Document:

Amendment No. 1 to Five-Year Credit Agreement

EXHIBIT 10.20
AMENDMENT NO. 1 TO FIVE-YEAR CREDIT AGREEMENT

THIS AMENDMENT NO. 1 TO FIVE-YEAR CREDIT AGREEMENT (this "Amendment"),
dated as of May 22, 2001, is entered into by and among AUTOZONE, INC.,
a Nevada corporation (the "Borrower"), the Lenders identified on
the signature pages hereto and BANK OF AMERICA, N.A., as Administrative
Agent for the Lenders (in such capacity, the "Agent"). Terms used
but not otherwise defined herein shall have the meanings provided in the
Amended Credit Agreement referred to below.

W I T N E S S E T H:

WHEREAS, pursuant to a Five-Year Credit Agreement dated as of
May 23, 2000 (the "Credit Agreement") among the Borrower, the Lenders
party thereto and the Agent, the Lenders have extended commitments to make
a revolving credit facility available to the Borrower; and

WHEREAS, the Borrower, the Required Lenders and the Agent have
agreed to amend the Credit Agreement as set forth herein;

NOW, THEREFORE, in consideration of the agreements herein contained,
the parties hereby agree as follows:

PART I

DEFINITIONS

SUBPART 1.1. Certain Definitions. Unless otherwise defined herein
or the context otherwise requires, the following terms used in this Amendment,
including its preamble and recitals, have the following meanings:

"Amended Credit Agreement" means the Credit Agreement as amended
hereby.
"Amendment Effective Date" as defined in Subpart 3.1.

 

PART II
AMENDMENTS TO CREDIT AGREEMENT

Effective on (and subject to the occurrence of) the Amendment Effective
Date, the Credit Agreement shall be amended in accordance with this Part
II. Except as so amended, the Credit Agreement shall continue in full
force and effect.

SUBPART 2.1. Amendment to Section 1.1. Section 1.1 of the Credit
Agreement is hereby amended by deleting the existing definitions of "364-Day
Credit Agreement", "Change of Control", "Commercial Credit
Business Arrangement", "Consolidated Adjusted Debt" and "Interbank
Offered Rate" and replacing them with the following new definitions:

(a) "364-Day Credit Agreement" means that certain Credit Agreement
dated as of May 22 2001 by and among the Borrower, the lenders party thereto,
Fleet National Bank, as administrative agent and The Chase Manhattan Bank,
as syndication agent, as amended, modified, restated, supplemented or replaced
from time to time.
(b) "Change of Control" means either (i) a "person" or a "group"
(within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934) becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934) of more than 50% of the then outstanding
voting stock of the Borrower or (ii) a majority of the board of directors
of the Borrower shall consist of individuals who are not Continuing Directors.
For purposes hereof, "Continuing Directors" means, as of any date of determination,
(i) an individual who on the date two years prior to such determination
date was a member of the Borrower's board of directors or (ii) (a) any
director whose nomination for election by the Borrower's shareholders was
approved by a vote of a majority of the directors then still in office
who either were directors on the date two years prior to such
determination date or whose nomination for election was previously so approved
(or who are Continuing Directors pursuant to clause (b) below) or (b) any
director who was elected by a majority of the directors then still in office
who either were directors on the date two years prior to such determination
date
or whose nomination for election was previously so approved (or who are
Continuing Directors pursuant to clause (a) above).

(c) "Commercial Credit Business Arrangement" means any agreement
between the Borrower or any of its Subsidiaries and an entity that purchases
such Person's commercial accounts receivables with only such limited recourse
back to such Person as is customary in factoring arrangements of this type.

(d) "Consolidated Adjusted Debt" means, at any time, the sum
of, without duplication, (i) Consolidated Funded Indebtedness and (ii)
the product of Consolidated Rents multiplied by 6.0.

(e) "Interbank Offered Rate" means, for the Interest Period for
each Eurodollar Loan comprising part of the same borrowing (including conversions,
extensions and renewals), a per annum interest rate (rounded upwards, if
necessary, to the nearest whole multiple of 1/100 of 1%) equal to the rate
of interest, determined by the Administrative Agent on the basis of the
offered rates for deposits in dollars for a period of time corresponding
to such Interest Period (and commencing on the first day of such Interest
Period), appearing on Telerate Page 3750 (or, if, for any reason, Telerate
Page 3750 is not available, the Reuters Screen LIBO Page) as of approximately
11:00 A.M. (London time) two (2) Business Days before the first day of
such Interest Period; provided, however, if no such interest
rate for a period of time corresponding to such Interest Period appears
on Telerate Page 3750 or the Reuters Screen LIBO Page, then the applicable
interest rate shall be determined by the Administrative Agent in good faith.
As used herein, "Telerate Page 3750" means the display designated as page
3750 by Dow Jones Telerate, Inc. (or such other page as may replace such
page on that service for the purpose of displaying the British Bankers
Association London interbank offered rates) and "Reuters Screen LIBO Page"
means the display designated as page "LIBO" on the Reuters Monitor Money
Rates Service (or such other page as may replace the LIBO page on that
service for the purpose of displaying London interbank offered rates of
major banks).

SUBPART 2.2. Amendment to Section 2.2(b). Section 2.2(b) of the
Credit Agreement is hereby amended by deleting the following words from
the second sentence therein:

"such time as determined by each such Lender in accordance with such
Lender's customary practices (in any event not to be later than"

and by deleting the symbols "))" and substituting ")".
SUBPART 2.3. Amendment to Section 2.2(c). Section 2.2(c) of the
Credit Agreement is hereby amended by deleting the following words from
the second sentence therein:

"such time as determined by each such Lender in accordance with such
Lender's customary practices (in any event not to be later than"

and by deleting the symbols "))" and substituting ")".
SUBPART 2.4. Amendment to Section 2.2(d). Section 2.2(d) of the
Credit Agreement is hereby amended by deleting the following words from
the first sentence therein:

"such time as determined by each such Lender in accordance with such
Lender's customary practices (in any event until"

and by deleting the symbols "))" and substituting ")".
SUBPART 2.5. Amendment to Section 3.3(b)(ii). Section 3.3(b)(ii)
of the Credit Agreement is hereby deleted in its entirety and is replaced
with the following:

