SERIES 1997 NOTE AGREEMENT
    
        SERIES 1997 NOTE AGREEMENT (this "Agreement"), dated as of April 1,
1997, among THE INDUSTRIAL DEVELOPMENT BOARD OF THE CITY OF LAWRENCEBURG, a
Tennessee public nonprofit corporation (the "Board"), NATIONSBANK OF TENNESSEE,
NATIONAL ASSOCIATION, a national banking association with its principal office
in Nashville, Tennessee (the "Purchaser"), and JONES APPAREL GROUP, INC., a 
Pennsylvania corporation (the "Lessee").

        PRELIMINARY STATEMENTS:

        WHEREAS, the Board is a public nonprofit corporation and a public 
instrumentality of the City of Lawrenceburg, Tennessee, and is authorized 
under Sections 7-53101 to 7-53-311, inclusive, Tennessee Code Annotated, as 
amended (hereinafter called the "Act"), to acquire, whether by purchase,
exchange, gift, lease, or otherwise, and to own, lease and dispose of 
properties for the public purpose of promoting industry and developing trade
by inducing manufacturing, industrial, governmental, educational and commercial
enterprises to locate in or remain in the State of Tennessee; and

        WHEREAS, the Lessee heretofore leased from the Board pursuant to the
Lease (as defined herein) certain distribution facilities located on land owned
by the Board and located in the City of Lawrenceburg, Tennessee, and in 
connection therewith the Board issued its Taxable Revenue Note Series 1996
Jones Apparel Group Project, Inc.) (the "Series 1996 Note") to finance the 
cost thereof; and

        WHEREAS, Lessee has requested the Board to reimburse it for its costs
to be incurred by Lessee in connection with the Board's enhancement of such 
facilities by issuing its note to the Purchaser and by using the proceeds from
the issuance of such note for the purpose of reimbursing the Lessee for the 
cost of constructing and equipping a new 210,000 square foot distribution 
facility to be located on the leased premises adjacent to the existing 
distribution facility; and

        WHEREAS, the Board proposes to issue and sell its 1997 note (the "Series
1997 Note") to the Purchaser pursuant to this Agreement and further proposes to 
use the proceeds from the sale thereof to perform its obligations under such 
Lease; and

        WHEREAS, the Series 1996 Note and the Series 1997 Note proposed to be 
issued under this Agreement will be secured by, among other security, the 
amended and restated assignment of the rental payments under the Lease and the
amended and restated deed of trust from the Board with respect to the property
on which the distribution facilities are located.
    
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        NOW, THEREFORE, in consideration of the premises, the Board, the 
Purchaser and the Lessee hereby agree as follows:
    
                                  ARTICLE I
                                 DEFINITIONS

        In addition to the terms defined in the preamble hereto, and elsewhere 
herein, the following terms have the following respective meanings as used in 
this Agreement unless the context otherwise requires:

        "Act" means Sections 7-53-101 to 7-53-311, inclusive, of Tennessee Code
Annotated, as amended.

        "Agreement" means this Series 1997 Note Agreement as it now exists and 
as it may hereafter be amended.

        "All Unpaid Installments" shall have the same meaning as in the Lease.

        "Assignment" means the Amended and Restated Assignment Agreement dated 
as of April 1, 1997 from the Board to the Purchaser.

        "Authorized Lessee Representative" means the President or any Vice 
President of the Lessee, except that the Lessee may, by written notice to the
Noteholder, designate additional Authorized Lessee Representatives or delete 
Authorized Lessee Representatives.

        "Basic Rent" means the Basic Rent payable pursuant to Section 4.01 of 
the Lease.

        "Building" shall have the same meaning as in the Lease.

        "Business Day" means any day other than a Saturday, Sunday, or a public
holiday or the equivalent for banks generally under the laws of State of 
Tennessee.

        "Closing Date" means the date agreed to by the parties as the date to 
close the sale of the Series 1997 Note but in no event later than April 18, 
1997.

        "Deed of Trust" means the Amended and Restated Construction Deed of 
Trust and Security Agreement with respect to the Project dated as of April 1,
1997 from the Board for the benefit of the Purchaser as amended, restated and
supplemented.

        "Default Rate" shall have the same meaning as in the Series 1996 Note.

        "Documents" means the Lessee Documents and the Series 1997 Note 
Documents.

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        "Environmental Indemnity' means the Environmental Law Compliance and 
indemnity Agreement dated -as of April 1, 1997 among the Lessee and the 
Purchaser.

        "Escrow and Security Agreement" means the Escrow and Security Agreement
dated as of April 1, 1997 by and among the Board, Lessee and NationsBank of 
Tennessee, National Association, as Escrow Agent and Trustee.

        "Event of Default" means an Event of Default as defined in Article VI 
hereof.

        "First Amendment to Lease" means the First Amendment to Lease dated as 
of April 1, 1997 by and between the Board and Lessee.

        "First Amendment to the Amended and Restated Deed of Trust And Security
Agreement" means the First Amendment to the Amended and Restated Deed of Trust 
said Security Agreement dated as of April 1, 1997 entered into by the Board, 
NationsBank of Tennessee, National Association and Lessee.

        "Holder," whether or not capitalized, means the registered owner from 
time to time of the Series 1997 Note.

        "Land" means the real property described in Schedule A to the Lease.

        "Lease" means the Lease dated as of May 1, 1996 between the Board, as 
lessor, and the Lessee, as lessee, as amended by the First Amendment to Lease 
and as such lease may hereafter be amended.

        "Leased Property" means the Land, the Building and all other 
improvements now or hereafter located on the Land.

        "Lessee" means Jones Apparel Group, Inc., a Pennsylvania corporation.

        "Lessee Documents" means this Agreement, the Lease, the Series 1997 
Guaranty, the Escrow and Security Agreement and the Environmental Indemnity.

