Document:

<PAGE>

                                                                    Exhibit 10.1
                             JERI-JO KNITWEAR, INC.
                        (formerly JJ Acquisition Corp.)
                         McNAUGHTON APPAREL GROUP INC.
                       (formerly Norton McNaughton, Inc.)
                               463 Seventh Avenue
                              New York, NY 10018

                                              September 28, 2000
Susan Schneider
Leslie Schneider
Scott Schneider
c/o Currants
1407 Broadway
Suite 2909
New York, NY 10018

     Re:  Agreement of Purchase and Sale dated as of April 15,
          1998, as amended (the "Agreement"), by and among JJ
          Acquisition Corp. (now Jeri-Jo Knitwear, Inc.), Norton
          McNaughton, Inc. (now McNaughton Apparel Group Inc.),
          Jeri-Jo Knitwear Inc., Jamie Scott, and the
          Stockholders of Jamie Scott, Inc.
          ------------------------------------------------------

Ladies and Gentlemen:

          Reference is made to the Agreement.  Capitalized terms used and not
defined below shall have the meanings assigned to such terms in the Agreement.
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto hereby amend the Agreement as set forth
below.

          1.   Section 2.02(d)(A)(ii) of the Agreement is hereby deleted in its
entirety and amended to read as follows:

          "(ii) as a condition to the Purchaser's and Norton's obligations
     under subclause (A)(iii) below in respect of the Third Initial Payment,
     simultaneously with the delivery of the Third Initial Payment, the
     Stockholder Representative shall deliver the Earn Out Letter of Credit to
     Norton for cancellation."

          2.   Section 2.02(d)(A)(iii) of the Agreement is amended to read in
its entirety as follows:

          "(iii) (1) at or before 3:00 p.m. on October 2, 2000 (time being of
     the essence), the Purchaser and Norton shall pay $10,000,000 (the "Second
     Initial Payment"), together with interest on $30,000,000 (that is, in
     respect of both the Second Initial Payment and the Third Initial Payment)
     at a rate per annum equal to 8.25% computed for the actual number of days
     elapsed during the period from and including August 29, 2000 to but
     excluding October 2, 2000 and on the basis of a 360-day year and (2) at or
     before 3:00 p.m. on the date (the "Date") which is the earlier to occur of
     (a) January 15, 2001 and (b) the closing of Norton's proposed amended and
     restated $225 million senior secured credit facility (the "New Credit
     Facility") (time being of the essence), the Purchaser and Norton shall pay
     $20,000,000 (the "Third Initial
<PAGE>

                                       2

     Payment"; the Third Initial Payment, together with the First Initial
     Payment and the Second Initial Payment, collectively, the "Initial
     Payment"), together with interest, from and after October 2, 2000, on the
     Third Initial Payment as set forth in the next sentence of this Section
     2.02(d)(A)(iii), in each case, to the Designees by wire transfer of
     immediately available funds to a bank account(s) designated by the
     Designees. The Purchaser and Norton shall pay interest on the outstanding
     amount of the Third Initial Payment, from and after October 2, 2000 and
     until paid in full, at a rate per annum equal to 8.25%, on the first
     Business Day of each month (commencing with November 1, 2000) and on the
     date on which the Third Initial Payment is paid in full, in each case,
     computed for the actual number of days elapsed during the period from and
     including the last date on which interest has been paid in respect of the
     Third Initial Payment to but excluding the date on which interest is so
     paid and on the basis of a 360-day year, in each case, to the Designees by
     wire transfer of immediately available funds to a bank account(s)
     designated by the Designees."

          3.   Section 2.02(d) of the Agreement is amended to add thereto
subclause (A)(iv) as follows:

          "(iv) as a condition to the Purchaser's and Norton's
     obligations under clause (A)(iii) above in respect of the Second
     Initial Payment, simultaneously with the delivery of the Second
     Initial Payment the Stockholder Representative shall deliver the
     Earn Out Letter of Credit to Norton for the purpose of attaching
     thereto and making a part thereof an amendment in the form of
     Exhibit A to the Amendment to the Agreement dated September 28,
     2000 (1) reducing the face amount of the Earn Out Letter of
     Credit from $30,000,000 to $20,000,000 and (2) extending the
     expiry date thereunder to February 28, 2001, whereupon Norton
     shall simultaneously return the Earn Out Letter of Credit (as so
     amended) to the Stockholder Representative. Notwithstanding
     anything to the contrary contained in the Agreement, for all
     purposes of the Agreement, from and after the satisfaction of the
     terms of this subclause (A)(iv), the "Earn Out Letter of Credit"
     shall mean the Earn Out Letter of Credit as previously defined in
     the Agreement and as amended by such Exhibit A."

          4.   The references to "(as amended by the August Agreement and
hereby)" set forth in paragraph 5 of the Amendment to the Agreement dated as of
August 29, 2000 are hereby deleted and replaced with references to "(as amended
by the August Agreement, hereby and the Amendment to the Agreement dated
September 28, 2000)".

          5.   The parties hereto understand and agree that attached hereto as
Exhibit B is an unsigned preliminary Summary of Terms and Conditions with
respect to the New Credit Facility referred to in this amendment. It is further
agreed by Norton that it shall give written notice to the Designees of any
closing of the New Credit Facility, which notice shall be given promptly prior
to such closing.

          6.   Except as amended by this amendment, the Agreement is hereby
ratified and confirmed in all respects.  Nothing in this amendment shall confer
or deemed to confer any right, remedy, benefit or entitlement to any third party
(other than the Designees).  This amendment shall be construed pursuant to and
in accordance with the laws of the State of New York, without regard to conflict
of law principles, and may be executed in counterparts, including by telecopy,
each of which shall be deemed an original, and all of which taken together shall
constitute one and the same amendment.

                                   *   *   *
<PAGE>

                                       3

                                    Very truly yours,

                                    JERI-JO KNITWEAR, INC.
                                    MCNAUGHTON APPAREL GROUP INC.

