PROSPECTUS FILED PURSUANT TO RULE
424(b)(3)
Registration No. 333-58236
$805,645,000
Jones Apparel Group, Inc.
Jones Apparel Group Holdings, Inc.
Jones Apparel Group USA, Inc.
Nine West Group Inc.
Zero Coupon Convertible Senior Notes due 2021
and Shares of Common Stock of Jones Apparel
Group, Inc.
Issuable Upon Conversion of the Notes
--------------------------
Jones Apparel Group, Inc. and its subsidiaries Jones Apparel Group
Holdings, Inc., Jones Apparel Group USA, Inc. and Nine West Group Inc.
are jointly and severally liable for the obligations under the notes. In
this prospectus, the terms "we," "us," and "our" refer collectively to
all four co-obligors in respect of the notes.
We issued the notes in a private placement in February 2001 at an
issue price of $499.60 per $1,000 principal amount at maturity. This
prospectus will be used by selling securityholders to resell their notes
and the Jones Apparel Group common stock issuable upon conversion of
their notes, and we will not receive any proceeds from sales that the
selling securityholders make.
We will not pay cash interest on the notes prior to maturity.
Instead, on February 1, 2021, the maturity date of the notes, noteholders
will receive $1,000 per note. The original issue price per note
represented a yield to maturity of 3.50% per year calculated from
February 1, 2001. If a Tax Event occurs and we so elect, cash interest,
instead of future original issue discount, shall accrue and be payable
semi-annually on each note at 3.50% per year. See "Description of the
Notes--Optional Conversion to Semi-annual Cash Pay Note Upon Tax Event"
for the definition of the term "Tax Event."
Noteholders may convert their notes at any time on or before the
maturity date, unless the notes have been redeemed or purchased
previously, into 9.8105 shares of Jones Apparel Group common stock per
note. The conversion rate will not be adjusted for accrued original issue
discount, but will be subject to adjustment in certain events described
under "Description of the Notes--Conversion Rights."
We may redeem the notes at any time on or after February 1, 2004 at
the indicative redemption prices listed on page 15. Holders may require
us to repurchase the notes on February 1, 2004, February 1, 2009 and
February 1, 2014 at a price per note of $554.41, $659.44 and $784.36,
respectively. We may choose to pay the purchase price in cash, in shares
of Jones Apparel Group common stock valued at 95% of their Market Price
or any combination thereof. In addition, if we experience specific kinds
of fundamental changes prior to February 1, 2004, holders may require us
to repurchase the notes. In the case of a repurchase upon such a
fundamental change, the repurchase price will be equal to the issue price
of the notes plus accrued original issue discount, and we may choose to
pay the repurchase price in cash, in shares of Jones Apparel Group common
stock valued at 95% of their Market Price or any combination thereof. See
"Description of the Notes--Purchase of Notes at the Option of the Holder"
for the definition of the term "Market Price."
The notes are our senior obligations and rank equally with all our
other senior unsecured debt.
Jones Apparel Group common stock is listed on the New York Stock
Exchange under the Symbol "JNY." On April 30, 2001, the closing price of
Jones Apparel Group common stock was $39.740 per share.
THIS INVESTMENT INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 7.
The notes and the shares of Jones Apparel Group common stock may be
offered by the selling securityholders in negotiated transactions or
otherwise at market prices prevailing at the time of sale or at
negotiated prices. The selling securityholders may be deemed to be
"underwriters" as defined in the Securities Act of 1933, as amended (the
"Securities Act"). If any broker-dealers are used by the selling
securityholders, any commissions paid to broker-dealers and, if
broker-dealers purchase any notes or shares as principals, any profits
received by such broker-dealers on the resale of the notes or shares of
Jones Apparel Group common stock may be deemed to be underwriting
discounts or commissions under the Securities Act. In addition, any
profits realized by the selling securityholders may be deemed to be
underwriting commissions.
This prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, any of the securities offered hereby by
any person in any jurisdiction in which it is unlawful for such person to
make such an offering or solicitation.
--------------------------
Neither the Securities and Exchange Commission (the "SEC") nor any
state securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The date of this prospectus is May 8, 2001.
TABLE OF CONTENTS
Page
Where You Can Find More Information..................................... 3
Special Note Regarding Forward-Looking Statements....................... 4
The Company............................................................. 5
Summary of the Offering................................................. 5
Risk Factors............................................................ 7
Price Range of Common Stock and Dividend Policy......................... 10
Use of Proceeds......................................................... 10
Ratio of Earnings to Fixed Charges...................................... 10
Description of Other Debt............................................... 11
Description of the Notes................................................ 13
Registration Rights..................................................... 26
Description of Capital Stock............................................ 27
Certain United States Federal Income Tax Considerations................. 28
Selling Securityholders................................................. 34
Plan of Distribution.................................................... 39
Legal Matters........................................................... 40
Experts................................................................. 40
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE
YOU WITH DIFFERENT INFORMATION. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER
THAN THE DATE ON THE FRONT OF THIS PROSPECTUS.
As used in this prospectus, unless the context requires otherwise:
o "We," "us" and "our" refer collectively to all four co-obligors
in respect of the notes;
o "Jones" or the "Company" means Jones Apparel Group, Inc. and/or
its predecessors and consolidated subsidiaries, including the
other issuers, as the context may require;
o "Jones Apparel Group" means Jones Apparel Group, Inc.;
o "Jones Holdings" means Jones Apparel Group Holdings, Inc.;
o "Jones USA" means Jones Apparel Group USA, Inc.; and
o "Nine West" means Nine West Group Inc.
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WHERE YOU CAN FIND MORE INFORMATION
Jones files annual, quarterly and special reports, proxy statements
and other information with the SEC. Jones' SEC filings are available to
the public over the Internet at the SEC's web site at http://www.sec.gov.
You may also read and copy any document Jones files at the SEC's public
reference facilities in Washington, D.C., New York, New York and Chicago,
Illinois at the following addresses:
o 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549;
o Seven World Trade Center, Suite 1300, New York, New York 10048;
and
o Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661.
Please call the SEC at 1-800-SEC-0330 for further information on the
public reference facilities.
Reports, proxy statements and other information concerning us can
also be inspected and copied at the offices of the New York Stock
Exchange at 20 Broad Street, New York, New York 10005.
We have elected to incorporate by reference into this prospectus the
following document (including the documents incorporated by reference
therein) filed by Jones with the SEC:
o Annual Report on Form 10-K for the fiscal year ended December
31, 2000, filed with the SEC on March 26, 2001;
o Current Report on Form 8-K, filed with the SEC on April 16,
2001; and
o Proxy Statement, filed with the SEC on April 26, 2001.
Any statement made in a document incorporated by reference or deemed
incorporated herein by reference is deemed to be modified or superseded
for purposes of this prospectus if a statement contained in this
prospectus or in any other subsequently filed document which also is
incorporated or deemed incorporated by reference herein modifies or
supersedes that statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a
part of this prospectus. We also incorporate by reference all documents
filed pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act") after the date of this
prospectus and prior to the termination of this offering.
You may request a copy of these filings, in most cases without
exhibits, as well as the indenture referred to herein at no cost by
writing or telephoning us at the following address:
Chief Financial Officer
Jones Apparel Group, Inc.
250 Rittenhouse Circle
Bristol, Pennsylvania 19007
(215) 785-4000
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SPECIAL NOTE REGARDING
FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference contain
certain "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 with respect to financial
condition, results of operations, business strategies, operating
efficiencies or synergies, competitive position, growth opportunities for
existing products, plans and objectives of management, markets for our
common stock and other matters. Statements in this prospectus, including
those incorporated by reference, that are not historical facts are
"forward-looking statements" for the purpose of the safe harbor provided
by Section 21E of the Exchange Act and Section 27A of the Securities Act.
Forward-looking statements, including, without limitation, those relating
to our future business prospects, revenues and income, wherever they
occur in this prospectus, are necessarily estimates reflecting the best
judgment of our senior management and involve a number of risks and
uncertainties that could cause actual results to differ materially from
those suggested by forward-looking statements. You should consider
forward-looking statements, therefore, in light of various important
factors, including those set forth in this prospectus. Important factors
that could cause actual results to differ materially from estimates or
projections contained in the forward-looking statements include, without
limitation:
o the effect of national and regional economic conditions;
o lowered levels of consumer spending resulting from a general
economic downturn;
o the performance of our products within the prevailing retail
environment;
o customer acceptance of both new designs and newly-introduced
product lines;
o financial difficulties encountered by customers;
o the effects of vigorous competition in the markets in which we
operate;
o our ability to integrate the organizations and operations of
any acquired business into our existing organization and
operations;
o the termination or non-renewal of the licenses with Polo Ralph
Lauren Corporation;
o risks relating to our extensive foreign operations and
manufacturing;
o changes in the costs of raw materials, labor and advertising;
and
o our ability to secure and protect trademarks and other
intellectual property rights.
Words such as "estimate," "project," "plan," "intend," "expect,"
"believe" and similar expressions are intended to identify
forward-looking statements. You will find these forward-looking
statements at various places throughout this prospectus and the documents
incorporated by reference, including any amendments. You are cautioned
not to place undue reliance on these forward-looking statements, which
speak only as of the date they were made. We do not undertake any
obligation to publicly update or release any revisions to these
forward-looking statements to reflect events or circumstances after the
date of this prospectus or to reflect the occurrence of unanticipated
events.
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THE COMPANY
Jones is a leading designer and marketer of a broad range of women's
collection sportswear, suits and dresses, casual sportswear and jeanswear
for men, women and children, women's shoes and accessories, and costume
jewelry. Jones has pursued a multi-brand strategy by marketing its
products under several nationally known brands, including Jones New York,
Evan-Picone, Rena Rowan, Nine West, Easy Spirit, Enzo Angiolini,
Bandolino and Todd Oldham and the licensed brands Lauren by Ralph Lauren,
Ralph by Ralph Lauren and Polo Jeans Company. Each brand is
differentiated by its own distinctive styling and pricing strategy, and
together they target a wide range of consumers. Jones primarily contracts
for the manufacture of its products through a worldwide network of
quality manufacturers. Jones has capitalized on its nationally known
brand names by entering into various licenses for the Jones New York,
Evan-Picone and Nine West brand names with select manufacturers of
women's and men's products which Jones does not manufacture.
On July 31, 2000, Jones acquired 100% of the capital stock of
Victoria + Co Ltd. Victoria is a leading designer and marketer of branded
and private label costume jewelry sold to better department and specialty
stores. Victoria markets its products under the national brand names
Napier, Richelieu and Judith Jack and under several licensed brands,
including Tommy Hilfiger and Givenchy, as well as private labels. In
addition, Victoria markets jewelry under Jones' Nine West label.
On April 13, 2001, Jones entered into a definitive merger agreement
(the "Merger Agreement") with McNaughton Apparel Group Inc., a Delaware
corporation ("McNaughton"), pursuant to which McNaughton will be merged
with and into a direct wholly owned subsidiary of Jones (the "Merger").
McNaughton designs, contracts for the manufacture of and markets a broad
line of brand name, moderately-priced women's and juniors' career and
casual clothing. In connection with the Merger, stockholders of
McNaughton will receive $10.50 in cash and approximately $10.50 in Jones
Apparel Group common stock for each share of McNaughton common stock,
subject to adjustment in accordance with the Merger Agreement. The Merger
is subject to customary closing conditions, including approval by
McNaughton's shareholders and clearance under the Hart- Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
Our principal executive offices are located at 250 Rittenhouse
Circle, Bristol, Pennsylvania 19007. Our telephone number is (215)
785-4000.
SUMMARY OF THE OFFERING
The following summary of the offering should be read together with
the information contained in other parts of this prospectus and the
documents we incorporate by reference. You should carefully read this
prospectus and the documents we incorporate by reference, which contain
important information regarding the terms of the notes as well as tax and
other considerations that are important in making a decision about
whether to invest in the notes, and you should pay special attention to
the "Risk Factors" section beginning on page 7.
Notes Offered...............$805,645,000 aggregate principal amount at
maturity of Zero Coupon Convertible Senior Notes
Due 2021. We will not pay cash interest on the
notes prior to maturity, other than as described
below under "--Optional Conversion to Semi-annual
Cash Pay Note Upon Tax Event." The notes were
originally sold by Salomon Smith Barney Inc. and
Bear, Stearns & Co. Inc. to qualified
institutional buyers (as defined in Rule 144A
under the Securities Act) at an issue price of
$499.60 per note and a principal amount at
maturity of $1,000 per note. This prospectus also
relates to the offering of shares of Jones Apparel
Group common stock which are issuable upon
conversion or repurchase of the notes.
Maturity....................February 1, 2021.
Yield to Maturity of Notes..3.50% per year (computed on a semi-annual bond
equivalent basis) calculated from February 1,
2001.
Conversion Rights...........Holders may convert their notes at any time prior
to the close of business on February 1, 2021,
unless the notes have been redeemed or purchased
by us previously. For each note of $1,000
principal amount at maturity converted, we will
deliver 9.8105 shares of Jones Apparel Group
common stock. The conversion rate may be adjusted
for certain reasons but will not be adjusted for
accrued original issue discount. Upon conversion,
the holder will not receive any cash payment
representing accrued original issue discount;
accrued original issue discount will be deemed
paid by shares of the common stock received by the
holder of notes on conversion.
Ranking.....................The notes are our unsecured senior obligations and
rank equally with all of our other unsecured
senior indebtedness.
Original Issue Discount.....The notes were offered with original issue
discount for U.S. federal income tax
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purposes equal to the principal amount at maturity
of each note less the issue price to investors.
You should be aware that, although we will not pay
cash interest on the notes, U.S. investors must
include accrued original issue discount in their
gross income for U.S. federal income tax purposes
prior to the conversion, redemption, purchase or
maturity of the notes (even if such notes are
ultimately not converted, redeemed, purchased or
paid at maturity).
Sinking Fund................None.
Optional Redemption.........We may redeem all or a portion of the notes for
cash at any time on or after February 1, 2004.
Indicative redemption prices are set forth in this
prospectus on page 16.
Purchase of the Notes by Us
at the Option of the
Holder.................. Holders may require us to purchase their notes on
any one of the following dates at the following
prices:
o on February 1, 2004 at a price of $554.41 per
note;
o on February 1, 2009 at a price of $659.44 per
note; and
o on February 1, 2014 at a price of $784.36 per
note.
We may choose to pay the purchase price in cash or
Jones Apparel Group common stock, valued at 95% of
the Market Price, or a combination of cash and
Jones Apparel Group common stock.
Optional Conversion to
Semi-annual Cash Pay
Note Upon Tax Event......From and after the occurrence of a Tax Event, at
our option, cash interest in lieu of future
original issue discount shall accrue on each note
from the date on which we exercise such option at
the rate of 3.50% per year on the restated
principal amount (i.e., the issue price of the
note plus any original issue discount accrued to
the later of the date of the Tax Event and the
date we exercise such option) and shall be payable
semi-annually on each interest payment date to
holders of record at the close of business on each
regular record date immediately preceding such
interest payment date. Interest will be computed
upon a 360-day year comprised of twelve 30-day
months and will initially accrue from the Option
Exercise Date and thereafter from the most recent
date to which interest has been paid. In such an
event, the redemption prices, purchase prices, and
Fundamental Change repurchase prices shall be
adjusted as described herein. However, there will
be no changes in a holder's conversion rights. See
"Description of the Notes--Optional Conversion to
Semi-annual Cash Pay Note Upon Tax Event" for the
definition of the term "Option Exercise Date."