        "Noteholder" or "Purchaser" means NationsBank of Tennessee, National 
Association, a national banking association with its principal office in 
Nashville, Tennessee, as the original purchaser and registered owner of the 
Series 1997 Note, and any subsequent registered owner of the Series 1997 Note.

        "Notes" mean collectively the Series 1996 Note and the Series 1997 Note.

        "Prior Note Agreements" means collectively the Note Agreement, dated 
November 23, 1993, the Series 1995 Note Agreement dated as of June 30, 1995, 
the Note Agreement dated as of May 1, 1996, all by and among the Board, the 
Lessee and the Purchaser.

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        "Prime Rate" shall have the same meaning as in the Series 1997 Note.

        "Project" means the Land, the Building and any personal property 
located therein including any and all equipment used at or in connection with
the Project, but excluding any inventory owned by Lessee.

        "Series 1996 Note" means the Taxable Revenue Note, Series 1996 (Jones 
Apparel Group, Inc. Project) dated May 1, 1996 in the principal amount of 
$5,000,000 issued by the Board.

        "Series 1997 Guaranty" means that certain Series 1997 Guaranty Agreement
dated as of April 1, 1997 from Lessee.

        "Series 1997 Note" means the Taxable Revenue Note, Series 1997 (Jones 
Apparel Group, Inc. Project) dated the date hereof in the principal amount of 
$10,000,000 issued by the Board.

        "Series 1997 Note Documents" means this Agreement, the Lease, the Series
1997 Note, the Deed of Trust, the First Amendment to the Amended and Restated 
Deed of Trust and Security Agreement, the Series 1997 Guaranty, the Escrow and
Security Agreement and the Assignment.

        "Tangible Net Worth" means the excess of Lessee's Total Assets 
(excluding receivables from Lessee's officers and intangible assets determined
in accordance with generally accepted accounting principles) over Total 
Liabilities (exclusive of capital stock and surplus), all determined in 
accordance with generally accepted accounting principles consistently applied.

        "Total Assets" shall mean total assets determined in according with 
generally accepted accounting principles consistently applied.

        "Total Liabilities" shall mean total liabilities determined in 
accordance with generally accepted accounting principles consistently applied.

                                  ARTICLE II
                   AMOUNT AND TERMS OF THE SERIES 1997 NOTE
    
        SECTION 2.01.  The Series 1997 Note.  The Purchaser agrees to purchase 
and the Board agrees to sell, at par, on the terms and conditions hereinafter 
set forth, the Taxable Revenue Note, Series 1997 (Jones Apparel Group, Inc. 
Project) of the Board in the principal amount of Ten Million Dollars 
($10,000,000).  The Series 1997 Note shall contain the terms and conditions
and shall be substantially in the form of Exhibit A hereto.

        SECTION 2.02.  Purchasing the Series 1997 Note.  The Series 1997 Note 
shall be purchased on the Closing Date.  Not later than 4:00 P.M. (Nashville 
time) on the Closing
    
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Date, and upon fulfillment of the applicable conditions set forth in Article 
III, the Purchaser will purchase the Series 1997 Note by application of 
immediately available funds on behalf of the Board in the manner set forth 
in Section 20.03 of the Lease.
    
        SECTION 2.03.  Application of Payments.  Except as otherwise provided in
Article XX of the Lease, any payment or prepayment of Basic Rent under the Lease
shall be applied as a payment or prepayment first to accrued interest on the 
Notes and the remainder, if any, to prepayment penalty, if any, and then to 
principal installments on the Notes in the inverse order of maturity.  Any 
payment or prepayment on the Series 1996 Note or the Series 1997 Note shall be
applied as a payment or prepayment of Basic Rent under the Lease.

        SECTION 2.04.  Payments.  Each payment on the Series 1997 Note shall be
made not later than 12:00 Noon (Nashville time) on the day when due at the place
designated in the Series 1997 Note in immediately available funds.  Whenever any
payment to be made hereunder or under the Series 1997 Note shall be stated to be
due on a day other than a Business Day, such payment shall be extended to the 
next succeeding Business Day and such extension of time shall in such case be 
included in computing such interest.

        SECTION 2.05.  Use of Proceeds.  All of the proceeds from the sale of 
the Series 1997 Note will be used as provided in Section 20.03 of the Lease.
    
                                 ARTICLE III
                            CONDITIONS OF PURCHASE

        SECTION 3.01.  Conditions Precedent to the Purchase of the Series 1997 
Note.  The obligation of the Purchaser to purchase the Series 1997 Note is 
subject to the conditions precedent that the Purchaser shall have received 
on or before the Closing Date the following, each in form and substance 
satisfactory to the Purchaser:

        (a)  The Series 1997 Note duly executed by the Board.

        (b)  The Assignment duly executed by the Board.

        (c)  The First Amendment to Lease and the Escrow and Security 
             Agreement duly executed by the Board and the Lessee.

        (d)  The Deed of Trust duly executed by the Board.

        (e)  The First Amendment to the Amended and Restated Deed of Trust and 
             Security Agreement executed by the parties thereto.

        (f)  The Series 1997 Guaranty duly executed by the Lessee.

        (g)  The Environmental Indemnity duly executed by the Lessee.

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        (h) Evidence of the completion of all recordings and filings as may be
necessary or, in the opinion of the Purchaser, desirable to perfect the liens, 
assignments and security interests created by the Documents, and evidence that 
all other actions necessary or, in the opinion of the Purchaser, desirable to 
perfect and protect the priority lien, assignment and security interest created
by the Documents have been taken.

        (i) Certified copies of the resolutions of the Board of Directors of 
the Board approving each Series 1997 Note Document and of all documents 
evidencing other necessary corporate action and governmental approvals, if any,
with respect to each Series 1997 Note Document.

        (j) A Certificate of the Secretary, or similar officer, of the Board 
certifying the names and true signatures of the officers of the Board authorized
to sign each Series 1997 Note Document and the other documents to be delivered
by it hereunder.