                                    By:   /s/ Amanda J. Bokman
                                        ---------------------------
                                          Name: Amanda J. Bokman

Agreed as of the date first
above written:

   /s/ Susan Schneider
-------------------------------
   Susan Schneider

   /s/ Leslie Schneider
-------------------------------
   Leslie Schneider

   /s/ Scott Schneider
-------------------------------
   Scott Schneider
<PAGE>

                                                                       Exhibit A

September 28, 2000

AMENDMENT TO IRREVOCABLE STANDBY CREDIT NUMBER: 933394

AMENDMENT NO. 4

     Beneficiary                                         Applicant
Susan Schneider, as the Stockholder               Norton McNaughton of Squire,
Representative                                    Inc.
80 Carter Drive                                   463 Seventh Avenue
Edison, NJ 08817                                  New York, NY 10018

This amendment is to be considered an integral part of the above credit and must
be attached thereto.

The above mentioned credit is amended as follows:

The amount of this credit has been decreased by USD 10,000,000.00
The aggregate amount of the credit is now USD 20,000,000.00

The expiration date is amended to:  February 28, 2001.

All other terms and conditions remain unchanged.

This amendment will become effective upon our receipt of the beneficiary's
written advice of consent purportedly signed by an authorized signor of the
beneficiary, sent to us attention of Rosalina Aguba.  If the beneficiary
chooses, they may sign and return the attached copy indicating their consent or
rejection.

If you require any assistance or have any questions regarding this amendment,
please call 213-345-6605.

____________________________            ____________________________
Authorized Signature                    Authorized Signature

--------------------------------------------------------------------------------
   X   Amendment Accepted      _____ Amendment Refused
 -----
Date October 2, 2000
     --------------------
Signature________________

                      This document consists of 1 page(s)
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                                                                       Exhibit B

                        SUMMARY OF TERMS AND CONDITIONS
                         MCNAUGHTON APPAREL GROUP INC.
                  $225,000,000 SENIOR SECURED CREDIT FACILITY

BORROWER:  McNaughton Apparel Group, Inc., a Delaware corporation (the
"Parent") and those subsidiaries determined by the Lenders (collectively, the
"Borrowers").

GUARANTORS:   The Senior Credit Facility (defined below) shall be guaranteed by
all existing and future direct and indirect domestic subsidiaries of the Parent,
that are not Borrowers, upon consummation of the Transaction.  In addition
Borrowers will cross guarantee the obligations of other Borrowers.  All
guarantees shall be guarantees of payment and not of collection.

ADMINISTRATIVE AGENT:   The CIT Group/Commercial Services, Inc. (the
"Administrative Agent" or "CIT") will act as sole and exclusive administrative
agent.  Together with the Syndication Agent and Documentation Agent,
collectively, the "Agents".

SYNDICATION AGENT:    Banc of America Commercial Corporation (the "Syndication
Agent", "Collateral Agent" or "Bank of America") will act as sole and exclusive
syndication agent and collateral agent.

DOCUMENTATION AGENT:  Fleet Capital Corporation (the "Documentation Agent" or
"Fleet") will act as sole and exclusive documentation agent.

LEAD ARRANGER:  Banc of America Securities LLC ("BAS").

JOINT BOOK MANAGERS:   Banc of America Securities LLC ("BAS") and Fleet
Securities, Inc. ("FSI").

LENDERS:  A syndicate of financial institutions (including CIT, Bank of America
and Fleet) arranged by BAS and FSI, which institutions shall be acceptable to
the Borrower and the Agents (collectively, the "Lenders").

SENIOR CREDIT FACILITY:  An aggregate principal amount of up to $225 million
will be available upon the terms and conditions hereinafter set forth:

Revolving Credit Facility:  $225 million revolving credit facility (the
--------------------------
"Revolving Credit Facility"), which will include a $130 million sublimit for the
issuance of standby and commercial letters of credit (each a "Letter of
Credit:"), a $110 million sublimit for cash borrowings and a $30 million
sublimit for overadvances (the "Overadvance Amount").  Letters of Credit will be
issued by Bank of America,N.A. (in such capacity, the "Letter of Credit Issuing
Lender"), and each Lender will purchase an irrevocable and unconditional
participation in each Letter of Credit.  Aggregate outstandings under the
Revolving Credit Facilities including Letters of Credit shall not exceed $225
million.

PURPOSE:   The proceeds of the Senior Credit Facility shall be used: (i) for
working capital, capital expenditures, and other lawful corporate purposes; (ii)
to finance the earn-out payment pertaining to the acquisition of Jeri-Jo
Knitwear, Inc.; and (iii) to refinance the existing credit facility.

CLOSING:   The execution of definitive loan documentation, to occur on or before
           November 15, 2000.

INTEREST RATES:   As set forth in Addendum I.

MATURITY:  The Revolving Credit Facility shall terminate and all amounts
outstanding thereunder shall be due and payable in full  three years from
Closing.

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AVAILABILITY/SCHEDULED AMORTIZATION:   Revolving Credit Facility: Loans under
                                       --------------------------
the Revolving Credit Facility ("Revolving Credit Loans") may be made, and
Letters of Credit may be issued, on a revolving basis in each case subject to
availability up to the lessor of (A) $225 million or (B) the difference between:
(1) the sum of (i) 85% of eligible receivables of the Borrower and its
subsidiaries plus (ii) 60% of eligible inventory of the Borrower and its
subsidiaries plus (iii) the Overadvance Amount less (2) reserves, as
appropriate; provided, however, that the percentages set forth above are subject
to modification based upon the results of a field examination to be conducted on
behalf of the Agents.

SECURITY:  The Administrative Agent (on behalf of the Lenders) shall receive a
first priority perfected security interest in all of the capital stock of the
Borrower and each of the domestic subsidiaries (direct or indirect) of the
Borrower and 65% of the capital stock of each foreign subsidiary (direct or
indirect) of the Borrower, which capital stock shall not be subject to any other
lien or encumbrance.  The guarantees shall be secured by a first priority
perfected security interest in all other present and future assets and
properties of the Borrower and its subsidiaries (including, without limitation,
accounts receivable, inventory, real property, machinery, equipment, contracts,
trademarks, copyrights, patents, license rights and general intangibles).