Fundamental Change..........Upon a Fundamental Change involving us occurring
prior to February 1, 2004, each holder may require
us to repurchase all or a portion of such holder's
notes. This repurchase price will be equal to the
issue price of the notes plus accrued original
issue discount to the date of repurchase. We may
choose to pay the repurchase price in cash or in
Jones Apparel Group common stock valued at 95% of
the Market Price or a combination of cash and
common stock. See "Description of the
Notes--Fundamental Change Permits Holder to
Require Us to Repurchase Notes" for the definition
of the term "Fundamental Change."
Covenants...................The notes were issued under an indenture that
limits our ability and the ability of our
subsidiaries to create or permit to exist liens
and to engage in sale and leaseback transactions.
Use of Proceeds.............We will not receive any proceeds from any sale of
the securities contemplated by this prospectus.
Trading.....................The notes and shares of common stock issuable upon
the conversion of the notes have been designated
for trading in the PORTAL Market. However, any
notes or shares of common stock issuable upon
conversion sold under this prospectus will no
longer trade in the PORTAL Market. Jones Apparel
Group common stock is listed on the New York Stock
Exchange under the symbol "JNY."
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RISK FACTORS
You should consider carefully all the information included or
incorporated by reference in this prospectus and, in particular, should
evaluate the following risks before deciding to invest in the notes.
THE APPAREL, FOOTWEAR AND ACCESSORIES INDUSTRIES ARE HIGHLY COMPETITIVE
Apparel, footwear and accessories companies face competition on many
fronts, including the following:
o establishing and maintaining favorable brand recognition;
o developing products that appeal to consumers;
o pricing products appropriately;
o providing strong marketing support; and
o obtaining access to retail outlets and sufficient floor space.
There is intense competition in the sectors of the apparel, footwear
and accessories industries in which we participate. We compete with many
other manufacturers and retailers, some of which are larger and have
greater resources than we do. Any increased competition could result in
reduced sales or prices, or both, which could have a material adverse
effect on us.
FASHION TRENDS ARE CONSTANTLY CHANGING
Customer tastes and fashion trends can change rapidly. We may not be
able to anticipate, gauge or respond to such changes in a timely manner.
If we misjudge the market for our products or product groups, we may be
faced with a significant amount of unsold finished goods inventory, which
would have a material adverse effect on us.
THE APPAREL, FOOTWEAR AND ACCESSORIES INDUSTRIES ARE HIGHLY CYCLICAL
Negative economic trends over which we have no control that depress
the level of consumer spending could have a material adverse effect on
us. Purchases of apparel, footwear and related goods often decline during
recessionary periods when disposable income is low. In such an
environment, we may increase the number of promotional sales, which would
further adversely affect our profitability.
THE CONCENTRATION OF OUR CUSTOMERS COULD ADVERSELY AFFECT OUR BUSINESS
Our ten largest customers, principally department stores, accounted
for approximately 56% of sales in 2000. While no single customer
accounted for more than 10% of our net sales, certain of our customers
are under common ownership. Department stores owned by the following
entities accounted for the following percentages of our 2000 sales:
Federated Department Stores, Inc.......................... 14%
May Department Stores Company............................. 14%
Remainder of ten largest customers........................ 28%
We believe that purchasing decisions are generally made
independently by individual department stores within a commonly
controlled group. There has been a trend, however, toward more
centralized purchasing decisions. As such decisions become more
centralized, the risk to us of such concentration increases. The loss of
any of our largest customers, or the bankruptcy or material financial
difficulty of any customer or any of the companies listed above, could
have a material adverse effect on us. We do not have long-term contracts
with any of our customers, and sales to customers generally occur on an
order-by-order basis. As a result, customers can terminate their
relationships with us at any time or under certain circumstances cancel
or delay orders.
SIGNIFICANT PORTIONS OF OUR SALES AND PROFITS DEPEND ON CERTAIN OF OUR
LICENSE AGREEMENTS WITH POLO RALPH LAUREN CORPORATION
The termination or non-renewal of our exclusive licenses to
manufacture and market clothing under the Lauren by Ralph Lauren and Polo
Jeans Company trademarks in the United States and elsewhere would have a
material adverse effect on us. Our Lauren by Ralph Lauren and Polo Jeans
Company businesses represent significant portions of our sales and
profits. We sell products bearing those trademarks, as well as the Ralph
by Ralph Lauren trademark, under exclusive licenses from affiliates of
Polo Ralph Lauren Corporation.
The Lauren by Ralph Lauren license expires on December 31, 2001. We
have exercised our right to renew that license through December 31, 2006.
There is no presently existing right or obligation to renew the Lauren by
Ralph Lauren license after December 31, 2006.
The Polo Jeans Company license expires on December 31, 2005 and may
be renewed by us in five-year increments for up to 25 additional years,
if certain minimum sales levels in certain years are met. Polo Jeans
Company sales are made season-to-season, with customers having no
obligation to buy products beyond what they have already ordered for a
particular season. In addition, renewal of the Polo Jeans Company license
after 2010 requires a one-time payment by us of $25 million or, at our
option, a transfer of a 20% interest in our Polo
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Jeans Company business to Polo Ralph Lauren (with no fees required for
subsequent renewals). Polo Ralph Lauren also has an option, exercisable
on or before June 1, 2010, to purchase our Polo Jeans Company business at
the end of 2010 for a purchase price, payable in cash, equal to 80% of
the then fair value of the business as a going concern, assuming the
continuation of the Polo Jeans Company license through December 31, 2030.
In addition to the provisions described above, the licenses contain
provisions common to trademark licenses which could result in termination
of a license, such as failure to meet payment or advertising obligations.
THE EXTENT OF OUR FOREIGN OPERATIONS AND MANUFACTURING MAY ADVERSELY
AFFECT OUR DOMESTIC BUSINESS
In 2000, approximately 73% of our apparel products were manufactured
outside North America, primarily in Asia, while the remainder were
manufactured in the United States and Mexico. Nearly all of Nine West's
products were manufactured outside of North America in 2000 as well. The
following may adversely affect foreign operations:
o political instability in countries where contractors and
suppliers are located;
o imposition of regulations and quotas relating to imports;
o imposition of duties, taxes and other charges on imports;
o significant fluctuation of the value of the dollar against
foreign currencies; and
o restrictions on the transfer of funds to or from foreign
countries.
As a result of our substantial foreign operations, Jones' domestic
business is subject to the following risks:
o quotas imposed by bilateral textile agreements between the
United States and certain foreign countries;
o reduced manufacturing flexibility because of geographic
distance between us and our foreign manufacturers, increasing
the risk that we may have to mark down unsold inventory as a
result of misjudging the market for a foreign-made product; and
o violations by foreign contractors of labor and wage standards
and resulting adverse publicity.
FLUCTUATIONS IN THE PRICE, AVAILABILITY AND QUALITY OF RAW MATERIALS
COULD CAUSE DELAY AND INCREASE COSTS
Fluctuations in the price, availability and quality of the fabrics
or other raw materials used by us in our manufactured apparel and in the
price of leather used to manufacture our footwear and accessories could
have a material adverse effect on our cost of sales or our ability to
meet our customers' demands. We mainly use cotton twill, wool, denim, and
synthetic and blended fabrics. The prices for such fabrics depend largely
on the market prices for the raw materials used to produce them,
particularly cotton. The price and availability of such raw materials
and, in turn, the fabrics used in our apparel may fluctuate
significantly, depending on many factors, including crop yields and
weather patterns. We generally enter into denim purchase order contracts
at specified prices for three to six months at a time. Higher cotton
prices would directly affect our costs and could affect our earnings.
During the past few years, there have been increases in the price of
leather, which generally were reflected in the selling price of our
footwear and accessories products. In the future, we may not be able to
pass all or a portion of such higher raw materials prices on to our
customers.
OUR RELIANCE ON INDEPENDENT MANUFACTURERS COULD CAUSE DELAY AND DAMAGE
CUSTOMER RELATIONSHIPS
We rely upon independent third parties for the manufacture of most
of our products. A manufacturer's failure to ship products to us in a
timely manner or to meet the required quality standards could cause us to
miss the delivery date requirements of our customers for those items. The
failure to make timely deliveries may drive customers to cancel orders,
refuse to accept deliveries or demand reduced prices, any of which could
have a material adverse effect on our business. We do not have long-term
written agreements with any of our third party manufacturers. As a
result, any of these manufacturers may unilaterally terminate their
relationships with us at any time.
THE SUCCESSFUL INTEGRATION OF JONES AND MCNAUGHTON FOLLOWING THE MERGER
WILL PRESENT SIGNIFICANT CHALLENGES
Jones and McNaughton believe that the Merger presents opportunities
to achieve cost savings, including those in connection with distribution,
sourcing, marketing and overhead reductions. The failure to
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integrate McNaughton and Jones successfully, and to manage the challenges
presented by the integration process successfully, may prevent Jones from
achieving these anticipated cost savings.
WE DEPEND ON KEY PERSONNEL TO MANAGE OUR BUSINESS
Jones' success depends upon the personal efforts and abilities of
its senior executive officers, including Sidney Kimmel, its Chairman,
Jackwyn Nemerov, its President, and Irwin Samelman, its Executive Vice
President, Marketing, as well as the senior executive officers of our
operating subsidiaries, including, after the Merger, Peter Boneparth. If
any of these individuals become unable or unwilling to continue in their
present positions, our business and financial results could be materially
adversely affected.
OUR STOCK PRICE HAS BEEN VOLATILE AND WE EXPECT THAT IT WILL CONTINUE TO
BE VOLATILE
Our stock price has historically been volatile, and we expect that
it will continue to be volatile. Our financial results are difficult to
predict and could fluctuate significantly.
THERE HAS BEEN NO TRADING MARKET FOR THE NOTES
The notes are eligible for trading on the PORTAL Market; however,
any notes sold under this prospectus will no longer trade in the PORTAL
Market. We cannot assure you that any market for the notes will develop
or, if one does develop, that it will be maintained. If an active market
for the notes fails to develop or be sustained, the trading price of the
notes could be materially adversely affected.
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PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
Jones Apparel Group common stock is listed on the New York Stock
Exchange and is traded under the symbol "JNY." The following table shows
the high and low per share sale prices of Jones Apparel Group common
stock, as reported by the New York Stock Exchange for the periods
indicated.
HIGH LOW
1999 $32.500 $21.500
First Quarter 35.875 27.500
Second Quarter 34.875 24.750
Third Quarter 33.000 24.813
Fourth Quarter
2000 $31.875 $20.125
First Quarter 32.563 21.250
Second Quarter 29.188 22.063
Third Quarter 35.000 23.313
Fourth Quarter
2001
First Quarter $41.090 $31.125
Second Quarter (through April 30, 2001) 40.000 34.050
On April 30, 2001, the closing price of Jones Apparel Group common
stock on the New York Stock Exchange was $39.740 per share.
Jones Apparel Group has never declared or paid any cash dividends on
its common stock and does not anticipate paying any cash dividends on its
common stock in the foreseeable future.
USE OF PROCEEDS
The selling securityholders will receive all of the proceeds from
the sale of the notes under this prospectus and the Jones Apparel Group
common stock issuable upon conversion of the notes. We will not receive
any proceeds from these sales.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth our ratios of earnings to fixed
charges for the years and periods indicated:
YEAR ENDED DECEMBER 31,
-----------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Ratio of Earnings to Fixed Charges...... 4.3 4.1 12.6 18.2 14.4
We computed these ratios by dividing fixed charges into the sum of
earnings (after certain adjustments) and fixed charges. Earnings used in
computing the ratio of earnings to fixed charges consist of income before
income taxes and fixed charges excluding capitalized interest. Fixed
charges consist of interest expensed and capitalized, amortization of
debt expense and that portion of rental expense representative of
interest.
Because we do not have any preferred stock outstanding, the ratio of
earnings to fixed charges and preferred stock dividends, and the
deficiency of earnings to cover fixed charges and preferred stock
dividends were the same as the ratio of earnings to fixed charges and the
deficiency of earnings to cover fixed charges.
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DESCRIPTION OF OTHER DEBT
SENIOR CREDIT FACILITIES
Jones USA, as borrower, and Jones Apparel Group, Jones Holdings, and
Nine West, as co-obligors, are parties to two credit agreements with
First Union National Bank, as administrative agent (the "Administrative
Agent"), and other lending institutions (collectively, the "Banks") to
borrow an aggregate principal amount of up to $1.45 billion, consisting
of (i) a $750.0 million 364-Day Revolving Credit Facility and (ii) a
$700.0 million Five-Year Revolving Credit Facility, the entire amount of
each of which is available for letters of credit and cash borrowings. The
364-Day and Five-Year Revolving Credit Facilities are referred to
collectively in this prospectus as the "Senior Credit Facilities."
Debt under the Senior Credit Facilities bears interest at a floating
rate based, at Jones USA's option, upon (i) the reserve adjusted London
Interbank Offered Rate ("Adjusted LIBOR"), as determined by the
Administrative Agent for one, two, three or six months plus a margin
ranging between 0.35% and 1.125%, in the case of the 364-Day Revolving
Credit Facility, and 0.325% and 1.075%, in the case of the Five-Year
Revolving Credit Facility, depending on Jones' credit rating or (ii) the
Administrative Agent's Base Rate.
Loans made under the Senior Credit Facilities may be borrowed,
repaid and reborrowed from time to time until (in the case of the
Five-Year Facility) June 15, 2004 and (in the case of the 364-Day
Facility) June 12, 2001, subject to satisfaction of certain conditions on
the date of any such borrowing. The 364-Day Revolving Credit Facility is
subject to customary extension provisions for a limited number of
additional 364-day terms.
Jones USA is required to pay to the Banks an annual facility fee in
an amount ranging from 0.10% to 0.25% per annum, in the case of the
364-Day Revolving Credit Facility, and 0.125% to 0.30% per annum, in the
case of the Five-Year Revolving Credit Facility, depending on Jones'
credit rating, on the entire amount of the Senior Credit Facilities,
regardless of usage. Additionally, Jones USA is required to pay a letter
of credit fee in an amount ranging from 0.15% to 0.35% per annum, in the
case of the 364-Day Facility, and 0.125% to 0.30% per annum in the case
of the Five-Year Facility, depending on Jones' credit rating, on the
amount of outstanding trade letters of credit. Jones USA is also required
to pay a utilization fee of 0.125% per annum in the case of each facility
to the extent that the average utilization of such facility during any
quarter exceeds 50% of the original commitments under such facility
(exclusive of any issued and outstanding letters of credit under such
facility). Jones USA is also required to pay an issuance fee of 0.125%
per annum on all outstanding standby letters of credit.
The Senior Credit Facilities require Jones to satisfy an EBITDA plus
rents to cash interest expense plus rents coverage ratio and a net worth
maintenance covenant. The Senior Credit Facilities also contain covenants
which, among other things, will limit, subject to various exceptions,
Jones' ability to incur additional indebtedness, incur liens and
encumbrances, make guarantees, loans, acquisitions and investments,
engage in asset sales, mergers and consolidations, change its business,
engage in transactions with affiliates, prepay subordinated indebtedness,
make material amendments to debt instruments, pay dividends or other
distributions to shareholders and redeem or repurchase capital stock. The
Senior Credit Facilities also contain customary affirmative covenants.
