**EXHIBIT 10.38**

|  | As of November 7, 2007 |
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Ms. Lynne F. Cote2 Kincaid LaneChatham, NJ 07928

Dear Lynne:

        Reference is made to yourEmployment Agreement dated as of January 1, 2002 by and between you (formerlyknown as Lynne F. Fish) and McNaughton Apparel Group Inc. (formerly known asNorton McNaughton of Squire, Inc.), as amended and assigned to Jones ApparelGroup USA, Inc. (the "Employment Agreement"). All capitalized termsnot otherwise defined herein shall have the meanings ascribed thereto in theEmployment Agreement.

        For good and valuableconsideration, the receipt and sufficiency are hereby acknowledged, you (the"Executive") and Jones Apparel Group USA, Inc. (the"Company") agree as follows:

        1. Amendment. The terms andconditions of the Employment Agreement are hereby amended as follows:

               (a) The first sentence of Section 9(a) of the Employment Agreement is herebyamended to read as follows:

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"The Executive shall not, at any time during the Executive's      employment by the Company and thereafter until March 31, 2008 (the      "Non-Compete Period") (provided that the Company is making the      payments to the Executive, if any, which may be required hereby during the      Non-Compete Period) and under the following circumstances, engage or      become interested (as an owner, stockholder, partner, director, officer,      employee, consultant or otherwise) (collectively, "Engages") in      any business which then competes, directly or indirectly, with the      business then conducted or licensed by the Company or any of its      affiliates, including, without limitation, the manufacturing, marketing      and sale of products by independent licensees under trademarks owned by      the Company or any of its affiliates" (collectively, a      "Competitive Business").

               (b) Section 9(b) of the Employment Agreement is hereby amended to read asfollows:

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"The Executive shall not, at any time during Executive's      employment by the Company and thereafter until December 31,

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2011 (provided that the Company is making the payments to the      Executive, if any, which may be required hereby during the period ending      December 31, 2009), recruit, solicit for employment, hire or engage, or      assist any person or entity in recruiting, soliciting for employment,      hiring or engaging, any employee or consultant of the Company or any of      its affiliates, or any person who was such an employee or consultant of      the Company or any of its affiliates within one year before the      termination of the Executive's employment; or

               (c) A new Section 9(c) is hereby added to the Employment Agreement to read asfollows:

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"The Executive shall not at anytime during the Executive's      employment by the Company and thereafter until December 31, 2009 (provided      that the Company is making the payments to the Executive, if any, which      may be required hereby during such period), solicit, induce, or attempt to      solicit or induce, any person or entity then known by the Executive to be      a customer or distributor of the Company to terminate or diminish his, her      or its relationship with the Company; provided that in the event that (i)      the Executive Engages in a Competitive Business after March 31, 2008,      solely that fact and solely the fact that such Competitive Business      sources, manufactures, distributes, merchandises, markets, sells or      licenses products which compete with any of those sourced, manufactured,      distributed, merchandised, marketed, sold or licensed by the Company or      any of its distributors or licensees shall not be a breach or violation of      this Section 9(c) if such results in such termination or diminution or      (ii) the decision by a customer or distributor to terminate or diminish      his, her or its relationship with the Company is made by a person with      authority which is superior to the Executive's (and such person has not      been induced by the Executive to make such decision unless the Executive      has a reasonable, good faith commercial reason to engage in such      inducement) and such decision is made solely for a reasonable, good faith      commercial reason, then such termination or diminution shall not be a      breach or violation of this Section 9(c)."

               (d) Sections 14 and 15 of the Employment Agreement are hereby deleted in theirentirety, Section 16 of the Employment Agreement is hereby renumbered Section15, and a new Section 14 is hereby added to the Employment Agreement to read asfollows:

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"14. Costs. The Company shall reimburse the Executive for      all reasonable costs and expenses, including without limitation reasonable      attorneys' fees, of the Executive incurred in any dispute or proceeding      arising under this Agreement commenced by the Company, so long as the      Executive prevails in all material respects

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with respect to the Executive's defenses in any such dispute or      proceeding."

        2. Payment. No later thanfourteen (14) days following the execution hereof by the Executive, the Companyshall deliver to the Executive a check, payable to the Executive, in the gross,lump sum amount of $100,000, less deduction for taxes required by law to bewithheld or deducted as provided under Section 4(c) of this Agreement.