        (k) Certified copies of the Resolutions of the Board of Directors of 
the Lessee approving each Lessee Document and of all documents evidencing other
necessary corporate action and governmental approval, if any, with respect to 
each Lessee Document.

        (l) A Certificate of the Secretary, or similar officer, of the Lessee 
certifying the names and true signatures of the officers of the Lessee 
authorized to sign each Lessee Document and the other documents to be 
delivered by it hereunder.

        (m) The opinion of Boston, Bates & Holt, counsel for the Lessee, dated 
the date hereof, and in form acceptable to Purchaser.

        (n) The opinion of White and Betz, counsel for the Board, dated the 
date hereof, and in form acceptable to Purchaser.

        (o) A paid title insurance policy, prepared upon an opinion of counsel
approved by the Purchaser, in form and content, and with a company, acceptable 
to the Purchaser, in the amount of $15,000,000 insuring that the Deed of Trust 
creates a valid first lien in and upon the Project, free and clear of all 
defects and encumbrances except as set forth on Schedule B to the Lease and 
containing full coverage against liens of mechanics, materialmen, laborers and
any other party who might claim statutory or common law liens.

        (p)  Evidence satisfactory to the Purchaser as to:

             (i)  Methods of access to and egress from the Project, and nearby 
             or adjoining public ways, meeting the reasonable requirements of
             similar projects;

             (ii) The availability of storm and sanitary sewer facilities 
             meeting the reasonable requirements of the Project;

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             (iii) The availability of other required utilities, such as 
             electricity, water, etc., reasonably required to serve the 
             Project; and

             (iv) The securing of all requisite governmental approvals of 
             sanitary facilities, and other matters that are subject to the 
             jurisdiction of any governmental authority.

        (q)  Suitable policies or evidence of insurance in accordance with the 
terms of the Lease and this Agreement.

        (r) A survey, certified by a surveyor registered as such in Tennessee,
to which is attached a certificate satisfactory to the Purchaser, which survey
shall disclose all improvements, easements and rights-of-way, and the Building.

        (s) An environmental report, prepared by an environmental engineering 
firm acceptable to the Purchaser, if requested by Purchaser, with respect to 
the premises, in form, substance and detail satisfactory to the Purchaser.

        (t)  Such other items as the Purchaser may reasonably request.
    
                                  ARTICLE IV
                  REPRESENTATIONS, COVENANTS AND WARRANTIES
                                 OF THE BOARD
    
        SECTION 4.01.  Representations and Warranties of the Board.  The Board
represents and warrants as follows:
    
           (a) The Board is a duly established, organized and existing public
        corporation under the laws of the State of Tennessee.  Each of the 
        directors of the Board is a duly qualified elector of and taxpayer 
        in the City of Lawrenceburg, Tennessee, and no director is an officer
        or employee of the City of Lawrenceburg, Tennessee.  The composition 
        of the Board of Directors of the Board is in conformity with the 
        requirements of Section 7-53-301 of the Act.

           (b) The Board has all requisite power, authority and legal right to
        execute and deliver the Series 1997 Note Documents and all other 
        instruments and documents to be executed and delivered by the Board 
        pursuant hereto, to perform and observe the provisions thereof and to
        carry out the transactions contemplated thereby.  All corporate action
        on the part of the Board which is required for the execution, delivery,
        performance and observance by the Board of the Series 1997 Note 
        Documents has been duly authorized and effectively taken, and such
        execution, delivery, performance and observation by the Board do not 
        contravene applicable law or any contractual restriction binding on 
        or affecting the Board.

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           (c) No authorization or approval or other action by, and no notice 
        to or filing with, any governmental authority or regulatory body is 
        required for the due execution and delivery by the Board of, and 
        performance by the Board of its obligations under, any Series 1997 
        Note Document except for the filing of a Report on Debt Obligation 
        with the Division of Local Finance, Comptroller's Office, as 
        required by Chapter 402, Public Acts of 1989.

           (d) This Agreement is, and each other Series 1997 Note Document 
        when delivered hereunder will be, legal, valid and binding special 
        obligations of the Board enforceable against the Board in accordance
        with their respective terms.

           (e) There is no default of the Board in the payment of the principal
        of or interest on any of its indebtedness for borrowed money or under 
        any instrument or instruments or agreements under and subject to which
        any indebtedness for borrowed money has been incurred which does or 
        could affect the validity and enforceability of the Series 1997 Note
        Documents or the ability of the Board to perform its obligations 
        thereunder, and no event has occurred and is continuing under the 
        provisions of any such instrument or agreement which constitutes or,
        with the lapse of time or the giving of notice, or both, would 
        constitute such a default.

           (f) There is not pending or, to the knowledge of the undersigned 
        officers of the Board, threatened any action or proceeding before any
        court, governmental agency or arbitrator (i) to restrain or enjoin the
        issuance or delivery of the Series 1997 Note or the collection of any 
        revenues pledged under the Assignment, (ii) in any way contesting or 
        affecting the authority for the issuance of the Series 1997 Note or 
        the validity of any of the Series 1997 Note Documents, or (iii) in 
        any way contesting the existence or powers of the Board.

           (g) In connection with the authorization, issuance and sale of the 
        Series 1997 Note, the Board has complied with all provisions of the 
        Constitution and laws of the State of Tennessee, including the Act and
        Sections 8-44-104, et seq., of Tennessee Code Annotated (the "Public 
        Meetings Act").

           (h) The Board has not assigned or pledged and will not assign or 
        pledge its interest in the Lease for any purpose other than to secure 
        the Series 1996 Note and the Series 1997 Note under the Assignment.
        The Series 1996 Note and the Series 1997 Note constitute the only notes
        or other obligations of the Board in any manner payable from the 
        revenues to be derived from the Lease, and except for the Series 1996
        Note and the Series 1997 Note, no notes or other obligations have been
        or will be issued on the basis of the Lease.