"(ii) Debt and Equity Issuances. During any period in which
the Borrower has a senior unsecured (non-credit enhanced) long term debt
rating from S&P of below BBB- and a senior unsecured (non-credit enhanced)
long term debt rating from Moody's of below Baa3, immediately upon receipt
by the Borrower or any Subsidiary of proceeds from any Debt or Equity Issuance
(as defined below) the Borrower shall cause 50% of the net cash proceeds
of such Debt or Equity Issuance to be applied as follows:
(A) to prepay the principal amount of any borrowings outstanding under
the Facilities, with such prepayment applied pro rata to the Facilities
(based on outstanding commitments thereunder) to the extent of outstanding
borrowings under each Facility (it being understood that the aggregate
amount of prepayments required to be made by the Borrower under both Facilities
shall not exceed 50% of the net cash proceeds of such Debt or Equity Issuance);
and
(B) to permanently reduce on a Dollar for Dollar basis commitments outstanding
under the Facilities (regardless of whether there are any outstanding borrowings
being prepaid), with such reductions applied pro rata to the Facilities
(based on outstanding commitments thereunder) to the extent of outstanding
commitments under each Facility (it being understood that the aggregate
amount of commitment reductions required to be made by the Borrower under
both Facilities shall not exceed 50% of the net cash proceeds of such Debt
or Equity Issuance and that a commitment reduction under a Facility shall
reduce the individual commitments of the lenders under such facility on
a pro rata basis).

Any prepayment made pursuant to this Section 3.3(b)(ii) shall be accompanied
by interest on the principal amount prepaid through the date of prepayment.
For purposes hereof, "Debt or Equity Issuance" means the issuance
by the Borrower or any of its Subsidiaries (to a Person other than the
Borrower or any of its Subsidiaries) of (I) any Indebtedness for borrowed
money in the form of publicly issued or privately placed bonds or other
debt securities with a maturity of three years or greater or (II) any shares
of capital stock or other equity securities."

SUBPART 2.6. Amendment to Section 8.1(e)(i)(B). Section 8.1(e)(i)(B)
of the Credit Agreement is hereby amended by deleting the phrase between
the word "prior" and the symbol "(ii)" and replacing the phrase with the
following:

"to the applicable maturity date, but after the expiration of all
applicable grace periods, and such Indebtedness shall not be repaid when
due; or"

SUBPART 2.7. Amendment to Section 8.1(f). Section 8.1(f) of the
Credit Agreement is hereby amended by inserting the following phrase immediately
after the word "thereof" in the last sentence of Section 8.1(f):
"or, if longer, within the applicable appeal period (but in no event
for more than 90 days from the entry thereof)".

PART III
CONDITIONS TO EFFECTIVENESS

SUBPART 3.1. Amendment Effective Date. This Amendment shall be
and become effective as of the date hereof (the "Amendment Effective
Date") when all of the conditions set forth below in this Part III
shall have been satisfied.

SUBPART 3.2. Execution of Counterparts of Amendment. The Agent
shall have received counterparts (or other evidence of execution, including
telephonic message, satisfactory to the Agent) of this Amendment, which
collectively shall have been duly executed on behalf of each of the Borrower,
the Agent and the Required Lenders.

SUBPART 3.3. Legal Details, Etc. The Agent, for the benefit of
the Lenders, and its counsel shall have received, and be satisfied with,
any supporting documentation as the Agent may reasonably request.

PART IV

MISCELLANEOUS

SUBPART 4.1. Cross-References. References in this Amendment to
any Part or Subpart are, unless otherwise specified, to such Part or Subpart
of this Amendment.

SUBPART 4.2. Instrument Pursuant to Credit Agreement. This Amendment
is a Credit Document executed pursuant to the Credit Agreement and shall
(unless otherwise expressly indicated therein) be construed, administered
and applied in accordance with the terms and provisions of the Amended
Credit Agreement.

SUBPART 4.3. References in Other Credit Documents. At such time
as this Amendment shall become effective pursuant to the terms of Subpart
3.1, all references in the Credit Documents to the "Credit Agreement"
shall be deemed to refer to the Credit Agreement as amended by this Amendment.

SUBPART 4.4. Representations and Warranties. The Borrower hereby
represents and warrants that:

(a) It has taken all necessary action to authorize the execution,
delivery and performance of this Amendment.
(b) This Amendment has been duly executed and delivered by the Borrower
and constitutes the Borrower's legal, valid and binding obligations, enforceable
in accordance with its terms, except as such enforceability may be subject
to (i) bankruptcy, insolvency, reorganization, fraudulent conveyance or
transfer, moratorium or similar laws affecting creditors' rights generally
and (ii) general principles of equity (regardless of whether such enforceability
is considered in a proceeding at law or in equity).

(c) No consent, approval, authorization or order of, or filing, registration
or qualification with, any court or governmental authority or third party
is required in connection with the execution, delivery or performance by
the Borrower of this Amendment.

(d) The representations and warranties set forth in Section 5 of the
Amended Credit Agreement are, subject to the limitations set forth therein,
true and correct in all material respects as of the Amendment Effective
Date (except for those which expressly relate to an earlier date).

(e) Subsequent to the execution and delivery of this Amendment and after
giving effect hereto, no Default or Event of Default exists under the Amended
Credit Agreement or any of the other Credit Documents.

(f) All of the provisions of the Credit Documents, except as amended
hereby, are in full force and effect.

SUBPART 4.5. No Other Changes. Except as expressly modified and
amended in this Amendment, all the terms, provisions and conditions of
the Credit Documents shall remain unchanged and shall continue in full
force and effect.

SUBPART 4.6. Counterparts/Telecopy. This Amendment may be executed
by the parties hereto in several counterparts, each of which shall be deemed
to be an original and all of which shall constitute together but one and
the same agreement. Delivery of an executed counterpart by telecopy shall
be effective as an original and shall constitute a representation that
an original will be delivered.