The covenants may be modified or waived with the consent of a majority of
the Banks.
Defaults under the Senior Credit Facilities include failure to pay
any interest, principal or fees when due under the Senior Credit
Facilities, failure to perform any covenant or agreement contained in the
documents relating to the Senior Credit Facilities, the making by Jones
of inaccurate or false representations or warranties, the default by
Jones in respect of certain other indebtedness, the occurrence of certain
events of bankruptcy, the entering of certain judgments against Jones,
and a change in control of Jones.
6.25% SENIOR NOTES DUE 2001
The 6.25% Senior Notes Due 2001 (the "6 1/4% Notes") are unsecured
senior obligations of Jones Apparel Group, Jones Holdings, Jones USA and
Nine West, each as a co-obligor. The 6 1/4% Notes were originally issued
in an aggregate principal amount of $265.0 million, of which $242.9
million is currently outstanding. The 6 1/4% Notes bear interest at a
rate of 6 1/4%, payable semi-annually on April 1 and October 1 of each
year, and will mature on October 1, 2001. The 6 1/4% Notes are redeemable
at any time or from time to time at a redemption price equal to the
greater of (1) 100% of their principal amount or (2) the sum of the
present values of the remaining scheduled payments of principal and
interest discounted to the date of redemption on a semi-annual basis at
the treasury rate specified in the indenture relating to the 6 1/4% Notes
plus 15 basis points, plus in the case of each of clauses (1) and (2)
accrued and unpaid interest to the date of redemption. The 6 1/4% Notes
contain certain covenants including restrictions on liens and
restrictions on sale and leaseback transactions.
83/8% SERIES B SENIOR NOTES DUE 2005
The 83/8% Series B Senior Notes Due 2005 (the "83/8% Notes") are
unsecured senior obligations of Jones Apparel Group, Jones Holdings,
Jones USA and Nine West, each as a co-obligor. The 83/8% Notes were
originally issued in an aggregate principal amount of $200.0 million, of
which $129.6 million remains
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outstanding. The 83/8% Notes bear interest at a rate of 83/8%, payable on
February 15 and August 15 of each year, and will mature on August 15,
2005. The 83/8% Notes are not redeemable prior to maturity. The 83/8%
Notes contain certain covenants including limitation on liens and
purchase of Notes upon a change of control.
9% SERIES B SENIOR SUBORDINATED NOTES DUE 2007
The 9% Series B Senior Subordinated Notes Due 2007 (the "9% Notes")
are unsecured senior subordinated obligations of Nine West. The 9% Notes
were originally issued in an aggregate principal amount of $125.0
million, of which $82,000 is currently outstanding. The 9% Notes bear
interest at a rate of 9%, payable on February 15 and August 15 of each
year, and will mature on August 15, 2007. The 9% Notes are redeemable at
any time and from time to time on or after August 15, 2002 at the
redemption prices specified in the 9% Notes. The 9% Notes contain certain
covenants including limitation on sale of assets and purchase of Notes
upon a change of control.
5 1/2% CONVERTIBLE SUBORDINATED NOTES DUE 2003
The 5 1/2% Convertible Subordinated Notes due 2003 (the "5 1/2%
Notes") are unsecured subordinated obligations of Jones Holdings and Nine
West, each as a co-obligor. The 5 1/2% Notes were originally issued in an
aggregate principal amount of $185.7 million, of which $459,000 remains
outstanding. The 5 1/2% Notes bear interest at a rate of 5 1/2%, payable
on January 15 and July 15 each year, and will mature on July 15, 2003.
The 5 1/2% Notes are redeemable at any time and from time to time at a
redemption price equal to the greater of (a) 100% of their principal
amount or (b) the sum of the present values of the remaining scheduled
payments of principal and interest discounted, on a semi-annual basis, at
a rate equal to the sum of the treasury rate specified in the indenture
relating to the 5 1/2% Notes plus 25 basis points, plus in the case of
clauses (a) and (b) accrued and unpaid interest to the date of
redemption.
7.50% SENIOR NOTES DUE 2004
7.875% SENIOR NOTES DUE 2006
The 7.50% Senior Notes Due 2004 (the "7 1/2% Notes") and the 7.875%
Senior Notes Due 2006 (the "77/8% Notes") are unsecured senior
obligations of Jones Apparel Group, Jones Holdings, Jones USA and Nine
West, each as a co-obligor. The 7 1/2% Notes and the 77/8% Notes were
originally issued in respective aggregate principal amounts of $175
million and $225 million, and the full principal amount of each remains
outstanding. The 7 1/2% Notes bear interest at a rate of 7 1/2%, payable
semi-annually on June 15 and December 15 of each year, and will mature on
June 15, 2004. The 77/8% Notes bear interest at a rate of 77/8%, payable
semi-annually on June 15 and December 15 of each year, and will mature on
June 15, 2006. The 7 1/2% Notes and the 77/8% Notes are redeemable at any
time and from time to time at a redemption price equal to the greater of
(1) 100% of their principal amount or (2) the sum of the present values
of the remaining scheduled payments of principal and interest discounted,
on a semi-annual basis at a rate equal to the sum of the treasury rate
specified in the indentures relating to the 7 1/2% Notes and the 77/8%
Notes plus 25 basis points, plus in the case of clauses (1) and (2)
accrued and unpaid interest to the date of redemption. The 7 1/2% Notes
and the 77/8% Notes contain certain covenants, including restrictions on
liens and restrictions on sale and leaseback transactions.
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DESCRIPTION OF THE NOTES
We issued the notes under an indenture (the "indenture") dated as of
February 1, 2001 among us and The Bank of New York, as trustee (the
"trustee"). A copy of the indenture and the form of the notes are filed
as exhibits to Jones Apparel Group's Annual Report on Form 10-K for the
fiscal year ended December 31, 2000 which is incorporated by reference to
the registration statement of which this prospectus is a part and are
also available upon request as set forth under "Where You Can Find More
Information." The following summary of certain provisions of the
indenture and the notes does not purport to be complete and is subject
to, and qualified in its entirety by reference to, all the provisions of
the indenture, including the definitions therein of certain terms.
Because the following is only a summary, it does not contain all
information that you may find useful. For further information you should
read the notes and the indenture.
GENERAL
The notes:
o are our unsecured obligations and rank equally with all of our
other unsecured senior indebtedness;
o are limited to $805,645,000 aggregate principal amount at
maturity;
o will mature on February 1, 2021; and
o do not pay interest annually, but will pay a principal amount
of $1,000 per note upon maturity, representing a yield to
maturity of 3.50%.
The notes are redeemable prior to maturity only on or after February
1, 2004, as described below under "--Optional Redemption," and do not
have the benefit of a sinking fund. Principal of the notes is payable,
and the transfer of notes is registrable, at the office of the trustee.
The notes were offered at a substantial discount from their
principal amount at maturity. See "Certain United States Federal Income
Tax Considerations--U.S. Holders--Original Issue Discount." Except as
described below, we will not make periodic cash payments of interest on
the notes. Each note of $1,000 principal amount was issued at an issue
price of $499.60 per note. However, the notes will accrue original issue
discount while they remain outstanding. Original issue discount is the
difference between the issue price and the principal amount at maturity
of a note. The calculation of the accrual of original issue discount is
on a semi-annual bond equivalent basis using a 360-day year composed of
twelve 30-day months. The issue date for the notes and the commencement
date for the accrual of original issue discount was February 1, 2001.
The notes were issued only in registered form without coupons in
denominations of $1,000 and any integral multiple of $1,000 above that
amount. No service charge will be made for any registration of transfer
or exchange of notes, but we may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection
therewith. The notes are represented by three global securities
registered in the name of a nominee of DTC, New York, New York.
CONVERSION RIGHTS
A holder may convert notes, in multiples of $1,000 principal amount
at maturity, into Jones Apparel Group common stock at any time before the
close of business on February 1, 2021. However, a holder may convert a
note only until the close of business on the last business day prior to
the redemption date if we call a note for redemption, unless we default
on payment of the redemption price. A note for which a holder has
delivered a purchase notice or a Fundamental Change (as defined below
under "--Fundamental Change Permits Holder to Require Us to Repurchase
Notes") repurchase notice requiring us to purchase or repurchase the note
may be converted only if such notice is withdrawn in accordance with the
indenture.
The initial conversion rate is 9.8105 shares of common stock per
note with a principal amount at maturity of $1,000, subject to adjustment
upon the occurrence of certain events described below. The conversion
rate will not be adjusted for accrued original issue discount.
In lieu of issuing fractional shares, we will pay an amount of cash
based on the Sale Price (as defined below under "--Purchase of Notes at
the Option of the Holder") of the common stock on the trading day
immediately preceding the conversion date. On conversion of a note, a
holder will not receive any cash payment representing accrued original
issue discount and the conversion rate will not be adjusted to reflect
any such accrual. Our delivery to the holder of the fixed number of
shares of common stock into which the note is convertible, together with
any cash payment for fractional shares, will be deemed:
o to satisfy our obligation to pay the principal amount at
maturity of the note; and
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o to satisfy our obligation to pay original issue discount that
accrued from the issue date through the conversion date.
As a result, accrued original issue discount is deemed to be paid in
full rather than canceled, extinguished or forfeited.
A certificate for the number of full shares of common stock into
which any note is converted, together with any cash payment for
fractional shares, will be delivered through the conversion agent as soon
as practicable following the conversion date. For a discussion of the tax
treatment of a holder receiving common stock upon conversion, see
"Certain United States Federal Income Tax Considerations--U.S.
Holders--Conversion of Notes."
The conversion rate will be adjusted for:
o dividends or distributions on Jones Apparel Group common stock
payable in Jones Apparel Group common stock or other Jones
Apparel Group capital stock;
o subdivisions, combinations or certain reclassifications of
Jones Apparel Group common stock;
o distributions to all holders of Jones Apparel Group common
stock of certain rights to purchase Jones Apparel Group common
stock for a period expiring within 60 days at less than the
Sale Price at the time; and
o certain distributions to such holders of our assets or debt
securities or certain rights to purchase our securities
(excluding cash dividends or other cash distributions from
current or retained earnings unless the annualized amount
thereof per share exceeds 10% of the Sale Price on the day
preceding the date of declaration of such dividend or other
distribution and excluding distributions in connection with a
transaction described in the third succeeding paragraph).
However, no adjustment need be made if noteholders may participate
in the transaction or in certain other cases. In cases where the fair
market value of assets, debt securities or certain rights, warrants or
options to purchase our securities distributed to shareholders (a) equals
or exceeds the average quoted price of the common stock, or (b) such
average quoted price exceeds the fair market value of such assets, debt
securities or rights, warrants or options so distributed by less than
$1.00, rather than being entitled to an adjustment in the conversion
rate, the holder of a note will be entitled to receive upon conversion,
in addition to the shares of Jones Apparel Group common stock, the kind
and amount of assets, debt securities or rights, warrants or options
comprising the distribution that such holder would have received if such
holder had converted such note immediately prior to the record date for
determining the shareholders entitled to receive the distribution.
The indenture permits us to increase the conversion rate from time
to time.
If we are party to a consolidation, merger or binding share exchange
or a transfer of all or substantially all of our assets, the right to
convert a note into common stock may be changed into a right to convert
it into the kind and amount of securities, cash or other assets of Jones
or another person which the holder would have received if the holder had
converted the holder's notes immediately prior to the transaction.
Holders of the notes may, in certain circumstances, be deemed to
have received a distribution subject to federal income tax as a dividend
as the result of:
o a taxable distribution to holders of common stock which results
in an adjustment of the conversion rate; or
o an increase in conversion rate at our discretion.
See "Certain United States Federal Income Tax Considerations--U.S.
Holders--Adjustment of Conversion Rate."
If we exercise our option to have cash interest, instead of original
issue discount, accrue on a note following a Tax Event (as defined below
under "--Optional Conversion to Semi-annual Cash Pay Note Upon Tax
Event"), the holder will be entitled on conversion to receive the same
number of shares of Jones Apparel Group common stock the holder would
have received if we had not exercised this option.
If we exercise this option, notes surrendered for conversion by a
holder during the period from the close of business on any regular record
date to the opening of business of the next interest payment date, except
for notes to be redeemed on a date within this period or on the next
interest payment date, must be accompanied by payment of an amount equal
to the interest that the registered holder is to receive on the note.
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Except where notes surrendered for conversion must be accompanied by
payment as described above, we will not pay interest on converted notes
on any interest payment date subsequent to the date of conversion. See
"--Optional Conversion to Semi-annual Cash Pay Note Upon Tax Event."
OPTIONAL REDEMPTION
No sinking fund is provided for the notes. Prior to February 1,
2004, the notes will not be redeemable. Beginning on February 1, 2004, at
our option we may redeem the notes for cash at any time as a whole, or
from time to time in part. We will give not less than 30 days nor more
than 60 days notice of redemption to noteholders by mail.
The table below shows what redemption prices of a note would be on
February 1, 2004, at each February 1 thereafter prior to maturity and at
maturity on February 1, 2021. These prices equal the issue price plus the
accrued original issue discount calculated to each such date. The
redemption price of a note redeemed between such dates would include an
additional amount reflecting the additional original issue discount
accrued since the next preceding date in the table.
Accrued
Original Issue Redemption
Issue Discount At Price
Redemption Date Price (1) 3.50%(2) (1) + (2)
- --------------- --------- -------- ---------
February 1, 2004............................ $499.60 $54.81 $554.41
February 1, 2005............................ 499.60 74.38 573.98
February 1, 2006............................ 499.60 94.65 594.25
February 1, 2007............................ 499.60 115.63 615.23
February 1, 2008............................ 499.60 137.35 636.95
February 1, 2009............................ 499.60 159.84 659.44
February 1, 2010............................ 499.60 183.12 682.72
February 1, 2011............................ 499.60 207.22 706.82
February 1, 2012............................ 499.60 232.18 731.78
February 1, 2013............................ 499.60 258.02 757.62
February 1, 2014............................ 499.60 284.76 784.36
February 1, 2015............................ 499.60 312.46 812.06
February 1, 2016............................ 499.60 341.13 840.73
February 1, 2017............................ 499.60 370.81 870.41
February 1, 2018............................ 499.60 401.54 901.14
February 1, 2019............................ 499.60 433.36 932.96
February 1, 2020............................ 499.60 466.30 965.90
At stated maturity.......................... 499.60 500.40 1,000.00
If converted to semi-annual cash pay notes following the occurrence
of a Tax Event, the notes will be redeemable at the restated principal
amount plus accrued and unpaid interest from the date of such conversion
through the redemption date. However, in no event may the notes be
redeemed prior to February 1, 2004. See "--Optional Conversion to
Semi-annual Cash Pay Note Upon Tax Event."
If less than all of the outstanding notes are to be redeemed, the
trustee shall select the notes to be redeemed in principal amounts at
maturity of $1,000 or integral multiples of $1,000. In this case the
trustee may select the notes by lot, pro rata or by any other method the
trustee considers fair and appropriate. If a portion of a holder's notes
is selected for partial redemption and the holder converts a portion of
the notes, the converted portion shall be deemed to be the portion
selected for redemption.