           (i) The Board is not in default under any provision of its 
        Certificate of Incorporation or By-Laws, and is not in default under
        any of the provisions of

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        the laws of the State of Tennessee which default would affect its 
        existence or its powers referred to in subsection (b) of this Section.

           (j) No member, officer or other official of the Board has any 
        interest whatsoever in the Lessee or in the transactions contemplated
        by the Lease.

           (k) The Board will not enter into any agreement or instrument which
        might in any way prevent or materially impair its ability to perform 
        its obligations under the Series 1997 Note Documents.
    
           (l) The Board will not consent or agree to any modification of the 
        Lease or waive compliance with any of the terms thereof, unless any 
        such modification or waiver shall have been agreed to in writing by 
        the Noteholder.
    
           (m) The Board will execute, acknowledge where appropriate, and
        deliver from time to time promptly at the request of the Noteholder 
        all such instruments and documents as in the opinion of the Noteholder
        are necessary or desirable to carry out the intent and purpose of any 
        of the Documents.

        SECTION 4.02.  Affirmative Covenants.  So long as the Series 1997 Note 
shall remain unpaid, the Board will, upon request of the Noteholder and provided
it shall be furnished with sufficient funds to pay all costs and expenses 
(including attorney's fees) reasonably incurred by it as such costs and 
expenses accrue:
    
           (a) Take all action and do all things which it is authorized by law
        to take and do in order to perform and observe all covenants and 
        agreements on its part to be performed and observed under the Series
        1997 Note Documents.

           (b) Execute, acknowledge where appropriate, and deliver from time to
        time promptly at the request of the Noteholder all such instruments and
        documents as in the opinion of the Noteholder are necessary or desirable
        to carry out the intent and purpose of the Series 1997 Note Documents or
        Lessee Documents (or any of them).

                                     ARTICLE V
             OTHER REPRESENTATIONS, COVENANTS AND WARRANTIES OF LESSEE

        SECTION 5.01.  Representations and Warranties.  In order to induce the 
Board to amend and modify the Lease and the Purchaser to purchase the Series 
1997 Note, Lessee hereby represents and warrants to, and agrees with, the Board,
the Purchaser and any subsequent Noteholder as follows:

        (a) Organization.  The Lessee is a corporation duly organized, validly
existing and in good standing under the laws of the State of Pennsylvania and 
has all requisite power and
    
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authority to own and operate its properties and to carry on its business as now
being conducted.  Lessee shall remain a corporation duly organized and existing
and in good standing under the laws of the State of Pennsylvania, and is and 
shall remain duly qualified to do business in Tennessee and each state other 
than Tennessee in which qualification is necessary.  Neither the execution, 
the delivery, nor the performance of this Agreement and all related documents
by Lessee will constitute a default under or conflict with Lessee's charter or
bylaws or any agreement, contract, document, or instrument to which Lessee now
is a party.  The execution of all necessary resolutions and other prerequisites
of corporate actions have been duly performed so that the individual executing 
this Agreement and related documents on behalf of Lessee is duly authorized to 
bind Lessee by his signature.

        (b) Requisite Power and Authorization.  This Agreement constitutes, and
upon execution and delivery thereof, the other Lessee Documents will constitute,
legal, valid and binding obligations of the Lessee enforceable against the 
Lessee in accordance with their respective terms, except as enforcement thereof
may be limited by bankruptcy, insolvency, moratorium, reorganization or other 
similar laws affecting creditors' rights generally.  The Lessee has full power
and authority, corporate and otherwise, to execute and deliver, and to perform
all of its obligations under, each of the Lessee Documents.  All corporate 
action which is required for such execution, delivery and performance has been
validly taken.

        (c) Approvals.  No approval, consent or other authorization (corporate,
governmental or otherwise) of, or filing with, any court, agency, commission or 
other authority or entity is required for the due execution, delivery, 
performance or observance by the Lessee of this Agreement or for the payment 
of any sums thereunder.

        (d) Litigation.  There is no litigation or proceeding pending against 
Lessee or, to the knowledge of Lessee, threatened that, if decided adversely to
Lessee, would have a material effect upon its financial condition.  Lessee is 
not subject to any outstanding court or administrative order.

        (e) Financial Statements.  The financial statements of Lessee heretofore
delivered to the Purchaser fairly and accurately reflect the financial condition
and capital structure of Lessee as of the dates thereof.  Since said date, no
material adverse change in either has occurred or, to the knowledge of Lessee,
is threatened.  All financial statements delivered to Purchaser have been 
prepared in accordance with generally accepted accounting principles, 
consistently applied, and are true, accurate and complete in every material 
respect.  Without limiting the foregoing, Lessee warrants that such financial
statements disclose all known contingent liabilities as well as direct 
liabilities.  Lessee acknowledges that Purchaser agreed to purchase the Series
1997 Note in reliance upon such financial statements, and Lessee warrants that
no material adverse change has occurred in the financial condition of any
person or entity as set forth in such financial statements.  Lessee warrants 
that Lessee has good and marketable title to the assets disclosed on Lessee's
balance sheet disclosed to Purchaser, subject only to liens, security interests
and other encumbrances noted thereon.

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        (f) Taxes.  Lessee is not presently delinquent in the payment of any 
taxes imposed by any governmental authority or in the filing of any tax return
and Lessee is not involved in a dispute with any taxing authority over tax 
amounts due.  Lessee covenants that all future taxes assessed against Lessee
shall be timely paid and that all tax returns required of Lessee shall be 
timely filed.

        SECTION 5.02.  Lease.  The Lessee shall punctually pay all Basic Rent 
and other amounts due under the Lease and shall promptly perform all of its 
other obligations under the Lease.