SUBPART 4.7. Governing Law. THIS AMENDMENT SHALL BE DEEMED TO
BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE
OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.

SUBPART 4.8. Successors and Assigns. This Amendment shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.

SUBPART 4.9. ENTIRETY. THIS AMENDMENT, THE AMENDED CREDIT AGREEMENT
AND THE OTHER CREDIT DOCUMENTS EMBODY THE ENTIRE AGREEMENT BETWEEN THE
PARTIES AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS, IF ANY,
RELATING TO THE SUBJECT MATTER HEREOF. THESE CREDIT DOCUMENTS REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.

[Signature pages follow]

This Amendment No. 1 to Five-Year Credit Agreement is executed as of
the day and year first written above.

 

BORROWER:

AUTOZONE, INC.

a Nevada corporation

By:  /s/ James A. Cook, III

Name: James Cook

Title: VP & Treasurer

By: /s/ Harry L. Goldsmith

Name: Harry L. Goldsmith

Title:Sr. Vice President, Secretary & General Counsel

 

 

 

 

LENDERS:

FLEET NATIONAL BANK

By: /s/ Thomas J. Bullard

Name: Thomas J. Bullard

Title: Director

 

 

BANK OF AMERICA, N.A.

By:  /s/ Timothy H. Spanos

Name: Timothy H. Spanos

Title:  Managing Director

 

 

THE BANK OF NEW YORK

By: /s/ Howard F. Bascom, Jr.

Name: Howard F. Bascom, Jr.

Title: Vice President

 

 

BANK ONE, NA

By:  /s/ Catherine A. Muszynski

Name: Catherine A. Muszynski

Title: Vice President

 

 

FIFTH THIRD BANK

By:  /s/Megan S. Heisel

Name: Megan S. Heisel

Title: Corporate Banking Officer

 

 

HIBERNIA NATIONAL BANK

By:  /s/ Andrew B. Booth

Name: Andrew B. Booth

Title: Asst Vice President

 

 

THE CHASE MANHATTAN BANK

By:  /s/ Barry K. Bergman

Name:  Barry K. Bergman

Title: Vice President

 

 

KEYBANK NATIONAL ASSOCIATION

By: /s/ Mark A. LoSchiavo

Name: Mark A. LoSchiavo

Title:  AVP

 

 

NATIONAL CITY BANK

By:  /s/ James C. Ritchie

Name: James C. Ritchie

Title:  Assistant Vice President

 

 

SUNTRUST BANK

By: /s/ Bryan W. Ford

Name: Bryan W. Ford

Title:  Vice President

 

 

UNION PLANTERS N.A.

By: /s/ Keith Hart

Name: Keith Hart

Title:  Vice-President

 

WACHOVIA BANK, N.A.

By:  /s/ Anne L. Sayles

Name: Anne L. Sayles

Title: Senior Vice President

 

UNION BANK OF CALIFORNIA, N.A.

By:  /s/ Theresa L. Rocha

Name: Theresa L. Rocha

Title: Vice President

 

FIRST TENNESSEE BANK NATIONAL ASSOCIATION

By:  /s/ James H. Moore, Jr.

Name:  James H. Moore, Jr.

Title: SVP

 

FIRSTAR BANK, N.A.

By:  /s/ Amanda Smith

Name: Amanda Smith

Title:  AVP

 

MERRILL LYNCH BANK USA

By:  /s/ D. Kevin Imlay

Name: D. Kevin Imlay

Title: Senior Lending OfficerExhibit 10.1

EXHIBIT 10.1

EMPLOYMENT AGREEMENT

    AGREEMENT made April 13, 2001 by and between JONES APPAREL
GROUP, INC., a Pennsylvania corporation (the "Company"),
and PETER BONEPARTH (the "Executive").

W I T N E S S E T H:

    WHEREAS, the Executive is a party to the Amended and
Restated Employment Agreement dated June 7, 1999 with Norton McNaughton of
Squire, Inc. (as amended or supplemented to date, the "Prior Employment
Agreement"); and

    WHEREAS, Executive has agreed to continue to serve as the
president and chief executive officer of McNaughton Apparel Group Inc. and its
businesses (or their successors) after acquisition (the "Merger") by
the Company (collectively, "MAG"); and

    WHEREAS, the Company wishes the Executive to continue his
employment with MAG, and the Executive wishes to continue his employment with
MAG on the terms and conditions hereinafter set forth.

    NOW, THEREFORE, it is agreed as follows:

    1.    Employment; Election to Board.
(a) During the term of this Agreement, the Company shall employ the Executive as
the President and Chief Executive Officer of MAG, and as the President and Chief
Executive Officer of the MAG division of the Company, with such responsibilities
and authority for the MAG business as Executive has heretofore had as the
president and chief executive officer of MAG. During Executive's employment,
the Company shall also elect Executive to the board of directors of each of MAG
and MAG's subsidiaries. The Executive shall report directly to the President
of the Company. During the Term of this Agreement, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote all of Executive's business
time and attention to the business affairs of the Company, and to perform such
responsibilities in a professional manner. Notwithstanding the foregoing, during
the Term of this Agreement, it shall not be a violation of this Agreement for
the Executive to (a) serve on civic or charitable boards or committees; (b)
deliver lectures, fulfill speaking engagements or teach at educational
institutions; (c) serve as a non-employee member of a board of directors of a
business entity which is not competitive with the Company and as to which the
Board of Directors of the Company has given its consent; and (d) attend to
personal business, so long as such activities do not interfere with the
performance of the Executive's
responsibilities as a senior executive of the Company in accordance with this

1

Agreement.

    (b) Effective with the Effective Time (as defined in the
Agreement and Plan of Merger dated as of April 13, 2001 (the "Merger
Agreement") among the Company, MN Acquisition Corporation and MAG) (the
"Effective Time"), Executive shall be elected to the Board of
Directors of the Company (the "Board"), to serve in accordance with
the By-Laws of the Company. Commencing with the Effective Time and ending on the
third anniversary of the Effective Time (the "Initial Term") and
provided that Executive then is employed by the Company, the Board (or if it
then exists, the nominating committee of the Board) shall nominate Executive for
election to the Board at each meeting of the stockholders of the Company at
which directors are to be elected and shall recommend to such stockholders that
they vote in favor of Executive's election to the Board.

