EXHIBIT 10.26

JONES APPAREL GROUP, INC. 
DEFERRED COMPENSATION PLAN FOR OUTSIDE DIRECTORS

    Jones Apparel Group, Inc. (the "Company") desires to establish a Deferred
Compensation Plan for Outside Directors (the "Plan") in order to enhance the
Company's ability to attract and retain talented individuals to serve as
Directors of the Board of Directors of the Company (the "Board") by giving them
the opportunity to defer receipt of all or a portion of their annual retainer
and meeting attendance fees from the Company (the "Fees"). 

    1. Effective Date. The effective date of the Plan is January 1, 2003, and
the Plan shall be effective with respect to Fees payable for periods beginning
on and after January 1, 2003.

    2. Participation. Each non-employee Director ("Eligible Director") may elect
to defer all or a portion of his or her Fees in accordance with Section 4 of the
Plan. Each Eligible Director who makes any such election shall be a Plan
Participant.

    3. Administration. The Board's Compensation Committee shall act as the
administrator of the Plan (the "Administrator"). The Administrator shall have
the power and authority to administer, construe and interpret the Plan and to
correct any defect or supply any omission or reconcile any inconsistency in the
Plan as, in its sole discretion, it deems necessary or desirable. All actions
and determinations of the Administrator shall be final, conclusive and binding
on all parties concerned. The Administrator shall not be liable for any act done
or determination made in good faith. The expense of administering the Plan shall
be borne by the Company and shall not be charged against benefits payable
hereunder. The Administrator may employ agents and delegate to them such
administrative duties as the Administrator sees fit. Notwithstanding the
foregoing provisions of this Section 3, the Board may exercise any power or
perform any function of the Administrator, in which case any applicable
reference to Administrator shall be deemed to refer to the Board.

    4. Deferral of Compensation. (a)  Deferral Election. Prior to the first day
of each calendar year (or such earlier date as the Administrator may determine
from time to time), an Eligible Director may elect to defer all or a portion of
the Fees otherwise payable to that Eligible Director for such calendar year (the
"Plan Year") by executing a Deferral Election Form in the form prescribed by the
Administrator. In the event that an Eligible Director first becomes eligible to
participate during a Plan Year, he or she may make a Deferral Election within
thirty (30) days of becoming eligible to participate in the Plan with respect to
Fees earned in such calendar year following the submission of the Deferral
Election Form. In addition to electing to defer Fees (a "Deferral Election"),
the Deferral Election Form for each Plan Year will require the Eligible Director
to elect to have the deferred Fees credited on the Company's books in the form
of (i) share units ("Share Units"), with each unit representing a share of
common stock, par value $0.01, of the Company ("Common Stock"), (ii) cash units
("Cash Units"), the value of which shall be determined as set forth below in
Section 4(d) of this Plan, or (iii) such other investment unit alternatives as
the Board may make available from time to time ("Other Investment Units").
Except as otherwise determined by the Administrator, a Deferral Election shall
be irrevocable for a Plan Year after that Plan Year begins. A Deferral Election
shall continue in effect until such time as the Participant provides written
notice of its revocation or submits a new Deferral Election Form; provided that
any such revocation or change to the amount of Fees deferred shall not be
effective until the calendar year following the year in which such revocation or
change is made.

        (b)  Crediting to Participant Accounts. An account (an "Account") shall
be established on the Company's books to record a Participant's deferrals, which
shall be credited in the form of Cash Units, Share Units and/or Other Investment
Units, as the case may be. Each Participant Account shall be credited with an
amount equivalent to the Fees that would have otherwise been paid to the
Participant, such credit to be made on the date on which the Fees would have
been paid absent a Deferral Election. 