        SECTION 5.03.  Inspection.  The Lessee and the Board shall permit the 
Noteholder and any representative of the Noteholder to visit and inspect the 
Leased Property at such time as either the Board or the Lessee has title to 
any part thereof, to examine the books of account of the Lessee and to discuss
Lessee's affairs, finances and accounts with Lessee and independent certified 
public accountants, all during business hours and as often as the Noteholder or
any such representatives may reasonably request.  Any inspection or examination
pursuant to this paragraph shall be for the sole purpose of protecting the 
security of the Noteholder and shall not be construed as a representation by 
the Noteholder that there has been compliance with the plans and specifications
for the Project or that the Project will be or is free of faulty materials or 
workmanship, or a waiver of any right the Noteholder may have against Lessee or
any other party.

        SECTION 5.04.  Expenses Paid by Lessee, indemnification.

        (a) The Lessee will pay in full all reasonable out-of-pocket expenses 
of the Board and the Purchaser incurred in connection with the preparation, 
execution and delivery of this Agreement and the Lease and the consummation of
the transactions contemplated by such documents, including but not limited to 
(i) the fees and disbursements of the Board's counsel, and Purchaser's counsel,
(ii) all taxes(other than income taxes) applicable to such transactions, (iii) 
all present and future recording and filing fees and recording and filing taxes,
(iv) all expenses incident to the preparation of the Documents and any other 
documents relating to the Lease or the Series 1997 Note, and (v) all survey 
and title insurance premiums, fees and expenses.

        (b) The Lessee shall pay to or reimburse in full the Board and 
Noteholder for all costs and expenses incurred in the collection or enforcement
of (or in respect of any action taken to collector enforce) the Documents upon 
any default thereunder, or in any investigation of any such default, including 
reasonable attorneys' fees.

        (c) The Lessee shall indemnify and hold harmless both the Board, the 
Purchaser and any subsequent Noteholder (and all officers and directors of 
both the Board, the Purchaser and any subsequent Noteholder) against all 
liabilities, claims, costs and expenses imposed or asserted against either the
Board or the Purchaser for (i) any loss or damage to property or injury or 
death of any person that may be occasioned by any cause whatsoever pertaining
to the renovation, maintenance, operation or use of the Leased Property, (ii)
any breach or default on the part of the Lessee in the performance of any 
covenant or agreement

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under the Lessee Documents or arising from any act or failure to act by the 
Lessee or any of his agents, contractors, servants, employees or licensees or
arising from any accident, injury or damage whatsoever caused to any person, 
firm or corporation occurring in or about the Leased Property, or (iii) any 
such claim or action or proceeding brought thereon.

        (d) The obligations of the Lessee under this Section 5.04 shall survive
the payment in full of all amounts payable under the Series 1997 Note to the 
extent set forth above.

        SECTION 5.05.  Performance of Lessee or Board Obligations by Series 1997
Noteholder.  Without having any obligation to do so and only if an Event of 
Default has occurred and is continuing, the Noteholder may perform or pay any
obligation which the Lessee is obligated to pay or perform under any of the 
Lessee Documents or which the Board is obligated to pay or perform under any 
of the Series 1997 Note Documents.  All of the following shall bear interest 
at the Default Rate and, together with such interest, be repaid by the Lessee
to the Noteholder on demand: (1) all sums advanced or paid by the Noteholder 
under this Section, and (2) all costs reasonably incurred or paid by the 
Noteholder in the exercise of its rights under this Section.

        SECTION 5.06.  Further Assurances.  Lessee will execute such other 
assignments, security agreements, financing statements, and other documents 
that Purchaser may deem necessary to further evidence the obligations provided
for in the Lease or to perfect, extend, or clarify Purchaser's rights in any 
property securing or intended to secure the Series 1997 Note.  Any Vice 
President of Purchaser is hereby appointed as Lessee's attorney-in-fact with
full power of substitution for the signing of financing statements and other
similar filings with government offices for perfecting security interests
granted hereby.  Purchaser acknowledges that this power of attorney is coupled
with an interest and is irrevocable.

        SECTION 5.07.  Financial Statements.  The Lessee will provide to the 
Purchaser (i) within forty-five days in the case of the Lessee, after the end
of the Lessee's fiscal quarter, financial statements of the Lessee, in form and
content satisfactory to Purchaser including a complete balance sheet and profit
and loss statement for each quarter; (ii) within one hundred twenty days after 
the close of Lessee's fiscal year, complete certified audited financial 
statements of Lessee, prepared in accordance with generally accepted 
accounting principles, consistently applied, prepared by a certified public 
accountant acceptable to Purchaser; and (iii) a quarterly compliance
certificate from an officer of the Lessee acknowledging that the Lessee is not
in default in the performance of any provisions of the Lessee Documents and 
that the Lessee is in compliance with all fiscal covenants contained in the 
Lessee Documents.
    
        SECTION 5.08.  Cash Flow to Debt Service Ratio.  Lessee shall at all 
times maintain a ratio of Cash Flow to Debt Service of not less than 10.0 to 
1.0 except as provided below.  For the purposes of this covenant, "cash flow"
shall mean earnings of Lessee before interest, taxes, depreciation and 
amortization and "debt service" shall mean the sum of the current portion of
long term debt and capitalized leases, dividends, and treasury stock 
repurchases.  In the event Lessee is engaged in an active stock repurchase 
program, Lessee shall

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at all times maintain a ratio of Cash Flow to Debt Service of not less than 1.5
to 1.0.  An active stock repurchase program shall mean that Lessor has purchased
during the immediately preceding thirty day period not less than $1,000,000 of 
its own Common Stock.

        SECTION 5.09.  RESERVED

        SECTION 5.10.  Dividends and Loans or Advances.  The Lessee will not 
pay or make, directly or indirectly, to any related company, (i) dividends; 
(ii) royalty fees or related company management or consulting fees; and (iii)
any loans or advances for the duration of this Agreement unless immediately 
before and immediately after paying or making such dividend, royalty fee or 
related company management or consulting fee or any loan or advance, the Lessee
was and remains in compliance with the other covenants contained herein.