    2.    Term. The Executive shall be
employed for the period commencing as of the Effective Time and ending on the
third anniversary of the Effective Time (the "Expiration
Date"), as renewed in accordance with
the following sentence (the "Term").
The Executive's employment will
continue, and this Agreement will be automatically extended without limitation,
for successive 12-month periods commencing on the first day immediately
following the anniversary date of the Effective Time and ending on the next such
anniversary date (a "Contract Year"), unless either party to
this Agreement advises the other in writing, no later than the first anniversary
of the Effective Time and no later than each anniversary of the Effective Time
thereafter, that such party does not wish to extend (a "Non-extension
Notice"). If this Agreement shall be
so extended, the "Expiration Date"
shall mean the then applicable extended "Expiration
Date", and the "Term"
shall mean the period commencing at the Effective Time and ending on the then
applicable extended "Expiration Date".

For example, if the Effective Time is July 15, 2001, (i) if by July 15, 2002,
neither party has given a Non-extension Notice to the other, the Term will be
automatically extended through July 15, 2005, and (ii) if the Term is so
extended through July 15, 2005, then if by July 15, 2003, neither party has
given a Non-extension Notice to the other, the Term will be automatically
extended through July 15, 2006.

    3.    Salary, Retirement Plans, Fringe
Benefits and Allowances.

        (a)    Throughout
the Term, the Executive shall receive a salary at the annual rate of not less
than $1,000,000. The Executive's
salary shall be payable at such regular times and intervals as MAG customarily
pays its senior executives from time to time, but no less frequently than once a
month.

        (b)    During the
Term, the Executive shall be eligible to participate in all savings and
retirement plans, practices, policies and programs to the extent applicable
generally to other senior executives of the Company. In addition, during the
Initial Term, the Company will continue to provide to Executive the life and
disability insurance coverage which has been 

2

provided to Executive pursuant to the Prior Employment Agreement.

        (c)    During the
Term, the Executive and/or the Executive's
family, as the case may be, shall be eligible for participation in and shall
receive all benefits under welfare, fringe and other benefit plans, practices,
policies and programs provided by the Company (including, without limitation,
medical, prescription drug, dental, disability, accidental death and travel
accident insurance plans and programs) to the extent applicable generally to
other senior executives of the Company.

        (d)    The
Executive shall be entitled to an aggregate of four (4) weeks paid vacation
during each calendar year of the Term. The Executive shall also be entitled to
the benefits of the Company's policies
relating to sick leave and holidays.

        (e)    The
Executive shall have all expenses reasonably incurred by Executive on behalf of
the Company reimbursed by the Company in accordance with the Company's
standard policies and practices. The Executive shall be entitled to first class
seating for air travel on Company business.

        (f)    The Company
shall make available to the Executive all perquisites that are made available to
senior executives of the Company. In addition, during the Initial Term, the
Company will continue to provide to Executive such use of automobiles and
reimbursement for related expenses as has been provided to Executive pursuant to
the Prior Employment Agreement. Following the Initial Term, Executive shall be
entitled to such automobile usage, allowance and/or expense reimbursement
arrangements as are made available to senior executives of the Company.

    4.    Executive shall participate in the
Company's Executive Annual Incentive
Plan (the "Bonus Plan"),
pursuant to which the Executive will be entitled to receive an annual bonus
payment for each full calendar year of employment which ends prior to the
Expiration Date and throughout which the Executive has been employed by the
Company, and a partial annual bonus payment for the calendar year in which this
Agreement expires, prorated for the portion of such year preceding expiration,
conditioned upon the attainment of annual criteria and objectives established
for participants in the Bonus Plan, provided that in no event shall such annual
bonus be less than $1,000,000. For purposes of determining the annual bonus for
2001, Executive shall be deemed to have been employed by the Company commencing
January 1, 2001.

    5.    Stock Options. (a) As of the
Effective Time, the Stock Option Committee of the Board of Directors of the
Company shall grant to the Executive an option to purchase 300,000 shares of the
Company's common stock ("Common Shares") on the terms and conditions
contained in the form of stock option agreement annexed hereto and consistent
with the provisions of Section 5(b)(iii)-(iv) hereof.

        (b)    Subject to
the absolute authority of the Stock Option Committee of the Board 

3

of Directors of the Company from time to time to grant (or not to grant) to
eligible individuals options to purchase common stock of the Company ("Options"),
it is the intention of the Company and the expectation of the Executive that
while the Executive is employed hereunder, the Executive will receive Options
annually (in addition to those described in Section 5(a) hereof), on the
following terms and conditions (and any Options so granted shall be subject to
the following terms and conditions, which shall govern any conflicts in the
terms hereof with any terms and conditions in any stock option agreement):

            (i)   
Target awards will be in an amount (plus or minus 25%) equal to 150% of
Executive's salary;

           
(ii)    For purposes of determining the number of shares subject
to a given Option grant, the value of such Option shall be determined using the
Black-Scholes valuation method, or another generally recognized valuation method
which is being used uniformly by the Company for its senior executives;

           
(iii)    The exercise price per share of the Options shall be the
fair market value of the common stock on the date of grant, and the Options
shall expire on the tenth anniversary of the date of grant; and

           
(iv)    The Options shall vest ratably on the first three
anniversaries of the date of grant; provided, however, that all Options (and all
other options to purchase Common Shares then held by the Executive) which are
not then vested shall become fully vested and immediately exercisable during the
remaining original term of the option, upon the occurrence of any of the
following events ("Acceleration Events"):
Executive's Retirement, death,
Disability, a Change in Control, and termination of Executive's
employment by the Company without Cause or by the Executive for Good Reason; and

           
(v)    The Options shall be granted on such other terms and
conditions as are generally made applicable to Options granted to the other
senior executives of the Company.

