement and any amendments, and they each are designated agents for service of process under the 1933 Act in connection with the Registration Statement, with all powers relating to such designation. -----END PRIVACY-ENHANCED MESSAGE-----