        SECTION 5.11.  Liabilities to Tangible Net Worth.  Lessee will not 
permit its ratio of Total Liabilities to its Tangible Net Worth to exceed .75
to 1 at any time during the term of the Lease.

        SECTION 5.12.  Insurance.  The Lessee will maintain public liability 
insurance insuring against bodily injury and property damage with liability 
limits of $500,000 for each occurrence and $10,000,000 aggregate liability and
fire and extended coverage insurance on all assets in such form and in such 
amounts as are consistent with industry practices and with insurers satisfactory
to the Purchaser.  The Lessee shall provide evidence of insurance (together with
written agreement by the insurer or insurers to give Purchaser 30 days' prior 
written notice of cancellation) to the Purchaser and the Lessee shall name the
Purchaser as the loss payee on any and all such insurance policies relating 
to the Leased Property.

        SECTION 5.13.  Use of Project.  Lessee will keep the Project free from 
any lien, security interest, or encumbrance other than that granted to Purchaser
by the Board pursuant to the Deed of Trust and in good order and repair and will
not waste or destroy the Project or any part thereof.  Lessee will not use the 
Project in violation of any statute or ordinance.  Lessee's business activities
are conducted in accordance with all applicable laws and regulations, and Lessee
covenants that such activities shall continue to be so conducted.  Purchaser may
examine and inspect the Project at any time.

        SECTION 5.14.  No Conflicting Agreements.  Lessee is not a party to any
contract or agreement and is not subject to any contingent liability that does 
or may impair Lessee's ability to perform under the terms of this Agreement.  
The execution and performance of this Agreement will not cause a default under
any other contract or agreement to which Lessee or any property of Lessee is 
subject, and will not result in the imposition of any charge, penalty, lien or
other encumbrance against any of Lessee's property except in favor of Purchaser.

        SECTION 5.15.  Notice to Purchaser of Certain Events.  Lessee covenants
to give Purchaser prompt written notice of any litigation, arbitration, 
administrative proceeding or

                                     -13-
<PAGE> 14

investigation that may hereafter be instituted or threatened against Lessee in 
which the potential liability of Lessee exceeds $250,000.  Lessee covenants to 
give Purchaser written notice within ten days of (i) the creation or discovery
of any material additional contingent liability or the occurrence of any other
material adverse change in the financial condition of Lessee, (ii) the 
occurrence of any event, or presence of any condition, which constitutes an 
Event of Default or which with the giving of notice, the passage of time, or 
both, would constitute a default, and (iii) the change of the name of Lessee.

        SECTION 5.16.  Further Assurances.  Lessee covenants that it will 
execute, acknowledge where appropriate, and deliver from time to time promptly
at the request of the purchaser all such instruments and documents as in the 
opinion of the Purchaser are necessary or desirable to carry out the intent 
and purpose of the Series 1997 Note Documents or Lessee Documents (or any of 
them).

        SECTION 5.17.  Merger, Sale of Assets, Certificates and-Loans.  Lessee 
will not, without the prior written consent of the Purchaser:

        (a)  enter into any merger or consolidation; provided, however, that
             Lessee may, without the consent of Purchaser, merge or consolidate
             with any other company as long as the Lessee shall be the 
             continuing or surviving corporation;

        (b)  sell, lease, convey or otherwise dispose of any of its property or
             assets, except that Lessee may (i) grant liens or encumber any of 
             its property (other than its interest in the Lease) (ii) dispose of
             property in the ordinary course of business and (iii) otherwise 
             dispose of its properties as long as the aggregate fair market 
             value of the property so disposed of in any fiscal year of the 
             Lessee also does not exceed $1,000,000; and

        (c)  submit to the Purchaser any certificate or other document that 
             contains any untrue statement of a material fact or omits to 
             state a material fact necessary to make it not misleading.
    
        SECTION 5.18.  Borrowing.  Lessee will not create, incur, assume or 
become liable in any manner for any indebtedness for borrowed money, deferred
payment for the purchase of assets, lease payments, as surety or guarantor for
the debt of another, or otherwise plan to purchase, except for normal trade 
debts incurred in the ordinary course of Lessee's business, and except for 
existing indebtedness disclosed to Purchaser in writing and acknowledged by 
Purchaser prior to the date of this Agreement.

                                     -14-
<PAGE> 15

                                  ARTICLE VI
                              EVENTS OF DEFAULT

        The occurrence of any one or more of the following events shall 
constitute an Event of Default hereunder:

        (a)  non-payment when due of any installment of interest on the Series
             1996 Note or the Series 1997 Note; or

        (b)  non-payment when due of any installment of principal on the
             Series 1996 Note or the Series 1997 Note whether at maturity, by
             acceleration or mandatory prepayment; or

        (c)  non-payment when due of any other amount required to be paid by
             the Lessee or the Board hereunder or under any other Document
             (other than a default under subsections (a) or (b) above) continued
             for ten (10) days after written notice thereof to the Lessee; or

        (d)  the occurrence of an "Event of Default" as defined in Article
             14.01 of the Lease which continues beyond the applicable cure
             period provided therein, if any; or

        (e)  indebtedness of the Lessee in excess of $50,000 shall be declared
             to be due and payable, or required to be prepaid other than by
             regularly scheduled or other mandatory required prepayment, prior
             to the stated maturity thereof; or

        (f)  any representation or warranty made by Lessee herein or in the
             Lease is untrue in any material respect when made;

        (g)  default by the Lessee in the due observance or performance of any
             term, covenant, condition or agreement on its part to be performed
             under any of the Documents (other than a default under
             subsections (a), (b), (c), (d), (e) or (f) above) continued for 
             thirty (30) days after written notice specifying such default has
             been given to the Lessee;