MANDATORY PREPAYMENTS AND COMMITMENT REDUCTIONS:    As long as an Overadvance
Amount is outstanding, the Senior Credit Facility will be prepaid by an amount
equal to (i) 100% of the net cash proceeds of all asset sales by the Borrower or
any subsidiary of the Borrower (including sales of stock of subsidiaries),
subject to de minimus baskets and reinvestment provisions to be agreed upon and
net of selling expenses and taxes to the extent such taxes are paid; (ii) 75%
(if the Funded Debt to EBITDA Ratio (to be defined in the loan documentation) is
equal to or greater than 3.0: 1) or 50% (if the Funded Debt to EBITDA Ratio is
less than 3.0: 1) of Excess Cash Flow (to be defined in the loan documentation)
pursuant to an annual cash sweep arrangement; (iii) 100% of the net cash
proceeds from the issuance of any debt (excluding certain permitted debt to be
agreed) by the Borrower or any of its subsidiaries; and (iv) 100% of the net
cash proceeds from the issuance of equity by the Borrower or any of its
subsidiaries.

In addition to the foregoing, the outstanding Overadvance Amount will be reduced
in accordance with the following schedule:

          Date                     Reduction Amount
          ----                     ----------------
          November 4, 2000              TBD
          January 31, 2001              TBD
          February 28, 2001             TBD
          March 31, 2001                TBD
          April 30, 2001                TBD
          May 31, 2001                  TBD

OPTIONAL PREPAYMENTS AND COMMITMENT REDUCTIONS:  The Borrower may prepay the
Senior Credit Facility in whole or in part at any time without penalty, subject
to reimbursement of the Lenders' breakage and redeployment costs in the case of
prepayment of LIBOR borrowings. The unutilized portion of any commitment under
the Senior Credit Facility in excess of the stated amount of all Letters of
Credit may be irrevocably canceled by the Borrower in whole or in part.

CONDITIONS PRECEDENT TO CLOSING:   The Closing (and the initial funding) of the
Senior Credit Facility will be subject to satisfaction of the conditions
precedent deemed appropriate by the Administrative Agent and the Lenders
including, but not limited to, the following:

     (i)   The negotiation, execution and delivery of definitive documentation
           for the Senior Credit Facility satisfactory to BAS, FSI, the
           Administrative Agent and the Lenders, which shall include, without
           being limited to (a) satisfactory opinions of counsel to the Borrower
           and each Guarantor and such other customary closing documents as the
           Administrative Agent shall reasonably request and (b)

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                                                   McNaughton Apparel Group Inc.
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           satisfactory evidence that the Administrative Agent (on behalf of the
           Lenders) holds a perfected, first priority lien in all of the
           collateral for the Senior Credit Facility, subject to no other liens
           except for permitted liens to be determined.

     (ii)  Receipt and satisfactory review by the Administrative Agent of the
           consolidated financial statements of the Borrower and its
           subsidiaries for the fiscal years ended October 31, 1998, November 6,
           1999 and October [ ], 2000including balance sheets, income and cash
           flow statements audited by independent public accountants of
           recognized national standing and prepared in conformity with GAAP,
           unaudited consolidated financial statements for the most recently
           published fiscal quarter, and such other financial information as the
           Administrative Agent may request.

     (iii) There shall not have occurred a material adverse change since July
           31, 2000 in the business, assets, liabilities (actual or contingent),
           operations, condition (financial or otherwise) or prospects of the
           Borrower and its subsidiaries taken as a whole or in the facts and
           information regarding such entities as represented to date.

     (iv)  The absence of any action, suit, investigation or proceeding pending
           or threatened in any court or before any arbitrator or governmental
           authority that purports (a) to materially and adversely affect the
           Borrower or its subsidiaries, or (b) to affect any transaction
           contemplated hereby or the ability of the Borrower and its
           subsidiaries or any other obligor under the guarantees or security
           documents to perform their respective obligations under the
           documentation for the Senior Credit Facility.

     (v)   Receipt and review, with results satisfactory to the Administrative
           Agent and its counsel, of information regarding litigation, tax,
           accounting, labor, insurance, pension liabilities (actual or
           contingent), real estate leases, material contracts, debt agreements,
           property ownership, environmental matters, contingent liabilities and
           management of the Borrower and its subsidiaries, which information
           shall include asset appraisal reports with respect to all of the real
           and personal property owned by the Borrower and its subsidiaries.

     (vi)  At Closing, the Borrower shall have not less than $[ ] million of
           availability under the Revolving Credit Facility and, (b) the
           Borrower shall have received a minimum of $30 million of additional
           capital in form and structure satisfactory to the Agents.

     (vii) The continuance of the existing Accounts Receivable Factoring
           Facility beyond the maturity date of the Senior Credit Facility.

CONDITIONS PRECEDENT TO ALL LOANS:    Usual and customary for transactions of
this type, to include without limitation:  (i) all representations and
warranties are true and correct as of the date of each loan, and (ii) no event
of default under the Senior Credit Facility or incipient default has occurred
and is continuing, or would result from such loan.

REPRESENTATIONS AND WARRANTIES:    Usual and customary for transactions of this
type, to include without limitation: (i) corporate existence and status; (ii)
corporate power and authority/enforceability; (iii) no violation of law or
contracts or organizational documents; (iv) no material litigation; (v)
correctness of specified financial statements and no material adverse change;
(vi) no required governmental or third party approvals; (vii) use of
proceeds/compliance with margin regulations; (viii) status under Investment
Company Act; (ix) ERISA matters; (x) environmental matters; (xi) payment of
taxes; (xii) accuracy of disclosure; and (xiii) perfected liens and security
interests.