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The number of Share Units to be credited to a Participant's Account shall be
determined by dividing the dollar amount of the deferred Fees by the Market
Value of the Common Stock on the date the Fees would have otherwise been paid.
The "Market Value" of the Common Stock as of a given date means the closing
price of the Common Stock on the New York Stock Exchange (as reported in the
Eastern Edition of The Wall Street Journal) on such given date or, if shares
were not traded on such date, on the next preceding date on which shares were
traded; provided that, if the Common Stock is traded on an exchange or market in
which prices are reported on a bid and asked price basis, "Market Value" shall
mean the average of the mean between the bid and the asked price for the Common
Stock at the close of trading for the ten consecutive trading days immediately
preceding such given date; and provided further that, if the Common Stock is not
listed on a national securities exchange nor traded on the over-the-counter
market, the "Market Value" shall be determined by the Administrator in good
faith.

        (c)  Dividend and Interest Credits. Each Account that holds Share Units
shall be adjusted appropriately by the Administrator for any dividends on the
Common Stock as of the dividend payment date, which adjustment shall be in the
form of additional Share Units determined by multiplying the number of Share
Units then credited to the Account by the ratio of the dollar amount of the
dividend per share over the current Market Value of the Common Stock. The
Administrator shall also adjust appropriately the number of Share Units in each
Account for any stock dividend, split, combination or other change in the Common
Stock (including, without limitation, pursuant to any merger, acquisition or
other transaction). Cash Units credited to an Account shall accrue interest
compounded on the last day of each calendar month based on the weighted-average
U.S. Treasury bill interest rate during the applicable month.

        (d)  Transfers Among Investment Units. A Participant may transfer and
reallocate amounts in his or her Account among Share Units, Cash Units and any
Other Investment Units in accordance with procedures and policies as may be
adopted by the Administrator; provided that nothing herein shall require the
Administrator to adopt any such procedures and policies.

        (e)  Account Vesting. A Participant shall be fully vested in his or her
Account at all times.

        (f)  No Attendant Rights from Share Units. Except as provided in Section
4(c), a Participant shall not have any of the attendant rights of a holder of a
share of Common Stock in connection with Share Units allocated to his or her
Account, including the right to vote and the right to receive dividends provided
to holders of actual shares of Common Stock.

    5. Payment of Accounts. (a) Subject to Section 7, payment of a Participant's
Account balance will commence as soon as practicable following the earlier of
(x) the termination of the Participant's membership on the Board for any reason
(a "Board Termination") or (y) the date elected by the Participant on a Payment
Election Form in the form prescribed by the Administrator, if any (which date
shall be the first day of the month elected by the Participant). Payment of a
Participant's Account balance will be made in a lump-sum payment, unless the
Participant elects on a Payment Election Form to receive the amounts in annual
installments over a period of time not to exceed ten (10) years. Accounts shall
be paid to Participants in the form of cash. The Administrator may at any time
elect in its sole discretion to accelerate the payment of all or any portion of
all or any Accounts held under the Plan.

        (b) Lump-Sum Payment. 

            (i) Valuation Upon Board Termination. If a lump-sum payment is made
pursuant to clause (x) of Section 5(a), the Participant's Account shall be
valued on the date of such termination by determining the value of Share Units
based on the Market Value of Common Stock on such date, by crediting interest to
Cash Units at the applicable rate from the end of the preceding month to the
date of the 

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Participant's Board Termination and by determining the value of Other Investment
Units on such date in accordance with procedures established by the
Administrator. 

            (ii) Valuation in Connection with an Elected Date. If a lump-sum
payment is made pursuant to clause (y) of Section 5(a), the Participant's
Account balance shall be valued on the last day of the calendar month
immediately preceding the date elected by the Participant by determining the
value of Share Units based on the Market Value of Common Stock on that date, by
crediting interest to Cash Units at the applicable rate through that date and by
determining the value of Other Investment Units on that date in accordance with
procedures established by the Administrator.

        (c) Installment Payment. 