    6.    Termination of Employment.

        (a)    By
the Company for Cause, or by the Executive without Good Reason. The
Company may terminate the Executive's
employment for Cause (as defined herein) before the Expiration Date. If the
Executive's employment is terminated
for Cause, or if Executive resigns during the Term without Good Reason (as
defined below), the Company shall pay to the Executive any unpaid salary through
the date of termination and any bonus earned in the prior year but not yet paid,
as well as reimburse the Executive for any unpaid reimbursable expenses incurred
on behalf of the Company, and thereafter the Company shall have no additional
obligations to the Executive under this Agreement.

        (b)    Death
or Disability; Retirement. (i) If the Executive's
employment 

4

terminates before the Expiration Date because of Executive's
death or Disability (as defined herein), the Company shall pay Executive or
Executive's duly appointed personal
representative, as the case may be, (i) any unpaid salary through the date of
death or the Disability Termination Date (as defined herein) and any bonus
earned in the prior year but not yet paid, as well as reimbursement of any
unpaid reimbursable expenses incurred on behalf of the Company, (ii) an amount
equal to Executive's monthly salary
during each of the six (6) months following Executive's
death or the Disability Termination Date, and (iii) the Target Bonus for the
calendar year in which Executive dies or becomes Disabled, prorated for the
portion of such year preceding Executive's
death or the Disability Termination Date, which shall be paid not later than 120
days after the end of such year. Except as set forth in this Section 6(b), the
Company shall have no additional obligations to the Executive under this
Agreement in the event of Executive's
termination of employment under this Section 6(b).

           
(ii)    In addition to the foregoing and notwithstanding any
other agreement between the Executive and the Company, all options to purchase
the Company's common stock which were
held by the Executive at the time of the Executive's
Retirement, death or the Disability Termination Date, shall become fully
exercisable and shall remain exercisable by the Executive or by the Executive's
estate or her representative, as the case may be, during the remaining original
term of the option in the case of the Executive's
Retirement or Disability, or during the 3-year period following the date of the
Executive's death.

        (c)    By
the Company without Cause, or by the Executive for Good Reason.
(i) The Company may terminate the Executive's
employment before the Expiration Date without Cause, and the Executive may
terminate Executive's employment
before the Expiration Date for Good Reason, upon 30-days written notice to the
other party. If the Executive's
employment is so terminated by the Company without Cause, or by the Executive
for Good Reason, as the case may be, the Company shall pay and provide to the
Executive (i) any unpaid salary through the date of termination and any bonus
earned in the prior year but not yet paid, as well as reimbursement of any
unpaid reimbursable expenses incurred on behalf of the Company, (ii) the Target
Bonus for the calendar year in which termination occurs, prorated for the
portion of such year preceding termination (payable no later than the 30th
day immediately following termination of employment), (iii) during each month of
the Severance Period (as defined below), an amount equal to the sum of (x)
Executive's monthly salary at the rate
in effect immediately preceding termination and (y) one-twelfth of the Executive's
Target Bonus for the calendar year in which termination occurs, (iv) throughout
the Severance Period, continuation of Executive's
participation (including the Company's
contributions thereto) in all benefit plans and practices in which Executive was
participating immediately preceding termination, and (v) reimbursement to the
Executive for up to $10,000 of executive outplacement services. Except as set
forth in this Subsection 6(c), the Company shall not have any additional
obligations to the Executive under this Agreement in the event of Executive's
termination of employment under this Subsection 6(c).

            (ii)   
In addition to the foregoing and notwithstanding any other agreement
between the 

5

 Executive and the Company, all options to purchase the Company's
common stock which were held by the Executive at the time of the termination of
the Executive's employment by the
Company without Cause or by the Executive for Good Reason (whether or not
following a Change of Control), shall become fully exercisable and shall remain
exercisable for the same period following termination as would apply if the
Executive's employment had not
terminated.

        (d)    Change in Control. If, following a "Change
in Control" (as defined herein) and
prior to the Expiration Date, the Company terminates the Executive's
employment without Cause, or the Executive terminates employment hereunder for
Good Reason, the Company shall pay to the Executive, within 20 days following
termination, (i) any unpaid salary through the date of termination and any bonus
earned in the prior year but not yet paid, as well as reimbursement of any
unpaid reimbursable expenses incurred on behalf of the Company, (ii) the Target
Bonus for the calendar year in which termination occurs, prorated for the
portion of such year preceding termination, (iii) a lump-sum payment equal to
(x) 200% of Executive's yearly salary
at the rate in effect immediately preceding termination multiplied by (y) the
Severance Multiple (as defined herein), and (iv) a lump-sum equal to the Company's
cost for health insurance, life insurance and retirement benefits for the
Severance Period.

        (e)    As used herein:

            (i)   
the term "Cause"
shall mean (v) the Executive's
commission of an act of fraud or dishonesty or a crime involving money or other
property of the Company; (w) the Executive's
conviction of a felony or a plea of guilty or nolo contendere to an
indictment for a felony; (x) if, in carrying out Executive's
duties hereunder, the Executive engages in conduct which constitutes willful
misconduct or gross negligence; (y) the Executive's
failure to carry out a lawful order of the Board of Directors of the Company or
its Chief Executive Officer; or (z) a material breach by the Executive of this
Agreement. Any act or failure to act on the part of the Executive which is based
upon authority given pursuant to a resolution duly adopted by the Board of
Directors of the Company or authorized in writing by the Chief Executive Officer
of the Company, or based upon the advice of counsel for the Company, shall not
constitute Cause as used herein. For purposes of this provision only, a breach
shall be "material"
if it is demonstrably injurious to the Company, its affiliates or any of its
respective business units, financially or otherwise.

            Cause shall not exist unless and until the Company (i) has delivered to the
Executive a written Notice of Termination that specifically identifies the
events, actions, or non-actions, as applicable, that the Company believes
constitute Cause hereunder, and, in the case of termination for Cause under
clauses (x), (y) or (z) above, the Executive has been provided with an
opportunity to cure the offending conduct (if curable) within 30 days after
delivery of the written Notice of Termination, and has not so cured such conduct
(if curable), and (ii) the Executive has been provided an opportunity to be
heard (with counsel) by the Board within 30 days after delivery of the notice of
Termination; provided, however, that in the case of termination for Cause under
clauses (x), (y), and (z) above, the date of termination shall be no 

6

 earlier
than 35 days after delivery of the Notice of Termination.