COVENANTS:  Usual and customary for transactions of this type, to include
without limitation: (i) delivery of financial statements and other reports; (ii)
delivery of compliance and borrowing base certificates; (iii) delivery of

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notices of default, material litigation and material governmental and
environmental proceedings; (iv) compliance with laws (including environmental
laws and ERISA matters) and material contractual obligations; (v) payment of
taxes; (vi) maintenance of insurance; (vii) limitation on liens; (viii)
limitation on mergers, consolidations and sales of assets; (ix) limitation on
incurrence of debt; (x) limitation on dividends, stock redemptions and the
redemption and/or prepayment of other debt; (xi) limitation on investments
(including loans and advances) and acquisitions; (xii) limitation on capital
expenditures; and (xiii) limitation on transactions with affiliates.

Financial covenants to include (but not be limited to):

     1.   Maintenance at all times of Consolidated Working Capital at the end of
          each Fiscal Quarter of an amount not less than:

               Fiscal Quarter Ended               Amount
               --------------------               ------
               November 4, 2000                   $400,000
               January 2001                       $3.7 million
               April 2001                         $16.0 million
               July 2001                          $25.0 million
               October 2001                       $36.0 million
               January 2002                       $40.0 million
               April 2002                         $54.0 million
               July 2002                          $63.0 million
               October 2002                       $75.0 million
               January 2003                       $78.0 million
               April 2003                         $93.0 million
               July 2003                          $106.0 million
               October 2003                       $122.0 million

     2.   Maintenance at all times of a Minimum Consolidated Net Worth, at the
          end of each Fiscal Quarter of an amount not less than:

               Fiscal Quarter Ended               Amount
               --------------------               ------
               November 4, 2000                   93.0 million
               January 2001                       4.0 million
               April 2001                         103.0 million
               July 2001                          108 million
               October 2001                       16 million
               January 2002                       18 million
               April 2002                         $129 million
               July 2002                          $137 million
               October 2002                       $147 million
               January 2003                       $149 million
               April 2003                         $163 million
               July 2003                          $173 million
               October 2003                       $185 million

     3.   Maintenance, on a rolling four quarter basis, of a Minimum Interest
          Coverage (calculated as the ratio of Consolidated EBIT to Consolidated
          Net Interest Expense) at the end of each Fiscal Quarter of an amount
          not less than:

               Fiscal Quarter Ended               Amount
               --------------------               -----------------
               November 4, 2000                   3.11
               January 2001                       2.73
               April 2001                         2.53

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               July 2001                          2.35
               October 2001                       2.41
               January 2002                       2.49
               April 2002                         2.65
               July 2002                          2.81
               October 2002                       3.00
               January 2003                       3.19
               April 2003                         3.47
               July 2003                          3.78
               October 2003                       4.15

     4.   Maintenance, on a rolling four quarter basis, of a Minimum Fixed
          Charge Ratio (calculated as Consolidated EBITDA to Consolidated Fixed
          Charges) at the end of each Fiscal Quarter of an amount not less than:

               Fiscal Quarter Ended               Amount
               --------------------               -------
               November 4, 2000                   1.56
               January 2001                       1.38
               April 2001                         1.47
               July 2001                          1.46
               October 2001                       1.54
               January 2002                       1.69
               April 2002                         1.63
               July 2002                          1.67
               October 2002                       2.53
               January 2003                       2.58
               April 2003                         2.62
               July 2003                          2.66
               October 2003                       3.14

     5.   Maintenance, on a rolling four quarter basis, of a Maximum Leverage
          Ratio (calculated as the ratio of Funded Debt to Consolidated EBITDA)
          at the end of each Fiscal Quarter of an amount not greater than:

               Fiscal Quarter Ended               Amount
               --------------------               -------
               November 4, 2000                   3.42
               January 2001                       3.62
               April 2001                         3.48
               July 2001                          3.51
               October 2001                       2.95
               January 2002                       2.72
               April 2002                         2.69
               July 2002                          2.78
               October 2002                       2.31
               January 2003                       2.02
               April 2003                         2.00
               July 2003                          2.00
               October 2003                       2.00

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     6.   Capital Expenditures for any Fiscal Year may not exceed:

               Fiscal Year Ended                  Amount
               -----------------                  ------
               November 2000                      $8,000,000
               October 2001 and every fiscal year
                 thereafter                       $5,000,000

EVENTS OF DEFAULT:   Usual and customary in transactions of this type, to
include without limitation: (i) nonpayment of principal, interest, fees or other
amounts, (ii) violation of covenants (with cure periods as applicable), (iii)
inaccuracy of representations and warranties, (iv) cross-default to other
material agreements and indebtedness, (v) bankruptcy and other insolvency
events, (vi) material judgments, (vii) ERISA matters, (viii) actual or asserted
invalidity of any loan documentation or security interests, (ix) change of
control and (x) termination of the Accounts Receivable Factoring Facility prior
to the maturity of the Senior Credit Facility.

ASSIGNMENTS AND PARTICIPATIONS:   Each Lender will be permitted to make
assignments in acceptable minimum amounts to other financial institutions
approved by the Borrower (so long as no event of default under the Senior Credit
Facility or incipient default has occurred and is continuing) and the Agents,
which approval of Borrower shall not be unreasonably withheld.  Lenders will be
permitted to sell participations with voting rights limited to significant
matters such as changes in amount, rate and maturity date and releases of all or
substantially all of the collateral and the Guarantors.  An assignment fee of
$3,500 shall be payable to the Administrative Agent upon the effectiveness of
any such assignment (including, but not limited to, an assignment by a Lender to
another Lender).

WAIVERS AND AMENDMENTS: Amendments and waivers of the provisions of the loan
agreement and other definitive credit documentation will require the approval of
Lenders holding loans and commitments representing more than [50%] of the
aggregate amount of loans and commitments under the Senior Credit Facility,
except that the consent of all of the Lenders affected thereby shall be required
with respect to (a) increases in the commitment of such Lenders, (b) reductions
of principal, interest or fees, (c) extensions of scheduled maturities or times
for payment, and (d) releases of all or substantially all of the collateral and
the Guarantors.