            (i) Installment Amount. If the annual installment method is elected,
the amount of each annual payment will be determined by dividing the Account (as
determined below) on the Payment Date by the remaining number of installment
payments (e.g., if 10 installments are elected, the first payment would be equal
to 1/10 of the balance on the first Payment Date, the second payment would be
equal to 1/9 of the balance on the second Payment Date, and so on), with the
full Account balance being distributed on the last Payment Date. For purposes of
this Plan, the first "Payment Date" shall be the earlier of (1) the first day of
the month elected by the Participant in his or her Payment Election Form, if
any, or (2) the first day of the month following the Participant's Board
Termination, and each subsequent "Payment Date" shall be on the annual
anniversary of the first Payment Date. 

            (ii) Valuation for Installment Method. If payments are made using
the installment method, the Participant's Account shall be valued as of the end
of the month preceding each Payment Date (the "Valuation Date") by determining
the value of Share Units based on the Market Value of Common Stock on the
Valuation Date, by crediting interest to Cash Units at the applicable rate
through the Valuation Date and by determining the value of Other Investment
Units on the Valuation Date in accordance with procedures established by the
Administrator.

            (d) Change in Payment Election Form. A Participant may change a
Payment Election Form by submitting to the Administrator a new Payment Election
Form; provided such changes shall not take effect until thirteen months after
the date the new Payment Election Form is submitted.

    6. Early Payment. A Participant may file a written request with the
Administrator for payment from his or her Account due to an unforeseeable
emergency that is caused by an event beyond the control of the Participant and
that would result in severe financial hardship to the Participant if payment
were not permitted, such as may result from a sudden and unexpected illness or
accident not covered by insurance, loss of property due to casualty, or similar
circumstance. The Administrator may, in its sole discretion, accept or reject
any such request as it deems appropriate.

    7. Payment in the Event of Death. In the event that a Participant's service
is terminated by reason of death, the Company shall, within thirty (30) days
thereafter, pay the aggregate balance of the Participant's Account to the
Participant's beneficiary or beneficiaries in the form of a single lump-sum.
Each Participant may designate one or more death beneficiaries by executing a
Beneficiary Designation Form in the form prescribed by the Administrator. A
Participant may change the designated beneficiary or beneficiaries at any time
prior to the Participant's death by the delivery to the Administrator of a new
Beneficiary Designation Form. If no beneficiary has been designated, or if no
designated beneficiary survives the Participant, payments pursuant to this
Section 7 shall be made to the Participant's estate.

    8. Assignment and Alienation of Benefits. Except to the extent provided in
Section 7 of this Plan or pursuant to a domestic relations order issued by a
court of proper authority (which order specifies the amount and timing of any
payment to a 

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Participant's former spouse), no Participant or beneficiary may sell, assign,
transfer, encumber, or otherwise dispose of the right to receive payments
hereunder.

    9. Unsecured Obligation. The obligation of the Company to make payments of
amounts credited to the Participant's Account shall be a general unsecured
obligation of the Company, and such payment shall be made from general assets
and property of the Company. The Participant's relationship to the Company under
the Plan shall be only that of a general unsecured creditor and neither this
Plan, nor any agreement entered into hereunder, or action taken pursuant hereto,
shall create or be construed to create a trust for purposes of holding and
investing Account balances. The Company reserves the right to establish such a
trust, but such establishment shall not create any rights in or against any
amounts held thereunder.

    10. Amendment or Termination. The Board may amend or terminate this Plan at
any time and from time to time. Any amendment or termination of this Plan shall
not affect the rights of a Participant accrued prior thereto without the
Participant's written consent. Notwithstanding the foregoing provisions of this
Section 10, the Board may at any time partially or completely terminate the Plan
if, in its judgment, the tax, accounting, or other effects of the continuance of
the Plan would not be in the best interests of the Company.

        (a)  Partial Termination. The Board may partially terminate this Plan by
instructing the Administrator to not accept any additional deferrals and/or any
additional Deferral Elections under the Plan. If such a partial termination
occurs, the Plan shall continue to operate and be effective with regard to (i)
Accounts in existence prior to the effective date of such partial termination
and (ii) in the case of the cessation only of future Deferral Elections, future
deferrals pursuant to Deferral Elections made prior to the effective date of
such partial termination.