PURCHASE OF NOTES AT THE OPTION OF THE HOLDER
On the purchase dates of February 1, 2004, February 1, 2009 and
February 1, 2014, we will, at the option of the holder, be required to
purchase any outstanding note for which a written purchase notice has
been properly delivered by the holder to the trustee and not withdrawn,
subject to certain additional conditions. Holders may submit their notes
for purchase to the paying agent at any time from the opening of business
on the date that is 30 business days prior to such purchase date until
the close of business on such purchase date.
The purchase price of a note will be:
o $554.41 per note on February 1, 2004;
o $659.44 per note on February 1, 2009; and
o $784.36 per note on February 1, 2014.
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These purchase prices equal the issue price plus accrued original
issue discount to the purchase dates.
We may, at our option, elect to pay the purchase price in cash or in
shares of common stock valued at 95% of the Market Price (as defined
below) or any combination thereof. See "Certain United States Federal
Income Tax Considerations--U.S. Holders--Exercise of Holder's Put
Option."
If prior to a purchase date the notes have been converted to
semi-annual cash pay notes following the occurrence of a Tax Event, the
purchase price will be equal to the restated principal amount plus
accrued and unpaid interest from the date of such conversion to the
purchase date. See "--Optional Conversion to Semi- annual Cash Pay Note
Upon Tax Event."
We will be required to give notice on a date not less than 30
business days prior to each purchase date to all holders at their
addresses shown in the register of the registrar, and to beneficial
owners as required by applicable law, stating among other things:
o whether we will pay the purchase price of notes in cash or
common stock or any combination thereof, specifying the
percentages of each;
o if we elect to pay in common stock, the method of calculating
the Market Price of the common stock; and
o the procedures that holders must follow to require us to
purchase their notes.
The purchase notice given by each holder electing to require us to
purchase notes shall state:
o the certificate numbers of the holder's notes to be delivered
for purchase;
o the portion of the principal amount at maturity of notes to be
purchased, which must be $1,000 or an integral multiple of
$1,000;
o that the notes are to be purchased by us pursuant to the
applicable provisions of the notes and the indenture; and
o in the event we elect, pursuant to the notice that we are
required to give, to pay the purchase price in common stock, in
whole or in part, but the purchase price is ultimately to be
paid to the holder entirely in cash because any condition to
payment of the purchase price or portion of the purchase price
in common stock is not satisfied prior to the close of business
on the purchase date, as described below, whether the holder
elects: (1) to withdraw the purchase notice as to some or all
of the notes to which it relates, or (2) to receive cash in
respect of the entire purchase price for all notes or portions
of notes subject to such purchase notice.
If the holder fails to indicate the holder's choice with respect to
the election described in the final bullet point above, the holder shall
be deemed to have elected to receive cash in respect of the entire
purchase price for all notes subject to the purchase notice in these
circumstances. For a discussion of the tax treatment of a holder
receiving cash instead of common stock, see "Certain United States
Federal Income Tax Considerations--U.S. Holders--Exercise of Holder's Put
Option."
Any purchase notice may be withdrawn by the holder by a written
notice of withdrawal delivered to the paying agent prior to the close of
business on the purchase date.
The notice of withdrawal shall state:
o the principal amount at maturity being withdrawn;
o the certificate numbers of the notes being withdrawn; and
o the principal amount at maturity of the notes that remain
subject to the purchase notice, if any.
If we elect to pay the purchase price, in whole or in part, in
shares of Jones Apparel Group common stock, the number of shares of Jones
Apparel Group common stock to be delivered by us shall be equal to the
portion of the purchase price to be paid in Jones Apparel Group common
stock divided by 95% of the Market Price of a share of Jones Apparel
Group common stock.
We will pay cash based on the Market Price for all fractional shares
of common stock in the event we elect to deliver common stock in payment,
in whole or in part, of the purchase price. See "Certain United States
Federal Income Tax Considerations--U.S. Holders--Exercise of Holder's Put
Option."
The "Market Price" means the average of the Sale Prices of Jones
Apparel Group common stock for the 20 trading day period ending on the
third business day (if the third business day prior to the applicable
purchase
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date is a trading day or, if not, then on the last trading day prior
thereto) prior to the applicable purchase date, appropriately adjusted to
take into account the occurrence, during the period commencing on the
first of such trading days during such 20 trading day period and ending
on such purchase date, of certain events with respect to the common stock
that would result in an adjustment of the conversion rate.
The "Sale Price" of the Jones Apparel Group common stock on any date
means the closing sale price per share (or if no closing sale price is
reported, the average of the bid and ask prices or, if more than one in
either case, the average of the average bid and the average ask prices)
on such date as reported in composite transactions for the principal
United States securities exchange on which the common stock is traded or,
if the common stock is not listed on a United States national or regional
securities exchange, as reported by the Nasdaq System.
Because the Market Price of the common stock is determined prior to
the applicable purchase date, holders of notes bear the market risk with
respect to the value of the common stock to be received from the date
such Market Price is determined to such purchase date. We may pay the
purchase price or any portion of the purchase price in common stock only
if the information necessary to calculate the Market Price is published
in a daily newspaper of national circulation.
Our right to purchase notes, in whole or in part, with common stock
is subject to our satisfying various conditions, including:
o the registration of the common stock under the Securities Act
and the Exchange Act, if required; and
o any necessary qualification or registration under applicable
state securities law or the availability of an exemption from
such qualification and registration.
If such conditions are not satisfied with respect to a holder prior
to the close of business on the purchase date, we will pay the purchase
price of the notes of such holder entirely in cash. See "Certain United
States Federal Income Tax Considerations--U.S. Holders--Exercise of
Holder's Put Option." We may not change the form or components or
percentages of components of consideration to be paid for the notes once
we have given the notice that we are required to give to holders of
notes, except as described in the first sentence of this paragraph.
In connection with any purchase offer, we will:
o comply with the provisions of Rule 13e-4, Rule 14e-1 and any
other tender offer rules under the Exchange Act which may then
be applicable; and
o file Schedule TO or any other required schedule under the
Exchange Act.
Payment of the purchase price for a note for which a purchase notice
has been delivered and not validly withdrawn is conditioned upon delivery
of the note, together with necessary endorsements, to the paying agent at
any time after delivery of the purchase notice. Payment of the purchase
price for the note will be made promptly following the later of the
purchase date or the time of delivery of the note.
If the paying agent holds money or securities sufficient to pay the
purchase price of the note on the business day following the purchase
date in accordance with the terms of the indenture, then, immediately
after the purchase date, the note will cease to be outstanding and
original issue discount on such note will cease to accrue, whether or not
the note is delivered to the paying agent. Thereafter, all other rights
of the holder shall terminate, other than the right to receive the
purchase price upon delivery of the note.
Our ability to purchase notes with cash may be limited by the terms
of our then existing indebtedness or financing agreements.
No notes may be purchased for cash at the option of holders if there
has occurred and is continuing an event of default with respect to the
notes, other than a default in the payment of the purchase price with
respect to such notes.
FUNDAMENTAL CHANGE PERMITS HOLDER TO REQUIRE US TO REPURCHASE NOTES
If a Fundamental Change occurs at any time prior to February 1,
2004, each holder will have the right, at the holder's option, to require
us to repurchase any or all of the holder's notes. The notes may be
repurchased in multiples of $1,000 principal amount at maturity. We will
repurchase the notes at a price equal to the issue price plus accrued
original issue discount to the repurchase date. If, prior to the
repurchase date, we elect to convert the notes to semi-annual cash pay
notes following a Tax Event, the repurchase price will be equal to the
restated principal amount plus accrued and unpaid interest to the
repurchase date. See "--Optional Conversion to Semi-annual Cash Pay Note
Upon Tax Event."
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We may, at our option, instead of paying the Fundamental Change
repurchase price in cash, pay all or a portion of the Fundamental Change
repurchase price in Jones Apparel Group common stock, as long as Jones
Apparel Group common stock is then listed on a national securities
exchange or traded on the Nasdaq National Market. If we elect to pay all
or a portion of the Fundamental Change repurchase price in shares of
Jones Apparel Group common stock, then the number of shares of Jones
Apparel Group common stock to be delivered by us shall be equal to the
portion of the Fundamental Change repurchase price to be paid in Jones
Apparel Group common stock divided by 95% of the Market Price of a share
of Jones Apparel Group common stock.
On or before the 30th day after the occurrence of a Fundamental
Change, we will mail to all holders of record of the notes a notice of
the occurrence of the Fundamental Change and of the resulting repurchase
right. We will also deliver to the trustee a copy of the notice. To
exercise the repurchase right, holders of notes must deliver, on or
before the 60th day after the date of our notice of a Fundamental Change,
the notes to be repurchased, duly endorsed for transfer, together with
the form entitled "Option to Elect Repurchase Upon a Fundamental Change"
on the reverse side of the note duly completed, to the paying agent.
A Fundamental Change occurs if:
o Jones Apparel Group consolidates or merges with or into another
person (other than a subsidiary);
o Jones Apparel Group sells, conveys, transfers or leases its
properties and assets substantially as an entirety to any
person (other than a subsidiary);
o any person (other than a subsidiary) consolidates with or
merges with or into Jones Apparel Group;
o Jones Apparel Group outstanding common stock is reclassified
into, exchanged for or converted into the right to receive any
other property or security provided that none of these
circumstances will be a Fundamental Change if at least 50% of
the aggregate fair market value (as determined by our board of
directors) of such property and securities, other than cash
payments for fractional shares, consists of shares of voting
common stock of the surviving person that are, or upon issuance
will be, traded on a United States national securities exchange
or approved for trading on an established automated
over-the-counter trading market in the United States; or
o any person, including its affiliates and associates (an
"Acquiring Person"), files a Schedule 13D or Schedule TO (or
any successor schedule, form or report under the Exchange Act)
disclosing that such person has become the beneficial owner of
50% or more of the total voting power in the aggregate of all
classes of our common stock then outstanding normally entitled
to vote in elections of directors other than through a merger
or binding share exchange in which all or substantially all (as
determined by our board of directors) of the consideration
(except for cash payments for fractional shares) received by
the holders (other than the Acquiring Person) of Jones Apparel
Group common stock consists of shares of voting common stock of
the surviving person that are, or that upon issuance will be,
traded on a United States national securities exchange or
approved for trading on an established automated
over-the-counter trading market in the United States.
We will comply with the provisions of Rule 13e-4 and any other
tender offer rules under the Exchange Act which may then be applicable in
connection with the repurchase of the notes in the event of a Fundamental
Change.
The repurchase rights of the holders of notes could discourage a
potential acquirer of Jones. The Fundamental Change repurchase feature,
however, is not the result of management's knowledge of any specific
effort to obtain control of Jones by any means or part of a plan by
management to adopt a series of anti-takeover provisions.
The term Fundamental Change is limited to specified transactions and
may not include other events that might adversely affect our financial
condition. In addition, the requirement that we offer to repurchase the
notes upon a Fundamental Change may not protect noteholders in the event
of a highly leveraged transaction, reorganization, merger or similar
transaction involving us.
No notes may be repurchased at the option of holders upon a
Fundamental Change if there has occurred and is continuing an event of
default described under "--Events of Default" below. However, notes may
be repurchased if the event of default is in the payment of the
Fundamental Change repurchase price with respect to the notes.
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OPTIONAL CONVERSION TO SEMI-ANNUAL CASH PAY NOTE UPON TAX EVENT
From and after the date of the occurrence of a Tax Event, we will
have the option to elect to have interest in lieu of future original
issue discount accrue at the rate of 3.50% per year on a principal amount
per note (the "Restated Principal Amount") equal to the issue price plus
original issue discount accrued to the date of the Tax Event or the date
on which we exercise the option described herein, whichever is later (the
"Option Exercise Date").
Such interest will accrue from the Option Exercise Date and will be
payable in cash semi-annually on the interest payment dates of February 1
and August 1 of each year to holders of record at the close of business
on January 16 or July 16 immediately preceding the interest payment date.
Interest will be computed on the basis of a 360-day year comprised of
twelve 30-day months. Interest will initially accrue from the Option
Exercise Date and thereafter from the last date to which interest has
been paid.
A "Tax Event" means that we shall have received an opinion from
independent tax counsel experienced in such matters to the effect that,
on or after the date of this prospectus, as a result of:
(1) any amendment to, or change (including any announced
prospective change) in the laws, rules or regulations thereunder of
the United States or any political subdivision or taxing authority
thereof or therein, or
(2) any amendment to, or change in, an interpretation or
application of such laws, rules or regulations by any legislative
body, court, governmental agency or regulatory authority,
in each case which amendment or change is enacted, promulgated, issued or
announced or which interpretation is issued or announced or which action
is taken, on or after the date of this prospectus, there is more than an
insubstantial risk that original issue discount payable on the notes
either:
o would not be deductible on a current accrual basis, or
o would not be deductible under any other method,
in either case in whole or in part, by us (by reason of deferral,
disallowance, or otherwise) for United States federal income tax
purposes.
The Clinton Administration had proposed to change the tax law to
defer the deduction of original issue discount on convertible debt
instruments until the issuer pays the original issue discount. Congress
has not enacted these proposed changes in the law. If a similar proposal
were ever enacted and made applicable to the notes in a manner that would
limit our ability to either:
o deduct the interest, including original issue discount, payable
on the notes on a current accrual basis, or
o deduct the interest, including original issue discount, payable
on the notes under any other method for United States federal
income tax purposes,
such enactment would result in a Tax Event and the terms of the notes
would be subject to modification at our option as described above.
The modification of the terms of the notes by us upon a Tax Event,
as described above, may alter the timing of income recognition by holders
of the notes with respect to the semi-annual payments of interest due on
the notes after the Option Exercise Date.
CERTAIN COVENANTS
The indenture contains covenants including, among others, the
following:
Restrictions on Liens. Except as provided below under "--Exempted Debt,"
we will not, and will not permit any "significant subsidiary" (as such
term is defined in Regulation S-X promulgated by the SEC) to, create or
suffer to exist any mortgage, lien, pledge, charge, security interest or
encumbrance (a "lien" or "liens") to secure any of our or a significant
subsidiary's indebtedness on any property the net book value of which
exceeds 1% of our consolidated net tangible assets (the "Principal
Properties"), unless all of the notes outstanding at the time of such
lien are secured by the same lien, equally and ratably with any and all
other indebtedness secured by such lien.