INDEMNIFICATION:   The Borrower shall indemnify the Agents, BAS, FSI and the
Lenders and their respective affiliates from and against all losses,
liabilities, claims, damages or expenses arising out of or relating to the
Senior Credit Facility, the Borrower's use of loan proceeds or the commitments,
including, but not limited to, reasonable attorneys' fees (including the
allocated cost of internal counsel) and settlement costs.  This indemnification
shall survive and continue for the benefit of the indemnitees at all times after
the Borrower's acceptance of the Lenders' commitments for the Senior Credit
Facility, notwithstanding any failure of the Senior Credit Facility to close.

GOVERNING LAW:   State of New York.

PRICING/FEES/EXPENSES:   As set forth in Addendum I.

OTHER:   This Summary of Terms is intended as an outline of certain of the
material terms of the Senior Credit Facility and does not purport to summarize
all of the conditions, covenants, representations, warranties and other
provisions which would be contained in definitive legal documentation for the
Senior Credit Facility contemplated hereby.  The Borrower and the Guarantors
shall each waive its right to a trial by jury.

ADDENDUM I PRICING, FEES AND EXPENSES

UNUSED LINE FEE:  The Borrower will pay a fee (the "Unused Line Fee"),
determined in accordance with the Performance Pricing grid set forth below, on
the unused portion of each Lender's share of the Senior Credit Facility.  The
Unused Line Fee is payable monthly in arrears commencing upon Closing.

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INTEREST RATES:  The Revolving Credit Facility shall bear interest at a rate
equal to LIBOR plus the Applicable Margin or the Alternate Base Rate (to be
defined as the higher of (i) the Bank of America prime rate and (ii) the Federal
Funds rate plus .50%) plus the Applicable Margin.  The Applicable Margin in each
case shall be determined in accordance with the Performance Pricing grid set
forth below.

     The Borrower may select interest periods of 1, 2, 3 or 6 months for LIBOR
loans, subject to availability. Interest shall be payable at the end of the
selected interest period, but no less frequently than quarterly.

     A default rate shall apply on all loans in the event of default under the
Senior Credit Facility at a rate per annum of 2% above the applicable interest
rate.

EARLY TERMINATION FEE:   In the event that the Revolving Credit Facility is
terminated prior to its scheduled expiration date, Borrower would pay the Agents
for the pro rata benefit for the Lenders an early termination fee, in the
amounts set forth below, in order to compensate Lenders for their reliance
expenses and their loss of anticipated profits. If the effective date of
termination occurs in the first year of the term, then the early termination fee
would be one and one-half percent (1.50%) of the average loans and letters of
credit outstanding under the Revolving Credit Facility during the 180 days
preceding the effective date of termination; in the second year, the early
termination fee would be one percent (1.0%), and in the third year, the early
termination fee would be waived.

PERFORMANCE PRICING:   The Unused Line Fee and Applicable Margin for any fiscal
quarter, shall be the applicable rate per annum set forth in the table below
opposite the ratio of Funded Debt to EBITDA determined as of the last day of the
immediately preceding fiscal quarter.

<TABLE>
<CAPTION>

                                     Applicable Margin    Applicable Margin        Letters of Credit
                                     for LIBOR Loans      for Alternate Base
                                                          Rate Loans
                                    -----------------------------------------
                                     Revolver            Revolver             Documentary     Standby
Funded Debt to        Unused Line
EBITDA Ratio          Fee
---------------------------------------------------------------------------------------------------------
<S>                   <C>            <C>                 <C>                  <C>             <C>
Overadvance period    50 bps         300 bps             175 bps              150 bps         150 bps

Greater than or       50 bps         250 bps             125 bps              150 bps         150 bps
equal to 3.00:1

Less than or equal    50 bps         225 bps             100 bps              125 bps         150 bps
to 3.00:1 but
greater than 2.50:1

Less than or equal    37.5 bps       200 bps             75 bps               100 bps         150 bps
to 2.50:1 but
greater than 2.00:1

Less than 2.00:1      37.5 bps       175 bps             50 bps               75 bps          150 bps
---------------------------------------------------------------------------------------------------------
</TABLE>

CALCULATION OF INTEREST AND FEES:   All calculations of interest and fees shall
be made on the basis of actual number of days elapsed in a 360 day year.

COST AND YIELD PROTECTION:  Customary for transactions and facilities of this
type, including, without limitation, in respect of breakage or redeployment
costs incurred in connection with prepayments, changes in capital

--------------------------------------------------------------------------------
Bank of America.
                [LOGO]

                                    Page 7
<PAGE>

Confidential-DRAFT
            ------
                                                   McNaughton Apparel Group Inc.
--------------------------------------------------------------------------------

adequacy and capital requirements or their interpretation, illegality,
unavailability, reserves without proration or offset and payments free and clear
of withholding or other taxes.

LETTER OF CREDIT FEES:   Letter of credit fees are due monthly in arrears to be
shared proportionately by the Lenders. Fees will be calculated on the aggregate
stated amount for each Letter of Credit for the stated duration thereof.

EXPENSES:   The Borrower will pay all reasonable costs and expenses associated
with the preparation, due diligence, administration, syndication and enforcement
of all documentation executed in connection with the Senior Credit Facility,
including, without limitation, the legal fees of counsel to the Administrative
Agent and BAS (including the allocated cost of internal counsel), regardless of
whether or not the Senior Credit Facility is closed.  The Borrower will also pay
the expenses of each Lender in connection with the enforcement of any loan
documentation for the Facility.

--------------------------------------------------------------------------------
Bank of America.
                [LOGO]

                                    Page 8<PAGE>

                                                                     Exhibit 4.1
                                                                     -----------

                          MATERIAL SCIENCES CORPORATION

               AMENDED AND RESTATED 1992 OMNIBUS STOCK AWARDS PLAN

                                FOR KEY EMPLOYEES

         1. Purpose. The purpose of this Amended and Restated 1992 Omnibus Stock
Awards Plan for Key Employees (this "Plan") is to provide incentives to
management and other key employees of Material Sciences Corporation (the
"Company") and its subsidiaries (as determined by the committee) through rewards
based upon the ownership and performance of the common stock of the Company,
$.02 par value per share ("common stock").