        (b)  Complete Termination. The Board may completely terminate this Plan,
in which case (i) no further deferrals will be accepted by the Plan, (ii) no
further Deferral Elections will be accepted by the Plan and (iii) all Accounts
will be paid out in full within thirty (30) days after the effective date of
such complete termination.

    11. Taxes. The Company is not responsible for any of the income taxes
resulting from an Eligible Director's participation in the Plan. The Company
shall comply with all applicable tax reporting requirements relating to payments
under the Plan, and all payments under the Plan shall be subject to any required
tax withholding.

    12. No Right to Continued Directorship. Nothing in this Plan confers upon
any Director the right to continue as a member of the Board or interferes with
the rights of the Company and its shareholders to remove any Director in
accordance with the Company's bylaws.

    13. Validity. In case any provision of this Plan shall be held illegal or
invalid for any reason, such illegality or invalidity shall not affect the
remaining parts of the Plan, and the Plan shall be construed and enforced as if
such illegal and invalid provision had never been incorporated herein.

    14. Successors and Assigns. The Company's obligations under the Plan shall
be binding on all assigns of the Company and upon any successor corporation or
entity resulting from the merger, acquisition, consolidation, dissolution or
reorganization of the Company, or upon any successor corporation or organization
succeeding to all or substantially all of the assets of the Company. The Plan
shall be binding on all successors and assigns of a Participant, including the
Participant's beneficiaries and estate and the executor, administrator or
trustee of such estate, or any receiver or trustee in bankruptcy or
representative of the Participant's creditors.

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    15. Compliance with Rule 16b-3. It is the Company's intention that the Plan
comply with Rule 16b-3 promulgated under Section 16 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and that Participants remain
non-employee directors ("Non-Employee Directors") for purposes of administering
other employee benefit plans of the Company and having such other plans be
exempt from Section 16(b) of the Exchange Act. If any Plan provision is found to
not be in compliance with Rule 16b-3 or if any Plan provision would disqualify
Participants from remaining Non-Employee Directors, that provision shall be
deemed amended so that the Plan does so comply and the Participants remain
Non-Employee Directors, to the extent permitted by law and deemed advisable by
the Administrator, and in all events the Plan shall be construed in favor of its
meeting the requirements of Rule 16b-3.

    16. Applicable Law. This Plan is governed under the laws of the State of New
York.

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JONES APPAREL GROUP, INC. DEFERRED COMPENSATION PLAN FOR OUTSIDE DIRECTORS
DEFERRAL ELECTION FORM

I hereby elect that the following percentage of my annual retention and meeting
attendance fees from Jones Apparel Group, Inc. to be earned during subsequent
calendar years be deferred and credited to my Account (SELECT ONE OF THE
FOLLOWING): 

25%   _____ 50%   _____ 75%   _____ 100%   _____ Other Percentage
(specify)   _____

 

I hereby further elect that all amounts to be deferred to my Account for
subsequent calendar years be credited in the form of Share Units and/or Cash
Units (as such terms are defined in the Plan) in the following percentages (FILL
IN ONE OR BOTH OF THE FOLLOWING WITH WHOLE NUMBERS TOTALING 100%):

Cash Units:   _____% Share Units:   _____% Total: _______
   100%

 

___________________________________
PARTICIPANT Date: ______________ Accepted by Administrator:
___________________________________   
Date: ______________

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JONES APPAREL GROUP, INC. DEFERRED COMPENSATION PLAN FOR OUTSIDE DIRECTORS
PAYMENT ELECTION FORM

ELECTION OF PAYMENT COMMENCEMENT DATE

I hereby elect to receive payment of my Account commencing (CHOOSE ONE):

____ as soon as practicable following the date on which my service as a Director
on the Company's Board terminates. ____
MONTH ____________________ 1, _____ 
YEAR (FILL IN MONTH AND YEAR - DAY WILL BE FIRST OF THE ELECTED MONTH) 

>  
> Note: If your service as a Director on the Company's Board terminates prior to
> the date you elect herein, payment of your Account will commence as soon as
> practicable following termination of your directorship.