The restrictions in the preceding sentence do not apply to:
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o liens on property of a person existing at the time of its
merger or consolidation with or into any of us or our
significant subsidiaries or at the time of sale, lease or other
disposition of its properties to any of us or our significant
subsidiaries;
o liens on property of a person existing at the time it becomes a
significant subsidiary or existing on property prior to our or
a significant subsidiary's acquisition of the property;
o liens securing indebtedness (A) between a significant
subsidiary and any of us, or (B) between significant
subsidiaries or (C) between us;
o liens on any property created, assumed or otherwise brought
into existence in contemplation of the sale or other
disposition of the underlying property, so long as (A) the
relevant person disposes of such property within 180 days after
the creation of those liens and (B) any indebtedness secured by
those liens is without recourse to any of us or any significant
subsidiary;
o liens in favor of the United States of America or any of its
states, or any of their departments, agencies or
instrumentalities or political subdivisions, or in favor of any
country, or any of its political subdivisions, to secure
partial, progress, advance or other payments, or performance of
any other similar obligations, including, without limitation,
liens to secure pollution control bonds or industrial revenue
or other similar types of bonds;
o liens imposed by law, such as carriers', warehousemen's and
mechanics' liens and other similar liens arising in the
ordinary course of business which secure obligations not more
than 60 days past due or are being contested in good faith and
by appropriate proceedings;
o liens incurred in the ordinary course of business to secure
performance of obligations with respect to statutory or
regulatory requirements, performance or return-of-money bonds,
surety bonds or other obligations of a like nature, in each
case which are not incurred in connection with the borrowing of
money, the obtaining of advances or credit or the payment of
the deferred purchase price of property and which do not in the
aggregate impair in any material respect the use of property in
the operation of our business taken as a whole;
o liens incurred to secure appeal bonds and judgment and
attachment liens, in each case in connection with litigation or
legal proceedings which are being contested in good faith by
appropriate proceedings so long as reserves have been
established to the extent required by generally accepted
accounting principles as in effect at such time;
o pledges or deposits under workmen's compensation laws,
unemployment insurance laws or similar legislation, or good
faith deposits in connection with bids, tenders, contracts
(other than for the payment of indebtedness) or leases to which
any of us or any significant subsidiary is a party, or deposits
to secure public or statutory obligations of any of us or of
any significant subsidiary or deposits for the payment of rent,
in each case incurred in the ordinary course of business;
o utility easements, building restrictions and such other
encumbrances or charges against real property as are of a
nature generally existing with respect to properties of a
similar character;
o liens granted to any bank or other institution on the payments
to be made to such institution by any of us or any subsidiary
pursuant to any interest rate swap or similar agreement or
foreign currency hedge, exchange or similar agreement designed
to provide protection against fluctuations in interest rates
and currency exchange rates, respectively, provided that such
agreements are entered into in, or are incidental to, the
ordinary course of business;
o liens arising solely by virtue of any statutory or common law
provision relating to banker's liens, rights of set off or
similar rights and remedies, in each case as to any deposit
account or any other fund maintained with a creditor depository
institution, provided that (1) the deposit account is not a
dedicated cash collateral account and is not subject to
restrictions against access by the applicable co-obligor or a
significant subsidiary in excess of those set forth by
regulations promulgated by the Federal Reserve Board, and (2)
the deposit account is not intended by the applicable
co-obligor or a significant subsidiary to provide collateral to
the depository institution;
o liens arising from the Uniform Commercial Code financing
statements regarding leases;
o the giving, simultaneously with or within 180 days after the
latest of the date of the indenture, or the acquisition,
construction, improvement, development or expansion of such
property, of a purchase money lien on property acquired,
constructed, improved, developed or expanded after the date of
the indenture, or the acquisition, construction, improvement,
development or
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expansion after the date of the indenture, of property subject
to any lien which is limited to such property;
o the giving of a lien on real property which is the sole
security for indebtedness incurred within two years after the
latest of the date of the indenture, or the acquisition,
construction, improvement, development or expansion of the
property, so long as the holder of such indebtedness is
entitled to enforce its payment only by resorting to such
security;
o liens arising by the terms of letters of credit entered into in
the ordinary course of business to secure reimbursement
obligations thereunder;
o liens existing on the date of the indenture;
o liens for taxes, assessments and other governmental charges or
levies not yet due or as to which the period of grace, if any,
has not expired or which are being contested in good faith and
by appropriate proceedings if adequate reserves are maintained
to the extent required by generally accepted accounting
principles as in effect at such time; and
o extension, renewal, replacement or refunding of any lien
existing on the date of the indenture or referred to in certain
of the bullet points above, so long as the principal amount of
indebtedness so secured and not otherwise authorized by the
relevant bullet points shall not exceed the principal amount of
indebtedness, plus any premium or fee payable in connection
with any such extension, renewal, replacement or refunding, so
secured at the time of such extension, renewal, replacement or
refunding.
Restrictions on Sale and Leaseback Transactions. Except as provided below
under "--Exempted Debt," we will not, and will not permit any significant
subsidiary to, enter into any arrangement with any person providing for
the leasing from that person of any Principal Property previously or
contemporaneously sold or transferred to it by any of us or our
significant subsidiaries with the intention of taking back a lease of
such Principal Property (a "sale and leaseback transaction"), unless our
board of directors determines that the net proceeds of the sale or
transfer are to be at least equal to the fair market value of the
relevant Principal Property or asset at the time of the sale and transfer
and either one of the following occurs:
o within 180 days after it has been received, an amount equal to
the net proceeds of such sale or transfer is applied to the
retirement or prepayment of our or a significant subsidiary's
indebtedness that is senior to or equal in right of payment
with the notes or to the purchase, construction or development
of property or assets to be used in the ordinary course of
business, or
o the lessee would, on the effective date of the relevant sale or
transfer, be entitled, pursuant to the indenture, to issue,
assume or guarantee indebtedness secured by a lien upon the
relevant Principal Property at least equal in amount to the
then present value (discounted at the actual rate of interest
of the sale and leaseback transaction) of its obligation for
the net rental payments in respect of such sale and leaseback
transaction without equally and ratably securing the notes.
The restrictions in the preceding paragraph will not apply to any sale
and leaseback transaction:
o between (A) any of us and a significant subsidiary or (B)
between significant subsidiaries or (C) between us, so long as
the lessor is one of us or a wholly owned significant
subsidiary;
o which has a lease of less than three years in length;
o entered into within 180 days after the later of the purchase,
construction or development of the relevant Principal Property
or asset or the commencement of operation of the relevant
Principal Property; or
o involving Jones' distribution warehouse at South Hill,
Virginia.
Exempted Debt. Notwithstanding the restrictions in the indenture on (1)
liens and (2) sale and leaseback transactions, any of us or any
significant subsidiary may, in addition to amounts permitted under those
restrictions, create indebtedness secured by liens, or enter into sale
and leaseback transactions, so long as, at the time of those transactions
and after giving effect to them, the aggregate outstanding amount of all
such indebtedness secured by liens plus the then present value
(discounted at the actual rate of interest of the sale and leaseback
transaction) of the obligations for the net rental payments resulting
from the sale and leaseback transactions does not exceed 20% of our and
our subsidiaries' consolidated stockholders' equity.
Corporate Existence. Unless our board of directors determines that it is
no longer desirable in the conduct of our business and the business of
our significant subsidiaries considered as a whole, each of us will do or
cause to be
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done all things necessary to preserve and keep in full force and effect
our corporate existence, material rights (charter and statutory) and
material franchises.
No Special Protection in the Event of a Highly Leveraged Transaction. The
terms of the notes will not afford the holders special protection in the
event of a highly leveraged transaction.
EVENTS OF DEFAULT
Each of the following constitutes an event of default under the
indenture:
o default in payment of the principal amount at maturity (or if
the notes have been converted to semi-annual cash pay notes
following a Tax Event, the Restated Principal Amount),
redemption price, purchase price or Fundamental Change
repurchase price with respect to any note when such amount
becomes due and payable;
o if the notes have been converted to semi-annual cash pay notes
following a Tax Event, the failure to pay interest within 30
days of the due date;
o our failure to pay liquidated damages within 30 days of the due
date;
o our failure to comply with the obligations described under
"--Mergers and Sales of Assets" below;
o our failure to comply with any of our obligations under the
covenants described under "--Certain Covenants" above upon
receipt by us of notice of such default by the trustee or by
holders of not less than 25% in aggregate principal amount at
maturity of the notes then outstanding and our failure to cure
(or obtain a waiver of) such default within 30 days after
receipt by us of such notice;
o our failure to comply with any of our other agreements in the
notes or the indenture upon receipt by us of notice of such
default by the trustee or by holders of not less than 25% in
aggregate principal amount at maturity of the notes then
outstanding and our failure to cure (or obtain a waiver of)
such default within 60 days after receipt by us of such notice;
o a default under any indebtedness (other than the notes) by any
of us or by any significant subsidiary as a result of which an
amount in excess of $25.0 million becomes due and payable prior
to the date on which it would otherwise have become due and
payable upon receipt by us of notice of the default by the
trustee or by holders of not less than 25% in aggregate
principal amount at maturity of the notes then outstanding,
without such indebtedness having been discharged or such
acceleration having been rescinded or annulled within 30 days
after such notice;
o any judgment or decree for the payment of money in excess of
$25.0 million against any of us or any significant subsidiary
if (A) an enforcement proceeding thereon is commenced by any
creditor or (B) it is not discharged, waived or stayed and
remains outstanding for a period of 60 days;
o the co-obligation of any of us shall cease to be in full force
and effect (except as contemplated by the terms thereof); and
o certain events of bankruptcy, insolvency or reorganization
affecting us.
If any event of default (other than an event of default relating to
certain events of bankruptcy, insolvency or reorganization) occurs and is
continuing, either the trustee or the holders of not less than 25% in
aggregate principal amount at maturity of the notes then outstanding by
written notice to us (and to the trustee if such notice is given by the
holders) may declare the issue price of the notes plus the original issue
discount on the notes accrued through the date of such declaration to be
immediately due and payable. In the case of certain events of bankruptcy,
insolvency or reorganization, the issue price of the notes plus the
original issue discount accrued thereon through the occurrence of such
event shall automatically become and be immediately due and payable
without any declaration or other act on the part of the trustee or any
holders.
Subject to the provisions of the indenture relating to the duties of
the trustee in case an event of default shall occur and be continuing,
the trustee is under no obligation to exercise any of its rights or
powers under the indenture at the request or direction of any of the
holders, unless such holders have offered to the trustee indemnity or
security satisfactory to it against any loss, liability or expense.
Subject to such provisions for the indemnification of the trustee, the
holders of at least a majority in aggregate principal amount at maturity
of the outstanding notes have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the
trustee or exercising any trust or power conferred on the trustee with
respect to the notes. The trustee, however, may refuse to follow any
direction that conflicts with law or the indenture or that the
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trustee determines is unduly prejudicial to the rights of any other
holder or that would involve the trustee in personal liability. Prior to
taking any action under the indenture, the trustee is entitled to
indemnification satisfactory to it in its sole discretion against all
losses and expenses caused by taking or not taking such action.
No holder of a note has any right to institute any proceeding with
respect to the indenture, or for the appointment of a receiver or a
trustee, or for any other remedy thereunder, unless:
o such holder has previously given to the trustee written notice
of a continuing event of default with respect to the notes;
o the holders of at least 25% in aggregate principal amount at
maturity of the outstanding notes have made written request,
and such holder or holders have offered reasonable security or
indemnity against any loss, liability or expense, to the
trustee to institute such proceeding as trustee; and
o the trustee has failed to institute such proceeding, and has
not received from the holders of a majority in aggregate
principal amount at maturity of the outstanding notes a
direction inconsistent with such request, within 60 days after
such notice, request and offer.
However, such limitations do not apply to a suit instituted by a holder
of a note for the enforcement of payment of the principal amount at
maturity, the restated principal amount, redemption price, purchase price
or Fundamental Change repurchase price or interest on such note on or
after the applicable due date specified in such note.
The indenture provides that if a default with respect to notes
occurs and is continuing and is known to the trustee, the trustee must
mail to each noteholder notice of the default within 90 days after it
occurs. Except in the case of a default in the principal amount at
maturity (or if the notes have been converted to semi-annual cash pay
notes following a Tax Event, the Restated Principal Amount), redemption
price, purchase price or Fundamental Change repurchase price with respect
to any note when such amount becomes due and payable, the trustee may
withhold notice if and so long as a committee of its trust officers in
good faith determines that withholding notice is in the interests of the
noteholders.
The indenture requires Jones to furnish to the trustee, within 120
days after the end of each fiscal year, a statement by certain of its
officers as to whether or not we, to their knowledge, are in default in
the performance or observance of any of the terms, provisions and
conditions of the indenture and, if so, specifying all such known
defaults.
MODIFICATION AND WAIVER
Modifications and amendments of the indenture may be made by us and
the trustee with the consent of the holders of at least a majority in
aggregate principal amount at maturity of the outstanding notes affected
by such modification or amendment.
No such modification or amendment may, without the consent of the
holder of each outstanding note affected thereby,
o make any change to the percentage of principal amount at
maturity of notes the holders of which must consent to an
amendment;
o reduce the principal amount at maturity, restated principal
amount or issue price, or extend the stated maturity, of any
note;
o reduce the redemption price, purchase price or Fundamental
Change repurchase price of any note;
o make any change that adversely affects the right to convert any
note;
o except as otherwise provided herein and in the indenture, alter
the manner or rate of accrual of original issue discount or
interest on any note, reduce the rate of interest upon the
occurrence of a Tax Event, or extend the time for payment of
original issue discount or interest, if any, on any note;
o make any note payable in money or securities other than that
stated in the note;
o make any change that adversely affects such holder's right to
require us to purchase a note; or
o impair the right to institute suit for the enforcement of any
payment with respect to, or conversion of, the notes.
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Without the consent of any holder, we and the trustee may amend the
indenture to cure any ambiguity, omission, defect or inconsistency, to
provide for the assumption by a successor corporation of our obligations
under the indenture as permitted thereunder, or to make any other change
that does not adversely affect the rights of any holder.
The holders of at least a majority in principal amount at maturity
of the outstanding notes may waive compliance by us with certain
restrictive provisions of the indenture. The holders of at least a
majority in principal amount at maturity of the outstanding notes may
waive any past default under the indenture, except a default in the
payment of principal or interest and certain covenants and provisions of
the indenture which cannot be amended without the consent of the holder
of each outstanding note.
MERGERS AND SALES OF ASSETS
The indenture provides that none of the issuers may consolidate with
or merge into any other person or convey, transfer or lease all or
substantially all of its properties and assets to another person, unless
among other items: (i) the resulting, surviving or transferee person (if
other than the relevant issuer) is organized and existing under the laws
of the United States, any state thereof or the District of Columbia and
such person expressly assumes, by supplemental indenture, all obligations
of the relevant issuer under the notes and the indenture; (ii) the
relevant issuer or such successor person shall not immediately thereafter
be in default under the indenture; (iii) the relevant issuer shall have
provided the trustee with an opinion of counsel and officer's certificate
confirming compliance with the indenture and (iv) the notes shall be
secured ratably by any liens to which a Principal Property of the
relevant issuer becomes subject as a result of the transaction that would
otherwise not be permitted by the indenture. Upon the assumption of the
obligations of the relevant issuer by such a person in such
circumstances, subject to certain exceptions, the relevant issuer shall
be discharged from all obligations under the notes and the indenture
(except in the case of a lease). Although such transactions are permitted
under the indenture, certain of the foregoing transactions could
constitute a Fundamental Change permitting each holder to require us to
purchase the notes of such holder as described above.
DISCHARGE OF THE INDENTURE
We may satisfy and discharge our obligations under the indenture by
delivering to the trustee for cancelation all outstanding notes or by
depositing with the trustee, the paying agent or the conversion agent, if
applicable, after the notes have become due and payable, whether at
stated maturity, or any redemption date, or any purchase date, or a
Fundamental Change repurchase date, or upon conversion or otherwise, cash
or shares of Jones Apparel Group common stock (as applicable under the
terms of the indenture) sufficient to pay all of the outstanding notes
and paying all other sums payable under the indenture by us.