         2. Limitations on Shares To Be Issued. The number of shares of common
stock with respect to which awards may be granted under this Plan and which may
be issued upon the exercise or payment thereof shall not exceed, in the
aggregate, 3,262,500 shares, provided, however, that to the extent any awards
hereunder expire unexercised or unpaid or are canceled, terminated or forfeited
in any manner without the issuance of shares of common stock thereunder, such
shares shall again be available under this Plan. Shares of common stock issued
under this Plan may be authorized and unissued shares of common stock, treasury
stock, or a combination thereof, as the Compensation Committee (the
"Compensation Committee") of the Board of Directors of the Company (the "Board")
shall determine.

         3. Awards. The Compensation Committee may grant to those persons who it
deems to be key employees of the Company or any subsidiary of the Company
(collectively, the "participants"), in accordance with this Section and the
other provisions of this Plan, stock options, stock appreciation rights
("SARs"), restricted stock and other awards. For the purposes hereof, joint
ventures in which the Company owns an equity interest shall be considered a
subsidiary of the Company.

            (a)     Options.

                    (i)  Options granted under this Plan may be either incentive
stock options ("ISOs") which qualify under Section 422 of the Internal Revenue
Code of 1986, as amended, or options which do not qualify under such Section
("non-qualified options"), or in such other form, consistent with this Plan, as
the Compensation Committee may determine. Each option granted under this Plan
shall be evidenced by a written agreement between the Company and the optionee,
and such written agreement shall specify whether such option is intended to be
an ISO or a non-qualified option. Each option shall be exercisable immediately
in full or shall become exercisable in installments (based on the passage of
time, achievement of performance targets or both as determined by the
Compensation Committee) over the option period in such percentages of the total
number of shares covered by the option as shall be determined by the
Compensation Committee and stated in the agreement evidencing such option.

                    (ii) The per share option price shall be a price determined
by the Compensation Committee and specified in the option agreement, provided
that the per share option price with respect to any options granted under this
Plan (including, without limitation,
<PAGE>

any ISO's) shall not be less than 100% of the fair market value (determined in
accordance with procedures established by the Compensation Committee, the "fair
market value") of a share of common stock on the date the option is granted.

                    (iii) Options shall be exercised in whole or in part by
written notice to the Company (to the attention of the Secretary of the Company)
and payment in full of the option price. Payment of the option price may be
made, at the discretion of the optionee, and to the extent permitted by the
Compensation Committee, (A) in cash (including check, bank draft, or money
order), (B) in common stock (valued at the fair market value thereof on the date
of exercise), (C) by a combination of cash and common stock or (D) with any
other consideration.

                    (iv)  Without in any way limiting the authority of the
Compensation Committee to make or not to make grants of options hereunder, the
Compensation Committee shall have the authority (but not an obligation) to
include as part of any option agreement a provision entitling the participant to
a further option (a "Re-Load Option") in the event the participant exercises the
option evidenced by the option agreement, in whole or in part, by surrendering
other shares of common stock in accordance with this Plan and the terms and
conditions of the option agreement. Any such Re-Load Option shall (A) provide
for a number of shares equal to the sum of (y) the number of shares surrendered
as part or all of the exercise price of such option and (z) the number of shares
having a fair market value equal to the amount of taxes withheld as a result of
the exercise of such option; (B) have an expiration date which is the same as
the expiration date of the option the exercise of which gave rise to such Re-
Load Option; (C) have an exercise price which is equal to one hundred percent of
the fair market value of the common stock subject to the Re-Load Option on the
date of exercise of the original option; and (D) have such other terms and
conditions as the Compensation Committee may in its discretion determine.
Notwithstanding the foregoing, a Re-Load Option shall be subject to the same
exercise price and term provisions heretofore described for options under this
Plan.

                    Any such Re-Load Option may be an ISO or a non-qualified
option, as the Compensation Committee may designate at the time of the grant of
the original option; provided, however, that the designation of any Re-Load
Option as an ISO shall be subject to the one hundred thousand dollars ($100,000)
annual limitation on exercisability of ISOs described in Section 422(d) of the
Internal Revenue Code of 1986, as amended (the "Code"). Any such Re-Load Option
shall be subject to the availability of sufficient shares under Section 2 and to
any limitations imposed by Section 162(m) of the Code and shall be subject to
such other terms and conditions as the Compensation Committee may determine
which are not inconsistent with the express provisions of this Plan regarding
the terms of options.

               (b)  SAR

                    (i)   An SAR shall entitle its holder to receive from the
Company, at the time of exercise of such right, an amount equal to the excess of
the fair market value (at the date of exercise) of a share of common stock over
a specified price fixed by the Compensation Committee multiplied by the number
of shares of common stock as to which the holder is exercising the SAR. SARs may
be in tandem with any previously or contemporaneously granted option or
independent of any option. The specified price of a tandem SAR shall be the
option price of the related option. The amount payable may be paid by the
Company in common stock

                                       2
<PAGE>

(valued at its fair market value on the date of exercise), cash or a combination
thereof, as the Compensation Committee may determine, which determination shall
be made after considering any preference expressed by the holder.

                           (ii)  An SAR shall be exercised by written notice to
the Company (to the attention of the Secretary of the Company) at any time prior
to its stated expiration. To the extent a tandem SAR is exercised, the related
option will be cancelled and, to the extent the related option is exercised, the
tandem SAR will be cancelled.

                    (c)    Incentive Awards of Restricted Stock.

                           (i)   Shares of common stock may be awarded to
participants, subject to this paragraph 3(c) and such other terms and conditions
as the Compensation Committee may prescribe (such shares being called
"restricted stock"). Each certificate for restricted stock shall be registered
in the name of the participant and deposited, together with a stock power
endorsed in blank, with the Company.