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

                               
                (1)    a material breach of the Company's
                obligations under this Agreement, which breach has not been
                cured within 20 business days after the Company's
                receipt of written notice from the Executive of such breach;

               
(2) a reduction in the Executive's
                then annual base salary;

               
(3) the relocation of the Executive's
office to a location more than 30 miles from Executive's
present office;

               
(4) the failure to pay the Executive any undisputed portion of the Executive's
compensation within 15 business days after the date of receipt of written notice
that such compensation or payment is due;

               
(5) the failure to continue in effect any compensation or benefit plan in
which the Executive is participating, unless either (i) an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been made with
respect to such plan; or (ii) the failure to continue the Executive's
participation therein (or in such substitute or alternative plan) does not
discriminate against the Executive, both with respect to the amount of benefits
provided and the level of the Executive's
participation, relative to other similarly situated participants;

               
(6) a reduction in the Executive's
title and status as President and Chief Executive Officer of MAG, or as
President and Chief Executive Officer of the MAG division of the Company, or any
change in the Executive's status as
reporting directly to the President of the Company (other than a change pursuant
to which the Executive is reporting to either the Chief Executive Officer of the
Company or to the Company's Board of Directors); or the assignment to the
Executive of any duties materially inconsistent with the Executive's
position (including, without limitation, status, office, titles and reporting
requirements), authority, duties or responsibilities as contemplated by Section
1 of this Agreement, or any other action by the Company which results in a
material diminution in such position, authority, duties or responsibilities,
excluding for this purpose any action not taken in bad faith and which is
remedied by the Company no later than thirty (30) days after written notice by
the Executive; or

               
(7) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted in this Agreement.

            (iii)   
the terms "Disabled" or "Disability"
shall mean the Executive's physical or
mental incapacity which renders the Executive incapable, even with a reasonable
accommodation by the Company, of performing the essential functions of the
duties required of Executive by this 

7

 Agreement for one hundred twenty (120) or
more consecutive days; the term "Disability
Termination Date" shall mean the date
as of which the Executive's employment
with the Company is terminated, either by the Executive or by the Company,
following the suffering of a Disability by the Executive.

                       
            (iv)    the term "Severance
            Period" shall mean the
            period commencing with the termination of the Executive's
            employment and ending with the Expiration Date, as renewed in
            accordance with Section 2 hereof.

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

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

            (vii)   
the term "Target Bonus"
shall mean 75% of Executive's annual
salary for any given year during the Term, but not less than $1,000,000.

            (viii)   
the term "Retirement"
shall mean voluntary retirement by the Executive after attaining age 55 with 10
years of service with the Company (including service with MAG prior to the
Effective Time), or, if the Executive has not attained age 55 and/or has less
than 10 years of service with the Company (including service with MAG prior to
the Effective Time), the Company determines that circumstances exist that
warrant the granting of Retirement status.

        (f)    The Executive shall have no obligation to seek other employment or
otherwise mitigate the Company's
obligations to make payments under this Section 6, and the Company's
obligations shall not be reduced by the amount, if any, of other compensation or
income earned or received by the Executive after the effective date of Executive's
termination.

    7.    Effect of Section 280G of the Internal Revenue Code.

        (a)    Notwithstanding any other provision of this Agreement to the contrary,
and except as provided in Section 7(b), to the extent that any payment or
distribution of any type to or for the benefit of the Executive by the Company
(or by any affiliate of the Company, any person or entity who acquires ownership
or effective control of the Company or ownership of a substantial portion of the
Company's assets (within the meaning
of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"),
and the regulations thereunder), or any affiliate of such person or entity,
whether paid or payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise (the "Total
Payments"), is or will be subject to
the excise tax imposed under Section 4999 of the Code (the "Excise
Tax"), then the Total Payments shall
be reduced (but not below zero) if and to the extent that a reduction in the
Total Payments would result in the Executive retaining a larger amount, on an
after-tax basis (taking into account federal, state and local income taxes and
the Excise Tax), than if the Executive received the entire amount of such Total
Payments. Unless the Executive shall have given prior written 

8

 notice specifying
a different order to the Company to effectuate the foregoing, the Company shall
reduce or eliminate the Total Payments, by first reducing or eliminating the
portion of the Total Payments which are not payable in cash and then by reducing
or eliminating cash payments, in each case in reverse order beginning with
payments or benefits which are to be paid the farthest in time from the
Determination (as defined herein). Any notice given by the Executive pursuant to
the preceding sentence shall take precedence over the provisions of any other
plan, arrangement or agreement governing the Executive's
rights and entitlements to any benefits or compensation.

        (b)    The determination of whether the Total Payments shall be reduced as
provided in this Section 7 and the amount of such reduction shall be made at the
Company's expense by an accounting
firm selected by the Company from among its independent auditors and the five
(5) largest accounting firms (an "Eligible
Accounting Firm") in the United States
(the "Accounting Firm").
The Accounting Firm shall provide its determination (the "Determination"),
together with detailed supporting calculations and documentation to the Company
and the Executive within ten (10) days of the last day of Executive's
employment. If the Accounting Firm determines that no Excise Tax is payable by
the Executive with respect to the Total Payments, it shall furnish the Executive
with an opinion reasonably acceptable to the Executive that no Excise Tax will
be imposed with respect to any such payments and, absent manifest error, such
Determination shall be binding, final and conclusive upon the Company and the
Executive. If the Accounting Firm determines that an Excise Tax would be
payable, the Executive shall have the right to accept the Determination of the
Accounting Firm as to the extent of the reduction, if any, pursuant to this
Section 7, or to have such Determination reviewed by another Eligible Accounting
Firm selected by the Executive, at the expense of the Company, in which case the
determination of such second accounting firm shall be binding, final and
conclusive upon the Company and Executive.