        (h)  default by the Lessee in the due observance or performance of any
             term covenant, condition or agreement on its part to be performed
             under the Prior Note Agreements, or any of them, except that no 
             default shall be deemed to exist under the Prior Note Agreements
             by reason of a breach of the financial covenants contained in 
             Sections 5.07, 5.08 and 5.11 of the Prior Note Agreements unless
             there is a breach of any of the financial covenants contained in

                                     -15-
<PAGE> 16

             Section 5.07 through 5.11 hereof, which the parties agree shall
             supersede and replace Sections 5.07 through 5.11 of the Prior Note
             Agreements.  The parties further agree that the provisions of 
             Section 5.09 contained in the Prior Note Agreements are deleted 
             and are of no further force and effect.  Except as modified hereby,
             the terms of the Prior Note Agreements remain in full force and 
             effect; or

        (i)  default under any notes issued by the Board or Purchaser for the
             benefit of Lessee or under any and all other documents,
             instructions, deeds of trust, mortgages, security agreements,
             guaranties, executed and/or delivered by Lessee or the Board in
             connection therewith (the "Loan Documents"); it being agreed that
             a default under any of such Loan Documents shall be a default
             hereunder and vice versa.

                                 ARTICLE VII
                                MISCELLANEOUS
    
        SECTION 7.01.  Notices, Etc.  All notices and other communications 
provided for hereunder shall be in writing (including telegraphic, telecopy,
or telex communication) and mailed, telecopied, telexed, telegraphed or 
delivered, if to the Board, at its address, c/o White & Betz, 22 Public 
Square, Lawrenceburg, Tennessee 38464-0488, Attention: Alan C. Betz, Esq.; 
if to the Purchaser, at its address at NationsBank of Tennessee, National 
Association, 255 N. Military Avenue, Lawrenceburg, Tennessee 38464, Attention:
Mr. Timothy E. Pettus; if to any Noteholder other than the Purchaser, at the
address indicated on the note register maintained pursuant to Section 7.02 
hereof; if to the Lessee, at its address at Jones Apparel Group, Inc., 250 
Rittenhouse Circle, Bristol, Pennsylvania 19007, Attention: Chief Financial 
Officer; or, as to each party, at such other address as shall be designated 
by such party in a written notice to the other party.  All such notices and 
communications shall, when mailed or telegraphed; be effective three days 
after deposit in the mails or delivery to the telegraph company, respectively,
addressed as aforesaid.  All such notices and communications otherwise 
transmitted shall be effective upon receipt by the addressee.

        SECTION 7.02.  Series 1997 Note Registration.  The Series 1997 Note 
shall be registered (as hereinafter provided) in the name of the owner on a 
note register to be provided for that purpose by the Board in the office of 
the Lessee, as note registrar.  The note registrar and the note register shall
be subject to change upon written notice thereof from the Noteholder.  No 
transfer thereof shall be valid unless made at the written request of the 
registered owner or his legal representative, on said note register and 
evidence of transfer of the Series 1997 Note furnished to the note registrar.
Principal of, premium, if any, and interest on the Series 1997 Note will be 
paid by check to the registered owner by mail at the address shown on the note
register or at such other place as may be directed by the Noteholder, which 
directions shall be noted in the note register.

                                     -16-
<PAGE> 17

        The person in whose name the Series 1997 Note shall be registered shall
be deemed and regarded as the absolute owner thereof for all purposes, and 
payment of or on account of the interest on or the principal of the Series 
1997 Note shall be made only to or upon the order of the registered owner 
thereof or his legal representative, but such registration may be changed as
hereinabove provided.  All such payments shall be valid and effectual to 
satisfy and discharge the liability upon the Series 1997 Note to the extent 
of the sum or sums paid.

        SECTION 7.03.  No Waiver: Remedies.  No failure on the part of the 
Noteholder to exercise, and no delay in exercising, any right under any 
Document shall operate as a waiver thereof; nor shall any single or partial 
exercise of any right under any Document preclude any other or further 
exercise thereof or the exercise of any other right.  The remedies provided
in the Documents are cumulative and not exclusive of any remedies provided
by law.

        SECTION 7.04.  Binding Effect, Governing Law.  This Agreement shall be 
binding upon and inure to the benefit of the Board, the Purchaser and the Lessee
and their respective successors and assigns, except that the Board shall not 
have the right to assign its rights hereunder or any interest herein without 
the prior written consent of the Purchaser.  This Agreement and the Series 1997
Note shall be governed by, and construed in accordance with, the laws of the 
State of Tennessee except to the extent that applicable federal law may 
permit any higher rate of interest.

        SECTION 7.05.  Acquisition of the Series 1997 Note For Account of the 
Purchaser.  The Purchaser represents and warrants that it will acquire the 
Series 1997 Note and the other Series 1997 Note Documents to be acquired by 
it for its own account and, except that the Purchaser may grant participation
interests therein to other financial institutions, not with a view to the 
distribution or any disposition thereof, and that it has no present intention
of making any such distribution or disposition provided that the disposition 
of the Purchaser's property shall at all times be and remain within its 
control.  In the event that the Purchaser or any subsequent Noteholder should
transfer the Series 1997 Note, the Purchaser or any subsequent Noteholder shall
give prompt written notice to the Board and the Lessee of the name and address
of the transferee.  Until such time as the Board and the Lessee receive such 
notice from the Purchaser and the name and address of the transferee have been 
entered on the note register and noted on the Series 1997 Note, the Board and 
the Lessee shall be entitled to assume that the Purchaser is the Noteholder and
that the Noteholder is as reflected in the most recent entry on the note 
register and the most recent notation on the Series 1997 Note.

        SECTION 7.06.  Severability.  In the event that any clause or provision
of any Series 1997 Note Document shall be held to be invalid by any court of 
competent jurisdiction, the invalidity of such clause or provision shall not 
affect any of the remaining provisions of such Series 1997 Note Document.