LIMITATION OF CLAIMS IN BANKRUPTCY
If a bankruptcy proceeding is commenced in respect of us, the claim
of the holder of a note is, under Title 11 of the United States Code,
limited to the issue price of the note plus that portion of the original
issue discount that has accrued from the date of issue to the
commencement of the proceeding.
REGARDING THE TRUSTEE
The indenture provides that, except during the continuance of an
event of default, the trustee will perform only such duties as are
specifically set forth in the indenture. During the existence of an event
of default, the trustee will exercise such rights and powers vested in it
under the indenture and use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in
the conduct of such person's own affairs.
The indenture and provisions of the Trust Indenture Act that are
incorporated by reference therein contain limitations on the rights of
the trustee, should it become one of our creditors, to obtain payment of
claims in certain cases or to realize on certain property received by it
in respect of any such claim as security or otherwise. The trustee is
permitted to engage in other transactions with us or any of our
affiliates; provided, however, that if it acquires any conflicting
interest (as defined in the indenture or in the Trust Indenture Act), it
must eliminate such conflict or resign.
The trustee under the indenture has additional financial
arrangements with us, including as trustee under Nine West's Supplemental
Executive Retirement Plan, as trustee for the Nine West Pension Plan, as
a lender under the Senior Credit Facilities, as trustee for our 7 1/2%
Notes, 7 7/8% Notes, 8 3/8% Notes and 9% Notes and as transfer agent and
registrar for Jones Apparel Group common stock.
BOOK-ENTRY; DELIVERY AND FORM; GLOBAL NOTE
Notes sold by the selling securityholders pursuant to the
registration statement of which this prospectus forms a part will be
represented by one or more permanent global notes in definitive,
fully-registered form without interest coupons. The global notes will be
deposited with the trustee as custodian for DTC and registered in the
name of a nominee of DTC in New York, New York for the accounts of
participants in DTC.
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Investors may hold their interests in the global note directly
through DTC if they are DTC participants, or indirectly through
organizations that are DTC participants.
Investors who purchase notes in offshore transactions may hold their
interests in the global note directly through Euroclear Bank S.A./N.V.,
as operator of the Euroclear System ("Euroclear") and Clearstream
Banking, societe anonyme ("Clearstream"), if they are participants in
such systems, or indirectly through organizations that are participants
in such systems. Euroclear and Clearstream will hold interests in the
global note on behalf of their participants through their respective
depositaries, which in turn will hold such interests in the global note
in the depositaries' names on the books of DTC.
DTC has advised us as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York Uniform
Commercial Code, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code and a "clearing agency" registered pursuant
to the provisions of Section 17A of the Exchange Act. DTC was created to
hold securities of institutions that have accounts with DTC
("participants") and to facilitate the clearance and settlement of
securities transactions among its participants in such securities through
electronic book-entry changes in accounts of the participants, thereby
eliminating the need for physical movement of securities certificates.
DTC's participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations. Access
to DTC's book-entry system is also available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, whether directly or
indirectly.
Ownership of beneficial interests in the global note will be limited
to participants or persons that may hold interests through participants.
Ownership of beneficial interests in the global note will be shown on,
and the transfer of those ownership interests will be effected only
through, records maintained by DTC (with respect to participants'
interests) and such participants (with respect to the owners of
beneficial interests in the global note other than participants).
Beneficial interests in the global note will be exchangeable for
definitive notes only in accordance with the terms of the indenture.
So long as DTC or its nominee is the registered holder and owner of
the global note, DTC or such nominee, as the case may be, will be
considered the sole legal owner of the notes represented by the global
note for all purposes under the indenture and the notes. Except as set
forth below, owners of beneficial interests in the global note will not
be entitled to receive definitive notes and will not be considered to be
the owners or holders of any notes under the global note. We understand
that under existing industry practice, in the event an owner of a
beneficial interest in the global note desires to take any actions that
DTC, as the holder of the global note, is entitled to take, DTC would
authorize the participants to take such action, and that participants
would authorize beneficial owners owning through such participants to
take such action or would otherwise act upon the instructions of
beneficial owners owning through them. No beneficial owner of an interest
in the global note will be able to transfer the interest except in
accordance with DTC's applicable procedures, in addition to those
provided for under the indenture and, if applicable, those of Euroclear
and Clearstream.
Payments of the principal of, premium, if any, and liquidated
damages, if any, on, the notes represented by the global note registered
in the name of and held by DTC or its nominee will be made to DTC or its
nominee, as the case may be, as the registered owner and holder of the
global note.
DTC or its nominee, upon receipt of any payment of principal in
respect of the global note, will credit participants' accounts with
payments in amounts proportionate to their respective beneficial
interests in the principal amount of the global note as shown on the
records of DTC or its nominee. We also expect that payments by
participants to owners of beneficial interests in the global note held
through such participants will be governed by standing instructions and
customary practices as is now the case with securities held for accounts
of customers registered in the names of nominees for such customers. Such
payments, however, will be the responsibility of such participants and
indirect participants, and neither we, the trustee nor any paying agent
will have any responsibility or liability for any aspect of the records
relating to, or payments made on account of, beneficial ownership
interests in the global note or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests or for any
other aspect of the relationship between DTC and its participants or the
relationship between such participants and the owners of beneficial
interests in the global note.
Unless and until it is exchanged in whole or in part for definitive
notes in definitive form, the global note may not be transferred except
as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or
another nominee of DTC. Transfers between participants in DTC will be
effected in the ordinary way in accordance with DTC rules and will be
settled in same-day funds.
Transfers between participants in Euroclear and Clearstream will be
effected in the ordinary way in accordance with their respective rules
and operating procedures. If a holder requires physical delivery of a
definitive note for any reason, including to sell notes to persons in
jurisdictions that require such delivery of such notes or to pledge such
notes, such holder must transfer its interest in the global note in
accordance with the normal procedures of DTC and the procedures set forth
in the indenture.
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Cross-market transfers between DTC, on the one hand, and directly or
indirectly through Euroclear or Clearstream participants, on the other,
will be effected in DTC in accordance with DTC rules on behalf of
Euroclear or Clearstream, as the case may be, by its respective
depositary; however, such cross-market transactions will require delivery
of instructions to Euroclear or Clearstream, as the case may be, by the
counterparty in such system in accordance with its rules and procedures
and within its established deadlines (Brussels time). Euroclear or
Clearstream, as the case may be, will, if the transaction meets its
settlement requirements, deliver instructions to its respective
depositary to take action to effect final settlement on its behalf by
delivering or receiving interests in the global note in DTC, and making
or receiving payment in accordance with normal procedures for same-day
funds settlement applicable to DTC. Euroclear participants and
Clearstream participants may not deliver instructions directly to the
depositaries for Euroclear or Clearstream.
Because of time zone differences, the securities account of a
Euroclear or Clearstream participant purchasing an interest in the global
note from a DTC participant will be credited during the securities
settlement processing day (which must be a business day for Euroclear or
Clearstream, as the case may be) immediately following the DTC settlement
date, and such credit of any interests in the global note settled during
such processing day will be reported to the relevant Euroclear or
Clearstream participant on such day. Cash received in Euroclear or
Clearstream as a result of sales of interests in the global note by or
through a Euroclear or Clearstream participant to a DTC participant will
be received with value on the DTC settlement date, but will be available
in the relevant Euroclear or Clearstream cash account only as of the
business day following settlement in DTC.
We expect that DTC will take any action permitted to be taken by a
holder of notes only at the direction of one or more participants to
whose account the DTC interests in the global note is credited and only
in respect of such portion of the aggregate principal amount of the notes
as to which such participant or participants has or have given such
direction. However, if there is an Event of Default under the notes, DTC
will exchange the global note for definitive notes, which it will
distribute to its participants.
Although we expect that DTC, Euroclear and Clearstream will agree to
the foregoing procedures in order to facilitate transfers of interests in
the global note among participants of DTC, Euroclear, and Clearstream,
DTC, Euroclear and Clearstream are under no obligation to perform or
continue to perform such procedures, and such procedures may be
discontinued at any time. Neither we nor the trustee will have any
responsibility for the performance by DTC, Euroclear or Clearstream or
their participants or indirect participants of their respective
obligations under the rules and procedures governing their operations.
If DTC is at any time unwilling to continue as a depositary for the
global note and a successor depositary is not appointed by us within 90
days, we will issue definitive notes in exchange for the global note.
We may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depositary). In that
event, certificates representing the notes will be printed and delivered.
The information in this section concerning DTC, Clearstream Banking,
Euroclear and DTC's book- entry system has been obtained from sources
that we believe to be reliable, but we do not take responsibility for the
accuracy thereof.
REGISTRATION RIGHTS
Pursuant to the registration rights agreement we entered into with
the initial purchasers of the notes, we have filed a shelf registration
statement, of which this prospectus is a part, covering resales of the
notes and the Jones Apparel Group common stock issuable upon the
conversion thereof pursuant to Rule 415 under the Securities Act.
Subject to certain rights to suspend use of the shelf registration
statement, we will use reasonable efforts to cause the shelf registration
statement to be declared effective by July 31, 2001 and to keep the shelf
registration statement effective until the earliest of (1) the time when
the notes or Jones Apparel Group common stock issuable upon conversion
thereof covered by the shelf registration statement can be sold pursuant
to Rule 144 under the Securities Act or any successor rule or regulation
thereto, (2) February 1, 2003, the second anniversary of the original
date of issuance of the notes, (3) the date on which all notes registered
under the shelf registration statement are disposed of in accordance
therewith and (4) the date upon which the notes are no longer
outstanding.
The following requirements and restrictions will generally apply to
a holder selling such securities pursuant to the shelf registration
statement:
o such holder will be required to be named as selling
securityholder in the related prospectus;
o such holder will be required to deliver a prospectus to
purchasers;
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o such holder will be subject to certain of the civil liability
provisions under the Securities Act in connection with such
sales; and
o such holder will be bound by the provisions of the registration
rights agreements which are applicable to such holder
(including certain indemnification obligations).
We have agreed to pay predetermined liquidated damages ("liquidated
damages") to holders of the notes and holders of Jones Apparel Group
common stock issued upon conversion of the notes if the shelf
registration statement is not timely made effective as described above or
if the prospectus is unavailable for periods in excess of those described
below. Such liquidated damages shall accrue until such failure to become
or remain effective or such unavailability is cured:
o in respect of any note, at a rate per year equal to 0.25% for
the first 90 days after the occurrence of such event and 0.5%
thereafter of the applicable principal amount (as defined
below) thereof, and
o in respect of any shares of Jones Apparel Group common stock
into which the notes have been converted at a rate per year
equal to 0.25% for the first 90 days after the occurrence of
such event and 0.5% thereafter of the then applicable
conversion price (as defined below).
The term "applicable principal amount" means, as of any date of
determination, with respect to each $1,000 principal amount at maturity
of the notes, the sum of the issue price of such notes plus accrued
original issue discount with respect to such notes through such date of
determination or, following the conversion of the notes to
interest-bearing securities after a Tax Event, the Restated Principal
Amount. The term "applicable conversion price" means, as of any date of
determination, the applicable principal amount per $1,000 principal
amount at maturity of notes as of such date of determination divided by
the conversion rate in effect as of such date of determination or, if no
notes are then outstanding, the conversion rate that would be in effect
were the notes then outstanding.
Such liquidated damages will accrue from and including the date on
which any such registration default occurs to but excluding the date on
which all registration defaults have been cured. We will have no other
liabilities for monetary damages with respect to our registration
obligations, except that if we breach, fail to comply with or violate
certain provisions of the registration rights agreement, the holders of
the notes will be entitled to equitable relief, including injunction and
specific performance.
We are permitted to suspend the effectiveness of the shelf
registration statement or the use of the prospectus that is part of the
shelf registration statement during specified periods (not to exceed 45
days in any three month period or 90 days in any 12 month period) in
specified circumstances, including circumstances relating to pending
corporate developments.
The summary above of certain provisions of the registration rights
agreement is subject to, and is qualified in its entirety by reference
to, all the provisions of the registration rights agreement, a copy of
which is filed as an exhibit to Jones Apparel Group's Annual Report on
Form 10-K for the fiscal year ended December 31, 2000 which is
incorporated by reference to the registration statement of which this
prospectus is a part and is also available upon request as described
under "Where You Can Find More Information."
DESCRIPTION OF CAPITAL STOCK
Jones Apparel Group's authorized capital stock consists of (1)
200,000,000 shares of common stock, $.01 par value per share, and (2)
1,000,000 shares of preferred stock, $.01 par value per share. On May 1,
2001, Jones Apparel Group had 120,029,305 shares of common stock issued
and outstanding and no shares of preferred stock outstanding. Jones
Apparel Group common stock is listed on the New York Stock Exchange under
the trading symbol "JNY."
Each share of Jones Apparel Group common stock is entitled to one
vote on all matters submitted to a vote of shareholders. Jones
shareholders are entitled to receive dividends when and as declared by
the Jones board of directors out of legally available funds. Dividends
may be paid on the Jones Apparel Group common stock only if all dividends
on any outstanding preferred stock of Jones shareholders have been paid
or reserved. To date, Jones has not paid any cash dividends on shares of
its common stock and does not anticipate paying any cash dividends in the
foreseeable future.
The issued and outstanding shares of Jones Apparel Group common
stock are fully paid and nonassessable. Jones shareholders have no
preemptive or conversion rights and are not subject to further calls or
assessments by Jones. In the event of the voluntary or involuntary
dissolution, liquidation or winding up of Jones, Jones shareholders are
entitled to receive, pro rata, after satisfaction in full of the prior
rights of creditors and holders of preferred stock, if any, all of Jones'
remaining assets available for distribution.
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The Jones board of directors is authorized to provide for the
issuance from time to time of Jones preferred stock in series and, as to
each series, to fix the designation, the dividend rate, whether dividends
are cumulative, the preferences which dividends will have with respect to
any other class or series of capital stock, the voting rights, the
voluntary and involuntary liquidation prices, the conversion or exchange
privileges, the redemption prices and the other terms of redemption, and
the terms of any purchase or sinking funds applicable to the series.
Cumulative dividends, dividend preferences and conversion, exchange and
redemption provisions, to the extent that some or all of these features
may be present when shares of Jones preferred stock are issued, could
have an adverse effect on the availability of earnings for distribution
to the holders of Jones Apparel Group common stock or for other corporate
purposes.
The transfer agent and registrar for Jones Apparel Group common
stock is The Bank of New York.
CERTAIN UNITED STATES FEDERAL INCOME
TAX CONSIDERATIONS
GENERAL
This section summarizes the material U.S. tax consequences to
holders of notes and the shares of common stock into which the notes may
be converted. It represents the views of our tax counsel, Cravath, Swaine
& Moore. However, the discussion is limited in the following ways:
o The discussion only covers you if you hold your notes and the
shares of common stock received upon conversion as a capital
asset (that is, for investment purposes), and if you do not
have a special tax status.
o The discussion does not cover tax consequences that depend upon
your particular tax situation in addition to your ownership of
notes or shares. We suggest that you consult your tax advisor
about the consequences of holding notes or shares in your
particular situation.
o The discussion is based on current law. Changes in the law may
change the tax treatment of the notes or the shares.
o The discussion does not cover state, local or foreign law.
o We have not requested a ruling from the IRS on the tax
consequences of owning the notes or the shares. As a result,
the IRS could disagree with portions of this discussion.