    8.    Company Property. Any trade name or mark, program, discovery,
process, design, invention or improvement which the Executive makes or develops,
which relates, directly or indirectly, to the business of the Company or its
affiliates, or Executive's employment
by the Company, shall be considered as "made
for hire" and shall belong to the
Company and shall be promptly disclosed to the Company. During the Executive's
employment and thereafter, the Executive shall, without additional compensation,
execute and deliver to or as requested by the Company, any instruments of
transfer and take such other action as the Company may reasonably request to
carry out the provisions hereof, including filing, at the Company's
sole expense, trademark, patent or copyright applications for any trade name or
mark, invention or writing covered hereby and assigning such applications to the
Company.

    9.    Confidential Information. The Executive shall not, either during
the term of Executive's employment by
the Company or thereafter, disclose to anyone or use (except, in each case, in
the performance of Executive's
responsibilities hereunder and in the regular course of the Company's
business), any information acquired by the Executive in connection with or
during the period of Executive's
employment by the Company or MAG, with respect to any 

9

 confidential, proprietary
or secret aspect of the affairs of the Company or any of its affiliates,
including but not limited to the requirements and terms of dealings with
existing or potential licensors, licensees, designers, suppliers and customers
and methods of doing business, all of which the Executive acknowledges are
confidential and proprietary to the Company, and any of its affiliates, as the
case may be.

    10.    Competition; Recruitment; Non-Disparagement.

        (a)    The Executive shall not, at any time during Executive's
employment by the Company and during the Severance Period (provided that the
Company is making the payments to Executive which may be required hereby during
such Severance Period) (the "Non-Compete
Period") and under the following
circumstances, engage or become interested (as an owner, stockholder, partner,
director, officer, employee, consultant or otherwise) in any business which then
competes, directly or indirectly, with the business then conducted by the
Company or any of its subsidiaries or affiliates. Notwithstanding the provisions
of the previous sentence, if the Executive's employment is terminated by the
Company for Cause prior to the end of the Initial Term, the restrictions imposed
on Executive by such sentence shall remain in effect only for so long as the
Company pays the Executive during each remaining month of the Initial Term, an
amount equal to the sum of (x) Executive's monthly salary at the rate in
effect immediately preceding termination and (y) one-twelfth of the Executive's
Target Bonus for the calendar year in which termination occurs, and provides to
Executive throughout the Initial Term, continuation of Executive's
participation (including the Company's contributions thereto) in all benefit
plans and practices in which Executive was participating immediately preceding
termination. The ownership of less than 5% of the stock of a publicly owned
company which competes with the Company, any of its subsidiaries or affiliates,
in and of itself, shall not be considered a violation of the provisions of this
Section 10.

        (b)    The Executive shall not, at any time during Executive's
employment by the Company and thereafter until the second anniversary of the
expiration of the Non-Compete Period, recruit, solicit for employment, hire or
engage, or assist any person or entity in recruiting, soliciting for employment,
hiring or engaging, any employee or consultant of the Company, any of its
subsidiaries or affiliates, or any person who was an employee or consultant of
the Company, any of its subsidiaries or affiliates within one year before the
termination of the Executive's
employment.

        (c)    For the longer of any period applicable under this Section 10 or a period
of three years immediately following the date of termination, (i) the Company,
and its respective affiliates and employees shall not disparage the Executive,
and (ii) the Executive shall not disparage the Company, or its respective
affiliates and employees.

        (d)    The Executive acknowledges that the provisions in Section 10(b) are
necessary for the protection of the Company, and its subsidiaries and affiliates
and are not unreasonable, because the Executive would be able to recruit and
hire personnel other than employees of the 

10

 Company, and any of their
subsidiaries and affiliates. The Executive further agrees that a breach of
Section 8, 9 or 10 of this Agreement shall result in the immediate cessation of
any payments pursuant to this Section 10 and Section 6 hereof, if applicable.
The duration and the scope of these restrictions on the Executive's
activities are divisible, so that if any provision of this Section 10 is held or
deemed to be invalid, that provision shall be automatically modified to the
extent necessary to make it valid.

    11.    Notices. Any notice or other communication to the Company or to
the Executive under this Agreement shall be in writing and shall be considered
given on the third business day following mailing by certified mail, return
receipt requested, to such party at Executive's
address on file with MAG, with a copy to Charles M. Modlin, Esq., Modlin Haftel
& Nathan LLP, 777 Third Avenue, New York, New York 10017, or to the Company
at 1411 Broadway, New York, New York 10018, Attention: General Counsel (or at
such other address as such party may specify by written notice to the other
party).

    12.    Successors; Binding Agreement.

        (a)    Company's Successors.
No rights or obligations of the Company under this Agreement may be assigned or
transferred by the Company, except that such rights or obligations may be
assigned or transferred pursuant to a merger or consolidation in which the
Company is not the continuing entity, or the sale or liquidation of all or
substantially all of the business or assets of the Company, provided that the
assignee or transferee is the successor to all or substantially all of the
business or assets of the Company and such assignee or transferee assumes all of
the liabilities, obligations and duties of the Company, as contained in this
Agreement, either contractually or as a matter of law. The Company will require
any such successor to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession had taken place. As used in this Agreement, "Company"
shall mean the Company as hereinbefore defined and any successor to its business
or assets as aforesaid, which executes and delivers the agreement provided for
in this Section 12 or which otherwise becomes bound by all the terms and
provisions of this Agreement or by operation of law.

        (b)    Executive's Successors.
This Agreement shall not be assignable by the Executive. This Agreement and all
rights of the Executive hereunder shall inure to the benefit of and be
enforceable by the Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. Upon the Executive's
death, all amounts to which Executive is entitled hereunder, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the Executive's devisee, legatee, or
other designee or, if there be no such designee, to the Executive's
estate.

    13.    Indemnification. The Company shall indemnify Executive and hold
the Executive harmless, to the maximum extent permitted by applicable law, from
and against all claims, actions, suits, proceedings, loss, damage, liability,
costs, charges and expenses, including 

11

 reasonable attorneys'
fees and costs arising in connection with the Executive's
performance of Executive's duties
hereunder or Executive's status as an
employee, officer, director or agent of the Company or its affiliates, in
accordance with the Company's
indemnity policies for its senior executives.