                           (ii)  There shall be established for each restricted
stock award a restriction period (the "restriction period") of such length as
shall be determined by the Compensation Committee. Shares of restricted stock
may not be sold, assigned, transferred, pledged or otherwise encumbered, except
as hereinafter provided, during the restriction period. Except for such
restrictions on transfer and such other restrictions as the Compensation
Committee may impose, the participant shall have all the rights of a holder of
common stock as to such restricted stock. The Compensation Committee, in its
sole discretion, may permit or require the payment of cash dividends to be
deferred and, if the Compensation Committee so determines, reinvested in
additional restricted stock or otherwise invested. At the expiration of the
restriction period, the Corporation shall redeliver to the participant (or the
participant's legal representative or designated beneficiary) the certificates
deposited pursuant to paragraph 3(c)(ii).

                           (iii) Except as provided by the Compensation
Committee at the time of grant or otherwise, upon a termination of employment
for any reason during the restriction period all shares of common stock still
subject to restriction shall be forfeited by the participant.

                    (d)    Other Awards.

                           (i)   Other awards, including, without limitation,
performance shares, convertible debentures, other convertible securities and
other forms of awards measured in whole or in part by the value of common stock,
the performance of the participant or the performance of the Company, may be
granted under this Plan. Such awards may be payable in common stock, cash or
both, and shall be subject to such restrictions and conditions, as the
Compensation Committee shall determine. At the time of any such award, the
Compensation Committee shall, if applicable, determine a performance period and
performance goals to be achieved during the performance period, subject to such
later revisions as the Compensation Committee shall deem appropriate to reflect
significant unforeseen events such as changes in laws, regulations or accounting
practices, unusual or non-recurring items or occurrences. Following the
conclusion of each performance period, the Compensation Committee shall
determine the extent to which performance goals have been attained or a degree
of achievement between maximum and

                                       3
<PAGE>

minimum levels during the performance period in order to evaluate the level of
payment to be made, if any.

                           (ii)  A participant may elect to defer all or a
portion of any such award in accordance with procedures established by the
Compensation Committee. Deferred amounts will be subject to such terms and
conditions and shall accrue such yield thereon (which may be measured by the
fair market value of the common stock and dividends thereon) as the Compensation
Committee may determine. Payment of deferred amounts may be in cash, common
stock or a combination thereof, as the Compensation Committee may determine.
Deferred amounts shall be considered an award under this Plan. The Compensation
Committee may establish a trust to hold deferred amounts or any portion thereof
for the benefit of participants.

         4.    Adjustments for Changes in Capitalization or Corporate
Reorganizations. Appropriate adjustments shall be made by the Compensation
Committee in the maximum number and kind of shares of common stock to be issued
under this Plan, and in the number and kind of shares of common stock that are
the subject of any option, SAR, restricted stock or other award under this Plan,
to give effect to any stock splits, stock dividends and other relevant changes
in capitalization occurring after the effective date of this Plan. If the
Company shall effect a merger, consolidation or other reorganization, pursuant
to which the outstanding shares of common stock shall be exchanged for other
shares or securities of the Company or of another corporation which is a party
to such merger, consolidation or other reorganization, the Company shall use its
best efforts to provide in any agreement or plan which it enters into or adopts
to effect any such merger, consolidation or other reorganization that: (1) any
holder of restricted stock issued pursuant to this Plan shall receive in such
transaction, subject to substantially the same restrictions in transferability
as apply to such restricted stock, the kind and number of shares or other
securities of the Company or such other corporation which is issuable to the
owner of a like number of unrestricted shares of common stock; (2) any optionee
under this Plan shall have the right (a) to purchase, at the aggregate option
price provided for in his option agreement and on the same terms and conditions,
the kind and number of shares or other securities of the Company or such other
corporation which would have been issuable to him in respect of the number of
shares of common stock which were subject to such option immediately prior to
the effective date of such merger, consolidation or other reorganization if such
shares had been then owned by him, and (b) to exercise SARs with respect to such
shares in lieu of such purchase to the extent such optionee had such rights with
respect to the options outstanding immediately prior to the effective date of
such merger, consolidation or other reorganization; and (3) any holder of any
other award under this Plan shall receive in such transaction such kind and
number of shares or other securities of the Company or such other corporation as
the Compensation Committee deems equitable and appropriate. Any adjustment with
respect to options required by this Section 4 shall be effected in such manner
that the difference between the aggregate fair market value of the shares or
other securities subject to the options immediately after giving effect to such
adjustment and the aggregate option price of such shares or other securities
shall be substantially equal to (but shall not be more than) the difference
between the aggregate fair market value of the shares subject to such options
immediately prior to such adjustment and the aggregate option price of such
shares. Any adjustments made under this Section 4 shall be determined by the
Compensation Committee.

                                       4
<PAGE>

          If the provision in the first paragraph above, insofar as it related
to options or SARs, has not been made with respect to any of the options or SARs
issued pursuant to this Plan by the date ten days prior to the scheduled
effective date of such merger, consolidation or other reorganization, then the
options and SARs outstanding under this Plan shall thereupon become exercisable
in full. If the provision for restricted stock described in the first paragraph
above has not been made with respect to any of the restricted stock issued
pursuant to this Plan by the date ten days prior to the scheduled effective date
of such merger, consolidation or other reorganization, then the restrictions on
the transfer, assignment, pledge or other encumbrance of such restricted stock
as to which such provision has not been made shall thereupon lapse as of such
date.

          Upon the approval by the shareowners of the Company of a merger,
consolidation or other reorganization pursuant to which the outstanding shares
of common stock are to be exchanged for cash, or upon the adoption by the
shareowners of the Company of a plan of complete liquidation, the restrictions
on the transfer, assignment, pledge or other encumbrance of restricted stock
issued pursuant to this Plan shall thereupon lapse, and all options outstanding
under this Plan shall thereupon become exercisable in full.