A "U.S. Holder" is:
o an individual U.S. citizen or resident alien;
o a corporation--or entity taxable as a corporation for U.S.
federal income tax purposes--that was created under U.S. law
(federal or state);
o an estate whose worldwide income is subject to U.S. federal
income tax; or
o a trust if a United States court can exercise primary
supervision over the trust's administration and one or more
United States persons are authorized to control all substantial
decisions of the trust.
If a partnership holds notes or shares, the tax treatment of a
partner will generally depend upon the status of the partner and upon the
activities of the partnership. If you are a partner of a partnership
holding notes or shares, we suggest that you consult your tax advisor.
The term "Non-U.S. Holder" refers to any beneficial owner of a note
or shares of Jones Apparel Group common stock who or which is not a U.S.
Holder.
IF YOU ARE CONSIDERING BUYING NOTES, WE URGE YOU TO CONSULT YOUR TAX
ADVISOR ABOUT THE PARTICULAR FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE NOTES,
INCLUDING THE CONVERSION OF THE NOTES INTO SHARES OF JONES APPAREL GROUP
COMMON STOCK, AND THE EFFECT THAT YOUR PARTICULAR CIRCUMSTANCES MAY HAVE
ON THESE TAX CONSEQUENCES.
U.S. HOLDERS
Original Issue Discount. The notes were issued with original issue
discount ("OID"). The amount of OID on a note is the note's stated
principal amount at maturity minus the note's issue price. The "issue
price" of a note is the first price at which a substantial amount of the
notes are sold to the public.
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Because the notes have OID, the following consequences arise:
o You must include the total amount of OID as ordinary income
over the life of the note. You must include OID in income as
the OID accrues on the notes, even if you are on the cash
method of accounting. This means that you are required to
report OID income, and pay tax on that income, before you
receive the cash that corresponds to that income.
o OID accrues on a note on a "constant yield" method. This method
takes into account the compounding of interest. Under this
method, the accrual of OID on a note will result in you being
taxable at approximately a constant percentage of your
unrecovered investment (including your previously accrued OID)
in the note.
o The accruals of OID on a note will generally be less in the
early years and more in the later years.
Market Discount. If you purchase a note for an amount that is less than
its issue price (increased by any previously accrued OID), the amount of
the difference will be treated as "market discount" for federal income
tax purposes, unless such difference is less than a specified de minimis
amount. Under the market discount rules, you will be required to treat
any partial principal payment on, or any gain on the sale, exchange,
retirement or other disposition of, a note as ordinary income to the
extent of the market discount which has not previously been included in
income. In addition, you may be required to defer, until the maturity of
the note or its earlier disposition in a taxable transaction, the
deduction of all or a portion of the interest expense on any indebtedness
incurred or continued to purchase or carry such note. Any market discount
will be considered to accrue ratably during the period from the date of
acquisition to the maturity date of the note, unless you elect to accrue
the discount on a constant-yield method. You may elect to include market
discount in income currently as it accrues (on either a ratable or
constant-yield method), in which case the rule described above regarding
deferral of interest expense deductions will not apply. This election to
include market discount in income currently, once made, applies to all
market discount obligations that you acquire on or after the first
taxable year to which the election applies and may not be revoked without
the consent of the Internal Revenue Service.
Acquisition Premium. If you purchase a note for an amount that is greater
than its issue price (increased by any previously accrued OID) but less
than its principal amount, you will be considered to have purchased such
note at an "acquisition premium." The amount of OID you are required to
include in your gross income with respect to such note will be reduced by
such acquisition premium over the life of the note.
Constant-Yield Election. You may elect to include in gross income all
interest that accrues on a note using the constant-yield method. For
purposes of this election, interest includes stated interest, OID, de
minimis OID, market discount, de minimis market discount and unstated
interest, as adjusted by any acquisition premium. This election may not
be revoked without the consent of the Internal Revenue Service.
Liquidated Damages for Failure to Register Under the Securities Act. As
more fully described under "Registration Rights," we may be required to
pay liquidated damages to holders of notes or holders of common stock
issued upon conversion of the notes.
o Although the matter is not free from doubt, we intend to take
the position that liquidated damages paid to a holder of a note
will be ordinary income for U.S. federal income tax purposes at
the time it accrues or is received in accordance with such
holder's method of accounting. It is possible, however, that
the Internal Revenue Service may take a different position, in
which case the treatment of liquidated damage payments may be
different.
o Although the matter is not free from doubt, we intend to take
the position that liquidated damages paid to a holder of common
stock will be subject to the treatment described below under
"--Distributions on Shares of Common Stock." It is possible,
however, that the liquidated damages payment may be taxable as
ordinary income.
Adjustment of Conversion Rate. The conversion rate of the notes is
subject to adjustment under certain circumstances, as described under
"Description of the Notes--Conversion Rights." Certain adjustments to the
conversion rate may cause you to be treated as having received a
distribution. This distribution would be taxable to you as a dividend,
return of capital or capital gain in accordance with the earnings and
profits rules discussed below under "Distributions on Shares of Common
Stock."
Sale, Exchange or Redemption of Notes. On the sale, retirement or
redemption of your note:
o You will have taxable gain or loss equal to the difference
between the amount received by you and your tax basis in the
note. Your tax basis in the note is initially your cost. It
increases by any OID and accrued market discount, if any,
previously included in income. It decreases by any principal
payments you receive on the note.
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o Except as described above under "--Market Discount," your gain
or loss will be capital gain or loss, and will be long-term
capital gain or loss if you held the note for more than one
year. For an individual, the maximum tax rate on long term
capital gains is 20% (or 18% if the note is acquired on or
after January 1, 2001 and held for more than five years).
Conversion of Notes. If you convert your notes into shares of common
stock:
o You will not recognize gain or loss on the conversion of the
notes solely into shares of common stock, other than cash
received in lieu of fractional shares.
o Your tax basis in the shares of common stock received upon
conversion of the notes will be equal to your aggregate tax
basis in the notes converted, less any portion allocable to
cash received in lieu of a fractional share.
o The holding period of the shares of common stock you receive
upon conversion of notes generally will include the period
during which you held the notes prior to the conversion.
However, the holding period for common stock attributable to
accrued OID may commence on the day following the conversion
date.
o Cash received in lieu of a fractional share of common stock
should be treated as a payment in exchange for the fractional
share (rather than as a dividend). Gain or loss recognized on
the receipt of cash paid in lieu of the fractional share should
equal the difference between the amount of cash received for
the fractional share and your tax basis allocable to the
fractional share exchanged. Any such gain or loss will be
capital gain or loss, and generally will be long-term capital
gain or loss if you held the notes for more than one year at
the time of conversion.
Exercise of Holder's Put Option. If you exercise your option to require
us to purchase or repurchase your notes, we may elect to pay for the
notes with cash, common stock or a combination thereof. (See "Description
of the Notes--Purchase of Notes at the Option of the Holder" and "
--Fundamental Change Permits Holder to Require Us to Repurchase Notes.")
o If you elect to exercise your option to tender a note to us on
a purchase date or a repurchase date and we deliver solely cash
in satisfaction of the purchase price, you would recognize gain
or loss, measured by the difference between the amount of cash
transferred by us to you and your tax basis in the tendered
note. Gain or loss recognized would generally be capital gain
or loss.
o If the purchase price or repurchase price is paid solely in
common stock, you would not recognize gain or loss, except as
described below with respect to a fractional share.
o Subject to the discussion below, if the purchase price or
repurchase price is paid in a combination of shares of common
stock and cash (other than cash received in lieu of a
fractional share), gain (but not loss) realized by you would be
recognized, but only to the extent such gain does not exceed
such cash.
o Your tax basis in the common stock received in the exchange
will be the same as your tax basis in the note tendered to us
in exchange for the common stock (exclusive of any tax basis
allocable to a fractional share interest as described below).
However, this tax basis will be decreased by the amount of cash
(other than cash received in lieu of a fractional share), if
any, received in the exchange and increased by the amount of
any gain recognized by you on the exchange (other than gain
with respect to a fractional share).
o Your holding period for common stock received in the exchange
will include the holding period for the note tendered to us in
exchange for the common stock (assuming each is held as a
capital asset). However, the holding period for common stock
attributable to accrued OID may commence on the day following
the purchase date or repurchase date.
o Cash received in lieu of a fractional share of common stock
should be treated as a payment in exchange for the fractional
share (rather than as a dividend). Gain or loss recognized on
the receipt of cash paid in lieu of the fractional share should
equal the difference between the amount of cash received for
the fractional share and your tax basis allocable to the
fractional share exchanged. Any such gain or loss will be
capital gain or loss, and generally will be long-term capital
gain or loss if you held the notes for more than one year by
the purchase date or repurchase date.
Notwithstanding the foregoing, if the purchase price or repurchase
price is paid in a combination of shares of common stock and cash (other
than cash received in lieu of a fractional share), the Internal Revenue
Service may treat the exercise of your put option differently than
described above. Under the alternate analysis,
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you might recognize less gain or recognize loss, as the case may be, and
you would have a corresponding reduction in your tax basis in the common
stock received in the exchange.
Distributions on Shares of Common Stock. Distributions on shares of
common stock will constitute dividends for U.S. federal income tax
purposes to the extent of our current or accumulated earnings and profits
as determined under U.S. federal income tax principles. If you are a U.S.
corporation, dividends paid to you may qualify for the dividends-received
deduction.
To the extent that you receive distributions on shares of common
stock that would otherwise constitute dividends for U.S. federal income
tax purposes but that exceed our current and accumulated earnings and
profits, the distribution will be treated first as a non-taxable return
of capital reducing your basis in the shares of common stock. Any
distribution in excess of your basis in the shares of common stock will
be treated as capital gain.
Sale or Exchange of Common Stock. If you sell or exchange your shares of
common stock, you will recognize gain or loss equal to the amount
realized on the sale or exchange minus your adjusted tax basis in the
shares. Any such gain or loss will generally be long-term capital gain or
loss if you have held or are deemed to have held the shares for more than
one year.
Optional Conversion to Semi-annual Cash Pay Note Upon Tax Event. The
modification of the terms of the notes by us upon a Tax Event as
described in "Description of Notes--Optional Conversion to Semi-annual
Cash Pay Note Upon Tax Event," will not be a taxable event. The
modification may, however, alter the timing of your income recognition
with respect to the semi-annual payments of interest due after the Option
Exercise Date. Nevertheless, after the modification, the tax consequences
described in this section "Certain United States Federal Income Tax
Considerations" generally will continue to apply to you.
NON-U.S. HOLDERS
Withholding Taxes on Interest on Notes. Generally, payments of principal
and interest on the notes will not be subject to U.S. withholding taxes.
However, for the exemption from withholding taxes to apply to you,
you must meet one of the following requirements. These requirements have
been changed for interest paid on or after January 1, 2001.
o You provide a completed Form W-8BEN (or substitute form) to the
bank, broker or other intermediary through which you hold your
notes. The Form W-8BEN contains your name, address and a
statement that you are the beneficial owner of the notes and
that you are not a U.S. Holder.
o You hold your notes directly through a "qualified
intermediary," and the qualified intermediary has sufficient
information in its files indicating that you are not a U.S.
Holder. A qualified intermediary is a bank, broker or other
intermediary that (1) is either a U.S. or non- U.S. entity, (2)
is acting out of a non-U.S. branch or office and (3) has signed
an agreement with the IRS providing that it will administer all
or part of the U.S. tax withholding rules under specified
procedures.
o You are entitled to an exemption from withholding tax on
interest under a tax treaty between the U.S. and your country
of residence. To claim this exemption, you must generally
complete Form W-8BEN and claim this exemption on the form. In
some cases, you may instead be permitted to provide documentary
evidence of your claim to the intermediary, or a qualified
intermediary may already have some or all of the necessary
evidence in its files.
o The interest income on the notes is effectively connected with
the conduct of your trade or business in the U.S., and is not
exempt from U.S. tax under a tax treaty. To claim this
exemption, you must complete Form W-8ECI.
Even if you meet one of the above requirements, interest paid to you
will be subject to withholding tax under any of the following
circumstances:
o The withholding agent or an intermediary knows or has reason to
know that you are not entitled to an exemption from withholding
tax. Specific rules apply for this test.
o The IRS notifies the withholding agent that information that
you or an intermediary provided concerning your status is
false.
o An intermediary through which you hold the notes fails to
comply with the procedures necessary to avoid withholding taxes
on the notes. In particular, an intermediary is generally
required to forward a copy of your Form W-8BEN (or other
documentary information concerning your status) to the
withholding agent for the notes. However, if you hold your
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notes through a qualified intermediary--or if there is a
qualified intermediary in the chain of title between yourself
and the withholding agent for the notes--the qualified
intermediary will not generally forward this information to the
withholding agent.
o You own 10% or more of the voting stock of the Company, are a
"controlled foreign corporation" with respect to the Company,
or are a bank making a loan in the ordinary course of its
business. In these cases, you will be exempt from withholding
taxes only if you are eligible for a treaty exemption or if the
interest income is effectively connected with your conduct of a
trade or business in the U.S., as discussed above.
Interest payments made to you will generally be reported to the IRS
and to you on Form 1042-S. However, this reporting does not apply to you
if one of the following conditions applies:
o You hold your notes directly through a qualified intermediary
and the applicable procedures are complied with.
o You file Form W-8ECI.
Withholding Taxes on Dividends on Shares of Common Stock. Unless an
exception applies, all dividends paid to a Non-U.S. Holder will be
subject to U.S. withholding tax at a rate of 30%. These taxes will be
withheld either by the paying agent or by the bank, broker, or other
intermediary through which you hold your shares.
In general, the entire dividend we pay is subject to withholding
tax. However, special rules apply if we pay a dividend that is greater
than our current or accumulated earnings and profits as calculated for
U.S. federal income tax purposes. In that case, either:
o We (or the intermediary) may elect to withhold only on the
portion of the dividend that is out of our earnings and
profits. In this case, the remainder of the dividend would not
be subject to withholding tax.
o We (or the intermediary) may withhold on the entire dividend.
In that case, you would be entitled to obtain a refund from the
IRS for the withholding tax on the portion of the dividend that
exceeds our earnings and profits.
You may be entitled to a reduced rate of withholding taxes--or
exemption from withholding taxes--if you are eligible for a tax treaty
between the United States and your country of residence. The particular
withholding tax rate that would apply to you depends on your tax status
and on the particular tax treaty. However, the rate under most treaties
is 15% for a typical portfolio investor.
To be eligible for a tax treaty, you generally must meet each of the
following requirements:
o You are the beneficial owner of the shares. That is, you are
not holding the shares on behalf of someone else.
o You are a resident of the tax treaty jurisdiction and you
satisfy all the other requirements in the treaty.
o You comply with the documentation requirements discussed below.
o If you are treated as a partnership or other pass-through
entity either for U.S. federal income tax purposes or under the
tax laws of the treaty jurisdiction, you must satisfy
additional requirements.
In order to comply with the documentation requirements to claim tax
treaty benefits, you must satisfy one of the following conditions. These
conditions have been significantly changed for dividends paid on or after
January 1, 2001.
o You complete Form W-8BEN and provide it to the intermediary.