        3. Mutual Release and Waiver.In consideration of the mutual promises contained in this Agreement, the Companyand the Executive agree as set forth below.

               (a) Release by the Company. Subject to the limitation set forth below inSection 3(e), the Company, on behalf of itself and its affiliates, irrevocablyreleases the Executive, her attorneys, agents, representatives, advisors,executors, administrators and heirs and the successors, predecessors and assignsof each of the foregoing (and those acting on their behalf in any capacitywhatsoever) from all claims, counterclaims, actions, complaints, causes ofactions, judgments, debts, rights to indemnification, demands or suits, at lawor in equity, known or unknown, arising from, relating to or otherwiseconcerning the Executive's employment with the Company or the terminationthereof, which the Company or any of its past and present parents, subsidiariesor affiliates and the successors, predecessors and assigns of each of theforegoing ever had, now have or hereafter can, shall or may have, for, upon orby reason of any matter, cause or thing whatsoever, from the beginning of theworld to the date of this Agreement, including any such claims based on theoriesof contract or tort. The Company covenants on behalf of itself and itsaffiliates not to sue the Executive or any other person or entity describedabove, at law or in equity, in any forum, for any claims, counterclaims,actions, complaints or causes of actions as set forth in this provision.

               (b) Release by the Executive. In consideration of the payments and thebenefits provided by the Company to the Executive pursuant to this Agreement,and subject to the limitations set forth below in Sections 3(c) and 3(e), theExecutive irrevocably releases the Company, its past and present parents,subsidiaries, affiliates, directors, officers, employees, shareholders,attorneys, agents, representatives and advisors and the successors, predecessorsand assigns of each of the foregoing (and those acting on their behalf in anycapacity whatsoever) (collectively, the "Company Releases Parties")from all claims, counterclaims, actions, complaints, causes of actions,judgments, debts, rights to indemnification, demands or suits, at law or inequity, known or unknown, arising from, relating to or otherwise concerning theExecutive's employment with the Company or the termination thereof, which theExecutive or any of her executors, administrators or heirs and the successors,predecessors and assigns of each of the foregoing ever had, now have orhereafter can, shall or may have, for, upon or by reason of any matter, cause orthing whatsoever, from the beginning of the world to the date of this Agreement.This includes, but is not limited to, any claims arising out of federal, stateor local wage payment, discrimination, sexual harassment, hostile workenvironment, retaliation, and fair employment practice law, including Title VIIof the Civil Rights Act of 1964, as amended, 42 U.S.C Sections 2000e et seq.,the Age Discrimination in Employment Act, as amended , 29 U.S.C Sections 621 etseq., the Americans with Disabilities Act, as amended, 42 U.SC. Sections 12101et seq., The Family and Medical leave Act of 1993, as amended, 29 U.S.C. Sections2601 et seq., the Fair Labor Standards Act as 1938, as amended, 29 U.S.C. Sections201 et seq., the 

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Employment Retirement Income Security Act of 1974, as amended 29 U.S.C. Sections1001 et seq., the New York Human Rights Law, as amended, N.Y. Exec. Law Sections290 et seq., the Administrative Code of the City of New York, Title 8, CivilRights Sections 8-101 et seq., and any other federal, state or local law orordinance (whether common law or statutory) dealing with discrimination inemployment on the basis of sex, gender, age, race, color, national origin,religion, disability or equal pay requirements, including such claims bases ontheories of the Executive's mental and physical condition, sexual harassment,hostile work environment, retaliation, contract or tort. The Executive covenantsnot to sue the Company or any other person or entity described above, at law orin equity, in any forum, for any claims, counterclaims, actions, complaints orcauses of actions as set forth in this provision.