    14.    Interest on Late Payments. "Undisputed
Late Obligations" shall bear interest
beginning on the Due Date until paid in full at an annual rate of one percent
(1.0%) plus the prime rate as declared from time to time by The Chase Manhattan
Bank. For purposes hereof, "Undisputed
Late Obligations" shall mean any
obligation which remains unpaid 5 days after written notice thereof is delivered
to the other party in accordance with Section 11 (the "Due
Date") for money under this Agreement
owing from one party to another, which obligation (i) is not subject to any bona
fide dispute or (ii) has been adjudicated by an arbitration panel or court
of competent jurisdiction to be due and payable.

    15.    Arbitration. Except as otherwise provided herein, all
controversies, claims or disputes arising out of or related to this Agreement
shall be settled under the rules of the American Arbitration Association then in
effect in the State of New York, as the sole and exclusive remedy of either
party, and judgment upon such award rendered by the arbitrator(s) may be entered
in any court of competent jurisdiction.

    16.    Attorneys' Fees. The
Company shall reimburse the Executive (or the Executive shall reimburse the
Company) for all reasonable costs, including without limitation reasonable
attorneys' fees, of the Executive or
the Company, as the case may be, in any dispute, arbitration or proceeding
arising under this Agreement (collectively, a "Proceeding"),
so long as the Executive or the Company, as the case may be, "prevails
in substantial part" with respect to
Executive's or the Company's
claims or defenses in such Proceeding. For purposes hereof, the Executive shall
be deemed to have "prevailed in
substantial part" if (i) the Executive
is the party originally demanding a Proceeding, and the arbitrator(s) shall have
awarded the Executive at least 75% of the amount originally demanded by the
Executive, or (ii) the Company is the party originally demanding a Proceeding,
and the arbitrator(s) shall have denied the Company the relief originally
requested. The Company shall be deemed to have "prevailed
in substantial part" if the Executive
is the party originally demanding a Proceeding and the arbitrator(s) shall have
awarded the Executive less than 25% of the amount originally demanded by the
Executive.

    17.    Restrictions on Disposition of Shares and Exercise of Options. Subject
to the consummation of the Merger, the Company and the Executive each agree that
from and after the Effective Time, Executive will not: (1) sell, exchange,
assign, pledge, encumber, hypothecate, transfer, enter into any hedge (or
similar transaction with the same economic effect as a sale or partial sale) in
respect of or otherwise dispose of (a "Transfer") any shares of the
Company's common stock ("Company Shares") (or interests therein)
underlying the options to acquire Company Shares that Executive receives in the
Merger ("Merger Options") or (2) Transfer any Company Shares (or
interests therein) that Executive receives upon exercise of the Merger Options; provided,
however, that Executive may Transfer (i) at any time following the
six-month 

12

 anniversary of the Effective Time, up to a number of Company Shares
(or interests therein) equal to 25% of the number of Company Shares underlying
the Merger Options at the Effective Time, (ii) at any time following the
one-year anniversary of the Effective Time, up to an additional number of
Company Shares (or interests therein) equal to 25% of the number of Company
Shares underlying the Merger Options at the Effective Time, (iii) at any time
following the two-year anniversary of the Effective Time, up to an additional
number of Company Shares (or interests therein) equal to 25% of the number of
Company Shares underlying the Merger Options at the Effective Time, and (iv) at
any time following the three-year anniversary of the Effective Time, up to an
additional number of Company Shares (or interests therein) equal to the
remaining 25% of the number of Company Shares underlying the Merger Options at
the Effective time; provided, further, however, notwithstanding the above, the
Executive may Transfer any and all of the then remaining Company Shares (or
interests therein) underlying the Merger Options at any time following the
Executive's death, Disability or Retirement, or Change in Control or
termination of Executive's employment either by the Company without Cause or by
the Executive for Good Reason. Any Transfer in violation of the provisions of
this Section 17 will be void. The stock options granted to Executive pursuant to
Section 5(a) hereof shall not be deemed to be Merger Options.

    Except as specifically provided above with respect to restrictions on the
Transfer of Company common stock (or interests therein), or as specifically
provided in the Merger Agreement, the terms and conditions of the MAG stock
options (that are converted into Merger Options in the Merger) will continue to
apply and remain in full force and effect. Executive acknowledges that his
agreement to the terms and conditions of this Section 17 is an inducement to and
a condition of the Company's willingness to enter into the Merger Agreement.

    18.    Miscellaneous.

        (a)    Given that a breach of the provisions of this Agreement would injure the
Company irreparably, the Company may, in addition to its other remedies, obtain
an injunction or other comparable relief restraining any violation of this
Agreement, and no bond, security or other undertaking shall be required of the
Company in connection therewith.

        (b)    The provisions of this Agreement are separable, and if any provision of
this Agreement is invalid or unenforceable, the remaining provisions shall
continue in full force and effect.

        (c)    This Agreement constitutes the entire understanding and agreement between
the parties, and upon the Effective Time supersedes the Prior Employment
Agreement and all other existing agreements between MAG and Executive and
between the parties, and cannot be amended, unless such amendment is in writing
and signed by both parties to this Agreement.

        (d)    This Agreement shall be governed by and construed in accordance with the
laws of the State of New York (other than its choice of laws rules), where it
has been entered and 

13

 where it is to be performed. The parties hereto consent to
the exclusive jurisdiction of any federal or state court in the State of New
York to resolve any dispute arising under this Agreement or otherwise.

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

        (f)    The failure of either party to insist on strict adherence to any term of
this Agreement on any occasion shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to that term or
any other term of this Agreement. For any waiver of a provision of this
Agreement to be effective, it must be in writing and signed by the party against
whom the waiver is claimed.

        (g)    The obligations of the Executive and the Company hereunder shall survive
the termination of the term of this Agreement and the Executive's
employment hereunder, to the extent necessary to give full effect to the
provisions of this Agreement.

14

    IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed as of the date first above written.

  
  		
JONES APPAREL GROUP, INC.

By: /s/ Wesley R. Card

     Chief Financial Officer

        /s/ Peter Boneparth

             Executive

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