If no election is made, you will automatically be deemed to have elected to
receive payment of your Account commencing as soon as practicable following the
date on which your service as a Director terminates. 

ELECTION OF FORM OF PAYMENT

I hereby elect the following method for payment of my Account (CHOOSE ONE): 

____ payment in a single lump-sum. ____ ____ annual installment payments over
____ years (FILL IN A WHOLE NUMBER UP TO 10 YEARS).

 If no election is made, you will automatically be deemed to have elected to
receive payment of your Account in a single lump-sum.

___________________________________
PARTICIPANT Date: ______________ Accepted by Administrator:
___________________________________   
Date: ______________

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JONES APPAREL GROUP, INC. DEFERRED COMPENSATION PLAN FOR OUTSIDE DIRECTORS
BENEFICIARY DESIGNATION FORM

Complete this form to name beneficiaries who will receive your Account balance
remaining at the time of your death. You can change your beneficiaries at any
time by completing a new form. You must sign where indicated on the last page
for this form to be valid.

I. Participant  

> _____________________________________________
> Participant's legal name (please print)

II. Primary Beneficiaries

> Your remaining Account balance will be paid only to those beneficiaries living
> at the time of your death. The proportions must total 100% of your Account
> balance. If proportions are not indicated, or do not total 100%, your
> remaining Account balance will be paid in equal shares to the designated
> beneficiaries. If any of your primary beneficiaries is not living at the time
> of your death, your remaining Account balance will be divided proportionately
> among the remaining primary beneficiaries.
> 
> In the event of my death, pay my Account balance to (if additional
> beneficiaries are designated, attach the required information on a separate
> page):

_______________________________________
Name _____________________________
Social Security Number _______________________________________
Relationship ______________
Date of Birth _____________%
Proportion _______________________________________
Address                          City _____________________________
State                       Zip _______________________________________
Name _____________________________
Social Security Number _______________________________________
Relationship ______________
Date of Birth _____________%
Proportion _______________________________________
Address                          City _____________________________
State                       Zip __________
Total   100%

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III. Secondary Beneficiaries

> Your remaining Account balance will be paid to secondary beneficiaries only
> (1) if none of your primary beneficiaries is living at the time of your death,
> or (2) if all of your primary beneficiaries die before your Account balance
> has been completely paid. The proportions must total 100%. If proportions are
> not indicated, or do not total 100%, your remaining Account balance will be
> paid in equal shares to the designated beneficiaries. If any of your secondary
> beneficiaries is not living at the time of your death or on the date that your
> last surviving primary beneficiary dies, your remaining Account balance will
> be divided proportionately among the remaining secondary beneficiaries.
> 
> If none of my primary beneficiaries is living at the time of my death or if
> all of my primary beneficiaries die before my Account balance has been
> completely paid, pay my Account balance to (if additional beneficiaries are
> designated, attach the required information on a separate page):    

_______________________________________
Name _____________________________
Social Security Number _______________________________________
Relationship ______________
Date of Birth _____________%
Proportion _______________________________________
Address                          City _____________________________
State                       Zip _______________________________________
Name _____________________________
Social Security Number _______________________________________
Relationship ______________
Date of Birth _____________%
Proportion _______________________________________
Address                          City _____________________________
State                       Zip __________
Total   100%

 

V. Participant's Signature

> I hereby revoke every previous designation of beneficiaries for this Plan. I
> understand that I may change my beneficiaries at any time by completing a new
> form, and that the change is effective when received in writing and accepted
> by the Administrator.

___________________________________
PARTICIPANT Date: ______________ Accepted by Administrator:
___________________________________  
Date: ______________

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