               (c) Representations of the Executive. The Executive hereby represents,warrants and covenants that she was represented by an attorney of her ownselection regarding the release and waiver in Section 3(b) (the"Release"). The Executive acknowledges that she enters into theRelease voluntarily and with full knowledge and understanding of the provisionsset forth in this Section 3 after consulting with her counsel. The Executivefurther acknowledges that with the advice of counsel she has decided to waivethe need for 21 calendar days from the receipt of this Agreement to consider theRelease of federal age discrimination claims. The Executive may revoke theRelease of federal age discrimination claims during the seven calendar daysfollowing execution of the Agreement (the "Revocation Period") bywritten notice to the General Counsel of the Company. Such a revocation willextend only to the claims contained in the Release of federal age discriminationclaims, but does not include any other representation, covenant, agreement,release, or waiver made by the parties hereto. Such revocation is not intendedto affect or impair any other rights, responsibilities or obligations arisingfrom or relating to this Agreement, except that, in the event of any suchrevocation, the Executive shall forfeit and surrender promptly to the Companyany amounts payable, or previously paid, under Section 2 of this Agreement. TheExecutive acknowledges that, at the expiration of the Revocation Period, theRelease of federal age discrimination claims shall become effective and shall befinal, binding and irrevocable.

               (d) Representations of the Company. The Company hereby represents andwarrants that (i) the execution, delivery and performance of this Agreement bythe Company has been fully and validly authorized by all necessary corporateaction, (ii) the officer signing this Agreement on behalf of the Company is dulyauthorized to do so, (iii) the execution, delivery and performance of thisAgreement does not violate any applicable law, regulation, order, judgment ordecree or any agreement, plan or corporate governance document to which theCompany is a party or by which it is bound and (iv) upon execution and deliveryof this Agreement by the Executive and the Company, it shall be a valid andbinding obligation of the Company enforceable against it in accordance with itsterms, except to the extent that enforceability may be limited by applicablebankruptcy, insolvency or similar laws affecting the enforcement of creditors'rights generally.

               (e) No Impairment. Nothing in this Section 3 is intended to release orotherwise affect or impair (i) any rights, responsibilities or obligationsarising from, relating to or otherwise concerning this Agreement, (ii) anyrights the Executive may have to benefits or entitlements under the Company's401(k) plan or the Company's deferred compensation 

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plans or arrangements in which the Executive participates, (iii) theExecutive's eligibility for indemnification and advancement of expenses inaccordance with the certificate of incorporation and by-laws of the Company orany applicable insurance policy, or (iv) the Executive's and the Company'srights, and obligations under Sections 6 through 15 of the Employment Agreement,as amended hereby.

        4. Miscellaneous.

               (a) Notices. Any notice or communication to the Company or to theExecutive under this Agreement shall be in writing and shall be considered givenon the third business day following mailing by certified mail, return receiptrequested, to the Company at 1411 Broadway, New York, New York 10018, Attention:General Counsel, or to the Executive at the Executive's address on file with theCompany (or at such other address as either party may specify by written noticeto the other party).

               (b) Entire Agreement. This Agreement and the Employment Agreementconstitute the entire understanding and agreement between the parties withrespect to the subject matter hereof, and cannot be amended, unless suchamendment is in writing and signed by both parties to this Agreement.

               (c) Tax Withholding. All amounts payable to the Executive hereunder shallbe subject to any required deductions or withholdings from, and the Executiveshall be responsible for, any applicable federal, state, local or other taxes(including any taxes under Section 409A of the Code).

               (d) Section 409A of the Code. For purposes of Section 409A of the Codeand related rules and regulations: (i) the Executive's termination of employmentwith the Company shall be treated as an "involuntary separation fromservice" within the meaning of Treas. Reg. Sec. 1.409A-1(n); (ii) theExecutive's right to receive payments from the Company pursuant to Section6(c)(ii) of the Employment Agreement shall be treated as a right to a series ofseparate payments under Treas. Reg. Sec. 1-409A-2(b)(2)(iii); and (iii) allexpenses (if any) to be reimbursed to the Executive pursuant to the EmploymentAgreement shall be paid promptly and, in any event, no later than December 31 ofthe calendar year in which they are incurred, and the Executive's right to suchreimbursement (if any) shall not be subject to liquidation or exchange for anyother benefit.

               (e) Governing Law. This Agreement shall be governed by and construed inaccordance with the laws of the State of New York (other than its choice of lawsrules). The parties hereto consent to the exclusive jurisdiction of any federalor state court in the State of New York to resolve any dispute arising underthis Agreement or otherwise.

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|  | Very truly yours,        
JONES APPAREL GROUP USA, INC.

By: /s/ Ira M. Dansky        Ira M. Dansky        Secretary
Agreed in all respects as ofthe date above written.

/s/ Lynne F. CoteLynne F. Cote

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