          5.   Miscellaneous Provisions.

               (a)  Administration. This Plan shall be administered by the
Compensation Committee. Subject to the limitations of this Plan, the
Compensation Committee shall have the sole and complete authority: (i) to select
participants in this Plan, (ii) to make awards in such forms and amounts as it
shall determine, (iii) to impose such limitations, restrictions and conditions
upon such awards as it shall deem appropriate, (iv) to interpret this Plan and
to adopt, amend and rescind administrative guidelines and other rules and
regulations relating to this Plan, (v) to correct any defect or omission or to
reconcile any inconsistency in this Plan or in any award granted hereunder and
(vi) to make all other determinations and to take all other actions necessary or
advisable for the implementation and administration of this Plan. The
Compensation Committee's determinations on matters within its authority shall be
conclusive and binding upon the Company and all other persons. All expenses
associated with this Plan shall be borne by the Company, subject to such
allocation to its subsidiaries and operating units as it deems appropriate. The
Compensation Committee may, to the extent that any such action will not prevent
this Plan from complying with Rule 16b-3 of the Securities and Exchange Act of
1934, as amended ("Rule 16b-3"), delegate any of its authority hereunder to such
person as it deems appropriate. The Compensation Committee may also establish a
"cashless exercise" program with a third party brokerage firm pursuant to which,
at the discretion of the Compensation Committee, options hereunder may be
exercised, subject to any restrictions imposed by the Compensation Committee.

               (b)  Non-Transferability. Subject to the provisions of paragraph
5(e), no award under this Plan, and no interest therein, shall be transferable
by the participant otherwise than by will or the laws of descent and
distribution. All awards shall be exercisable or received during the
participant's lifetime only by the participant or the participant's legal
representative. Any purported transfer contrary to this provision will nullify
the award. Awards under this Plan shall not be subject to execution, attachment
or other process, and no person shall be entitled to exercise any rights of a
participant or possess any rights of a participant by virtue of any

                                       5
<PAGE>

attempted execution, attachment or other process. Notwithstanding the first two
sentences of this paragraph 5(b) or any other provision of this Plan, awards
(other than ISOs) may be transferred by the participant to a "family member" of
such participant by gift or by domestic relations order. For purposes of this
paragraph 5(b), "family member" means any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-
in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-
in-law, including adoptive relationships, any person sharing the participant's
household (other than as a tenant or employee), a trust in which these persons
have more than fifty percent of the beneficial interest, a foundation in which
these persons (or the participant) control the management of assets, and any
other entity in which these persons (or the participant) own more than fifty
percent of the voting interests.

               (c)  Tax Withholding. The Compensation Committee shall have the
power to withhold, or require a participant to remit to the Company, an amount
sufficient to satisfy any withholding or other tax due with respect to any
amount payable and/or shares of common stock issuable under this Plan, and the
Compensation Committee may defer such payment or issuance unless indemnified to
its satisfaction. Subject to the consent of the Compensation Committee, a
participant may make an irrevocable election to have shares of common stock
otherwise issuable under an award withheld, tender back to the Company shares of
common stock received pursuant to an award or deliver to the Company
previously-acquired shares of common stock having a fair market value sufficient
to satisfy all or part of the participant's estimated tax obligations associated
with the transaction. Such election must be made by a participant prior to the
date on which the relevant tax obligation arises. The Compensation Committee may
disapprove of any election and may limit, suspend or terminate the right to make
such elections.

               (d)  Listing and Legal Compliance. The Compensation Committee may
suspend the exercise or payment of any award so long as it determines that
securities exchange listing or registration or qualification under any
securities laws is required in connection therewith and has not been completed
on terms acceptable to the Compensation Committee.

               (e)  Beneficiary Designation. Subject to paragraph 5(b),
participants may name, from time to time, beneficiaries (who may be named
contingently or successively) to whom benefits under this Plan are to be paid in
the event of their death before they receive any or all of such benefit. Each
designation will revoke all prior designations by the same participant, shall be
in a form prescribed by the Compensation Committee, and will be effective only
when filed by the participant in writing with the Compensation Committee during
the participant's lifetime. In the absence of any such designation, benefits
remaining unpaid or unexercised at the participant's death shall be paid to or
exercised by the participant's estate.

               (f)  Rights of Participants. Nothing in this Plan shall interfere
with or limit in any way the right of the Company to participant's employment at
any time, nor confer upon any participant any right to continue in the employ of
the Company for any period of time or to continue his or her present or any
other rate of compensation. No employee shall have a right to be selected as a
participant, or, having been so selected, to be selected again as a participant.

               (g)  Effective Date and Term of Plan. This Plan as amended and
restated shall be effective as of March 1, 2000, provided, however, that this
Plan as amended shall cease

                                       6
<PAGE>

to be effective and any awards granted hereunder and permitted only as a
consequence of the amendments hereto shall become null and void if this Plan as
amended is not approved by the Company's shareowners before February 28, 2001.

               (h)  Amendment, Suspension and Termination of Plan. The Board or
the Compensation Committee may suspend or terminate this Plan or any portion
hereof, or any agreement evidencing an award made under this Plan, at any time
and may amend it from time to time in such respects as the Board or the
Compensation Committee may deem advisable; provided, however, that no such
amendment shall be made without shareowner approval to the extent (i) such
approval is required by law, agreement or the rules of any exchange upon which
the common stock is listed or (ii) such amendment reprices, replaces, regrants
through cancellation, or lowers the exercise price of a previously granted
option. No such amendment, suspension or termination shall impair the rights of
participants under outstanding awards without the consent of the participants
affected thereby or make any change that would disqualify this Plan, or any
other plan of the Company intended to be so qualified, from the exemption
provided by Rule 16b-3. The Compensation Committee may amend or modify any award
in any manner to the extent that the Compensation Committee would have had the
authority under this Plan to initially grant such award. No such amendment or
modification shall impair the rights of any participant under any award without
the consent of such participant.

               (i)  Compliance with 16b-3. It is the intent of the Company that
this Plan comply in all respects with Rule 16b-3, that any ambiguities or
inconsistencies in the construction of this Plan be interpreted to give effect
to such intention and that if any provision of the Plan is found not to be in
compliance with Rule 16b-3, that such provision shall be deemed null and void to
the extent required to permit this Plan to comply with Rule 16b-3.

                                       7

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