        SECTION 7.07.  Payment on Non-Business Days.  Whenever any payment to be
made hereunder or under the Series 1997 Note shall be stated to be due on a day
which is not a Business Day, such payment may be made on the next succeeding 
Business Day.

                                     -17-
<PAGE> 18

        SECTION 7.08.  No Liability of Board's Officers, Etc.  No recourse under
or upon any obligation, covenant or agreement contained in this Agreement or the
Assignment, or in the Series 1997 Note, or under any judgment obtained against 
the Board, or by the enforcement of any assessment or by any legal or equitable 
proceeding by virtue of any constitution or statute or otherwise or under any
circumstances, under or independent of this Agreement or the Assignment, shall 
be had against any incorporator, member, director or officer, as such, past, 
present or future, of the Board, either directly or through the Board, or 
otherwise, for the payment for or to the Board or any receiver thereof, or 
for or to the holder of the Series 1997 Note or otherwise, of any sum that 
may be due and unpaid by the Board upon the Series 1997 Note.  Any and all 
personal liability of every nature, whether at common law or in equity, or by
statute or by constitution or otherwise, of any such incorporator, member, 
director or officer, as such, to respond by reason of any act or omission on 
his part or otherwise, for the payment for or to the Board or any receiver 
thereof, or for or to the holder of the Series 1997 Note or otherwise, of any
sum that may remain due and unpaid upon the Series 1997 Note, is hereby 
expressly waived and released as a condition of and consideration for the 
execution of this Agreement and the issue of the Series 1997 Note.

        SECTION 7.09.  No Liability of the City of Lawrenceburg, Tennessee, The
City of Lawrenceburg, Tennessee shall not in any event be liable for the payment
of the principal of, premium, if any, or interest on the Series 1997 Note, or 
for the performance of any pledge, mortgage, obligation or agreement of any 
kind whatsoever herein or indebtedness by the Board, and neither the Series 
1997 Note nor any of the agreements or obligations of the Board contained in 
this Agreement or the Assignment or otherwise shall be construed to constitute
an indebtedness of the City of Lawrenceburg, Tennessee, within the meaning of 
any constitutional or statutory provision whatsoever.

        SECTION 7.10.  Term of Agreement.  This Agreement and all terms and 
provisions hereof shall survive the closing of the purchase and delivery of 
the Series 1997 Note and shall not be merged into the Series 1997 Note or any
other documents evidencing the Series 1997 Note or the purchase thereof.  The
term of this Agreement shall be from the date hereof until the date of payment
in full of the Series 1997 Note and all other obligations of the Board or the 
Lessee hereunder and under the other Documents.

        SECTION 7.11.  Arbitration.  Any controversy or claim between or among
the parties hereto including but not limited to those arising out of or relating
to this Agreement, or any related notes or instruments, including any claim 
based on or arising from an alleged tort, shall be determined by binding 
arbitration in accordance with the Federal Arbitration Act (or if not 
applicable, the applicable state law), the rules of practice and procedure for
the arbitration of commercial disputes of Judicial Arbitration and Mediation 
Services, Inc. (J.A.M.S.) Endispute or any successors thereto as supplemented
by any special rules set forth in any of the Loan Documents including the 
special rules set forth below.  In the event of any inconsistency, the special
rules shall control.  Judgment upon any arbitration award may be entered in any
court having jurisdiction.  Lessee consents to the exclusive jurisdiction of 
the courts of competent jurisdiction in Davidson County, Tennessee.  Any 
party to the Agreement may bring an action,
     
                                     -18-
<PAGE> 19

withholding a summary of expeditional providing, to compel arbitration of any
controversy or claim to which this Agreement applies to any court having 
jurisdiction over such action.

        (A) Special Rules.  The arbitration shall be conducted in Davidson 
County, Tennessee and administered by J.A.M.S. who will appoint an arbitrator.
If J.A.M.S. is unable or legally precluded from administering the arbitration,
then the American Arbitration Association will serve.  All arbitration hearings
will be commenced within 90 days of the demand for arbitration; further, the 
arbitrator shall only, upon a showing of cause, be permitted to extend the 
commencement of such hearing for an additional 60 days.

        (B) Reservation of Rights.  Nothing herein shall be deemed to (i) limit
the applicability of any otherwise applicable statutes of limitation or repose 
and any waivers contained in this Agreement; or (ii) be a waiver by the 
Purchaser of the protection afforded to it by 12 U.S.C. Sec. 91 or any 
substantially equivalent state law; or (iii) limit the right of the purchaser
(a) to exercise self help remedies such as (but not limited to) setoff, or (b)
to foreclosure against any real or personal property collateral, or (c) to 
obtain from a court provisional or ancillary remedies such as (but not limited
to) injunctive relief, writ of possession or the appointment of a receiver.  
The Purchaser may exercise such self help rights, foreclosure upon such 
property, or obtain such provisional or ancillary remedies before, during or 
after the pendency of any arbitration proceeding brought pursuant to this 
Agreement.  Neither the exercise or self help remedies nor the institution or
maintenance of an action for foreclosure or provisional or ancillary remedies 
shall constitute a waiver of the right of any party, including the claimant in
such action, to arbitrate the merits of the controversy or claim occasioning 
resort to such remedies.

        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date 
first above written.
    
                                  THE INDUSTRIAL DEVELOPMENT BOARD OF
                                  THE CITY OF LAWRENCEBURG
    
                                  By: /s/ Jerry Putman
                                      Chairman
ATTEST:
Caralyne Thompson
          Secretary

                                     -19-


                                  NATIONSBANK OF TENNESSEE, NATIONAL
                                  ASSOCIATION

                                  By: /s/ Tim Pettus
                                  Title: Senior V. Pres.
    
                                  JONES APPAREL GROUP, INC.

                                  By: /s/ Gary R. Klocek
                                  Title: Corp. Controller

                                     -20-