The Form W-8BEN must contain your name and address, and you
must fill out Part II of the form to state your claim for
treaty benefits. As long as the shares remain actively traded,
you are not required to obtain a Taxpayer Identification Number
to claim treaty benefits.
o You hold your shares directly through a "qualified
intermediary." In this case, you need not file Form W-8BEN if
the qualified intermediary has in its files, or obtains from
you, certain information concerning your eligibility for treaty
benefits. A qualified intermediary is an intermediary that (1)
is either a U.S. or non-U.S. entity, (2) is acting out of a
non-U.S. branch or office and (3) has signed an agreement with
the IRS providing that it will administer all or part of the
U.S. tax withholding rules under specified procedures.
-32-
o In some limited circumstances, you may be permitted to provide
documentary evidence in lieu of Form W-8BEN even if you hold
your shares through an intermediary that is not a qualified
intermediary.
Alternatively, dividends paid to you will be exempt from U.S.
withholding tax if the dividend income is effectively connected with the
conduct of your trade or business in the U.S., and is not exempt from
U.S. tax under a tax treaty. To claim this exemption, you must generally
complete Form W-8ECI.
Even if you meet one of the above requirements, you will not be
entitled to the reduction in--or exemption from--withholding tax on
dividends paid to you under any of the following circumstances:
o The withholding agent or an intermediary knows or has reason to
know that you are not entitled to the reduction in rate or the
exemption from withholding tax. Specific rules apply for this
test.
o The IRS notifies the withholding agent that information that
you or an intermediary provided concerning your status is
false.
o An intermediary through which you hold the shares fails to
comply with the necessary procedures. In particular, an
intrmediary is generally required to forward a copy of your
Form W-8BEN (or other documentary information concerning your
status) to the withholding agent for the shares. However, if
you hold your shares through a qualified intermediary--or if
there is a qualified intermediary in the chain of title between
yourself and the withholding agent for the shares--the
qualified intermediary will not generally forward this
information to the withholding agent.
The amount of dividends paid to you, and the amount withheld from
the dividends, will generally be reported to the IRS and to you on Form
1042-S. However, this reporting does not apply to you if you hold your
shares directly through a qualified intermediary and the applicable
procedures are complied with.
THE RULES REGARDING WITHHOLDING ARE COMPLEX AND VARY DEPENDING ON
YOUR INDIVIDUAL SITUATION. THEY ARE ALSO SUBJECT TO CHANGE, AND CERTAIN
TRANSITION RULES APPLY FOR CALENDAR YEAR 2001. IN ADDITION, SPECIAL RULES
APPLY TO CERTAIN TYPES OF NON-U.S. HOLDERS OF SHARES, INCLUDING
PARTNERSHIPS, TRUSTS, AND OTHER ENTITIES TREATED AS PASS-THROUGH ENTITIES
FOR U.S. FEDERAL INCOME TAX PURPOSES. WE SUGGEST THAT YOU CONSULT WITH
YOUR TAX ADVISOR REGARDING THE SPECIFIC METHODS FOR SATISFYING THESE
REQUIREMENTS.
Sales or Exchange of Notes or Shares of Common Stock. You generally will
not be subject to U.S. federal income tax on gain recognized upon the
sale or other disposition of the notes or shares of common stock unless:
o The gain is, or is treated as, effectively connected with a
trade or business that you conduct within the U.S.; or
o You are an individual present in the U.S. for 183 or more days
during the year in which you dispose of the notes or shares and
certain other conditions are satisfied.
U.S. Trade or Business. If you hold your notes or shares of common stock
in connection with a trade or business that you are conducting in the
U.S.:
o Any interest on the notes, or any dividends on the shares and
any gain from disposing of the notes or shares, generally will
be subject to income tax as if you were a U.S. Holder.
o If you are a corporation, you may be subject to the "branch
profits tax" on your earnings that are connected with your U.S.
trade or business, including earnings from the notes or shares.
This tax is 30%, but may be reduced or eliminated by an
applicable income tax treaty.
Conversion of Notes. A Non-U.S. Holder generally will not be subject to
U.S. federal income tax on the conversion of a note into shares of common
stock. To the extent a Non-U.S. Holder received cash in lieu of a
fractional share on conversion, the cash may give rise to gain that would
be subject to the rules described above with respect to the sale or
exchange of a note or common stock.
Liquidated Damages for Failure to Register Under the Securities Act. As
more fully described under "Registration Rights," we may be required to
pay liquidated damages to holders of notes or holders of common stock
issued upon conversion of the notes. Payments of liquidated damages to
holders of notes or common stock, if any, may be subject to U.S.
withholding tax at a 30% or lower applicable treaty rate. If you hold
your notes or shares of common stock in connection with your U.S. trade
or business, payments of liquidated damages may be subject to U.S. tax as
provided above under " --U.S. Trade or Business."
-33-
Federal Estate Taxes. If you are an individual, your notes will not be
subject to U.S. estate tax when you die. However, this rule only applies
if, at your death, payments on the notes were not connected to a trade or
business that you were conducting in the U.S.
If you are an individual, your shares of common stock will be
subject to U.S. estate tax when you die unless you are entitled to the
benefits of an estate tax treaty.
INFORMATION REPORTING AND BACKUP WITHHOLDING
U.S. Holders. Under the tax rules concerning information reporting to the
IRS:
o Assuming you hold your notes or shares through a broker or
other securities intermediary, the intermediary must provide
information to the IRS and to you concerning interest and
retirement proceeds on your notes, or dividends and sale
proceeds on your shares, unless an exemption applies.
o Similarly, unless an exemption applies, you must provide the
intermediary with certain identifying information.
o If you are subject to these requirements but do not properly
comply, the intermediary must withhold 31% of all amounts
payable to you on the notes (including principal payments) or
shares. This is called "backup withholding." If the
intermediary withholds payments, you may use the withheld
amount as a credit against your federal income tax liability.
o Some holders, including all corporations, are exempt from these
requirements.
Non-U.S. Holders. The information reporting and backup withholding rules
described above apply to Non-U.S. Holders as follows:
o Principal and interest payments you receive will be
automatically exempt from the usual rules if you are a Non-U.S.
Holder exempt from withholding tax on interest, as described
above. The exemption does not apply if the withholding agent or
an intermediary knows or has reason to know that you should be
subject to the usual information reporting or backup
withholding rules. In addition, as described above, interest
payments made to you may be reported to the IRS on Form 1042-S.
o Dividends paid to you will be exempt from the usual information
reporting rules if you are eligible for a reduced withholding
rate under a tax treaty as discussed above. However, as
described above, dividends paid to you may be reported to the
IRS on Form 1042-S.
o If you are not eligible for a tax treaty and do not provide
information to the intermediary identifying yourself as a
Non-U.S. Holder, in some cases you may be subject to backup
withholding on dividends at the rate of 31% instead of the
regular dividend withholding rate of 30%. If necessary, you may
provide the intermediary with Form W-8BEN, without claiming
treaty benefits, in order to claim the 30% rate.
o Sale proceeds you receive on a sale of your notes or shares
through a broker may be subject to information reporting and/or
backup withholding if you are not eligible for an exemption. In
particular, information reporting and backup withholding may
apply if you use the U.S. office of a broker, and information
reporting (but not backup withholding) may apply if you use the
foreign office of a broker that has certain connections to the
U.S. In general, you may file Form W-8BEN to claim an exemption
from information reporting and backup withholding. We suggest
that you consult your tax advisor concerning information
reporting and backup withholding on a sale.
SELLING SECURITYHOLDERS
We initially issued the notes to the initial purchasers who then
sold the notes in transactions exempt from the registration requirements
of the Securities Act to "qualified institutional buyers" (as defined in
Rule 144A under the Securities Act) and buyers outside the United States
in accordance with Regulation S under the Securities Act. The selling
securityholders (which term includes their transferees, pledgees, donees
or their successors) may from time to time offer and sell pursuant to
this prospectus any or all of the notes and Jones Apparel Group common
stock issued upon conversion of the notes.
The following table sets forth the name, principal amount at
maturity of notes and number of shares beneficially owned by the selling
securityholders intending to sell the notes or common stock and the
principal amount at maturity of notes or shares of common stock to be
offered. Based on information provided to us by the applicable selling
securityholder, the table also discloses whether any selling
securityholder selling in
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connection with the prospectus or prospectus supplement has held any
position or office with, been employed by or otherwise has had a material
relationship with us or any of our affiliates during the three years
prior to the date of the prospectus or prospectus supplement.
Number of
Principal amount at shares of
maturity of notes common
beneficially owned Percentage of stock that Percentage of
that may be sold notes may be sold common stock Material
Name hereby outstanding hereby(1) outstanding(2) relationship
- ---- ------------------- ------------- ----------- -------------- ------------
AAM/Zazove Institutional Income
Fund L.P. ................................. $ 2,500,000 0.31% 24,526.25 *% None
Allstate Insurance Company................. 5,000,000 0.62 49,052.50 * None
Allstate Life Insurance Company............ 6,000,000 0.74 58,863.00 * None
American Fidelity Assurance Company........ 475,000 0.06 4,659.99 * None
American Motorist Insurance Company........ 1,146,000 0.14 11,242.83 * None
Amerisure Companies/Michigan Mutual
Insurance Company.......................... 1,000,000 0.12 9,810.50 * None
Arapahoe County Colorado................... 112,000 0.01 1,098.78 * None
Arbitex Master Fund, L.P................... 10,000,000 1.24 98,105.00 * None
Associated Electric & Gas Insurance
Services Limited........................... 1,000,000 0.12 9,810.50 * None
Aventis Pension Master Trust............... 900,000 0.11 8,829.45 * None
Banc of America Securities LLC............. 13,500,000 1.68 132,441.75 * (4)
Bancroft Convertible Fund, Inc............. 2,000,000 0.25 19,621.00 * None
BBT Fund, L.P.............................. 20,000,000 2.48 196,210.00 * None
BC McCabe Foundation....................... 1,000,000 0.12 9,810.50 * None
Bear, Stearns & Co. Inc.................... 7,500,000 0.93 73,578.75 * (5)
Black Diamond Offshore Ltd................. 3,496,000 0.43 34,297.51 * None
Blue Cross Blue Shield of Florida.......... 3,800,000 0.47 37,279.90 * None
Boilermaker - Blacksmith Pension Trust..... 5,600,000 0.70 54,938.80 * None
British Virgin Island Social Security
Board...................................... 85,000 0.01 833.89 * None
BS Debt Income Fund - Class A.............. 30,000 0.00 294.32 * None
CALAMOS(R)Convertible Fund -
CALAMOS(R)Investment Trust.................. 10,650,000 1.32 104,481.83 * None
CALAMOS(R)Convertible Growth and
Income Fund - CALAMOS(R)Investment
Trust...................................... 6,100,000 0.76 59,844.05 * None
CALAMOS(R)Convertible Portfolio -
CALAMOS(R)Advisors Trust.................... 470,000 0.06 4,610.94 * None
CALAMOS(R)Global Convertible Fund -
CALAMOS(R)Investment Trust.................. 425,000 0.05 4,169.46 * None
CapitalCare, Inc........................... 135,000 0.02 1,324.42 * None
CareFirst of Maryland, Inc................. 600,000 0.07 5,886.30 * None
CFFX LLC.................................. 10,000,000 1.24 98,105.00 * None
City of Albany Pension Plan................ 505,000 0.06 4,954.30 * None
City of Birmingham Retirement & Relief
System..................................... 4,000,000 0.50 39,242.00 * None
City of Knoxville Pension System........... 1,160,000 0.14 11,380.18 * None
City of New Orleans........................ 463,000 0.06 4,542.26 * None
City University of New York................ 276,000 0.03 2,707.70 * None
Clarica Life Insurance Co. - U.S........... 1,400,000 0.17 13,734.70 * None
Coastal Convertibles Ltd................... 1,000,000 0.12 9,810.50 * None
Conseco Annuity Assurance Company -
Multi-Bucket Annuity Convertible Bond
Fund....................................... 4,000,000 0.50 39,242.00 * None
DeAm Convertible Arbitrage Fund............ 3,000,000 0.37 29,431.50 * None
Delta Airlines Master Trust................ 9,900,000 1.23 97,123.95 * None
Delta Pilots Disability and Survivorship
Trust...................................... 1,900,000 0.24 18,639.95 * None
Deutsche Banc Alex Brown Inc............... 24,400,000 3.03 239,376.20 * None
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1976 Distribution Trust FBO A.R. Lauder
/ Zinterhofer.............................. 32,000 0.00 313.94 * None
1976 Distribution Trust FBO Jane A.
Lauder..................................... 31,000 0.00 304.13 * None
Dorinco Reinsurance Company................ 3,000,000 0.37 29,431.50 * None
Double Black Diamond Offshore LDC.......... 15,738,000 1.95 154,397.65 * None
Drury University........................... 185,000 0.02 1,814.94 * None
Elf Aquitaine.............................. 625,000 0.08 6,131.56 * None
Ellsworth Convertible Growth and
Income Fund, Inc........................... 2,000,000 0.25 19,621.00 * None
Employee Benefit Convertible Securities
Fund....................................... 500,000 0.06 4,905.25 * None
FreeState Health Plan, Inc................. 175,000 0.02 1,716.84 * None
Genesee County Employees' Retirement
System..................................... 550,000 0.07 5,395.78 * None
GLG Market Neutral Fund.................... 20,000,000 2.48 196,210.00 * None
Grady Hospital Foundation.................. 243,000 0.03 2,383.95 * None
Granville Capital Corporation.............. 20,000,000 2.48 196,210.00 * None
Greek Catholic Union....................... 115,000 0.01 1,128.21 * None
Greek Catholic Union II.................... 95,000 0.01 932.00 * None
Group Hospitalization and Medical
Services, Inc.............................. 700,000 0.09 6,867.35 * None
Healthcare Underwriters Mutual
Insurance Company.......................... 1,725,000 0.21 16,923.11 * None
HealthNow New York, Inc.................... 175,000 0.02 1,716.84 * None
HFR Master Fund, Ltd....................... 700,000 0.09 6,867.35 * None
H.K. Porter Company, Inc................... 135,000 0.02 1,324.42 * None
Highbridge Capital Corporation............. 35,000,000 4.34 343,367.50 * None
Independence Blue Cross.................... 230,000 0.03 2,256.42 * None
Jackson County Employees' Retirement
System..................................... 550,000 0.07 5,395.78 * None
Jersey (IMA) Ltd........................... 2,000,000 0.25 19,621.00 * None
J.P. Morgan Securities, Inc. 6,000,000 0.74 58,863.00 (6)
Julius Baer Securities Inc................. 1,680,000 0.21 16,481.64 * None
KBC Financial Products USA................. 1,500,000 0.19 14,715.75 * None
Kettering Medical Center Funded
Depreciation Account....................... 340,000 0.04 3,335.57 * None
Key Asset Management, Inc.................. 8,000,000 0.99 78,484.00 * None
Knoxville Utilities Board Retirement
System..................................... 790,000 0.10 7,750.30 * None
Lancer Securities Cayman LTD............... 1,500,000 0.19 14,715.75 * None
Lehman Brothers Inc........................ 17,000,000 2.11 166,778.50 * None
Libertyview Funds L.P...................... 8,000,000 0.99 78,484.00 * None
Lincoln National Global Asset Allocation
Fund, Inc.................................. 102,000 0.01 1,000.67 * None
Lydian Overseas Partners Master Fund....... 55,000,000 6.83 539,577.50 * None
Local Initiatives Support Corporation...... 126,000 0.02 1,236.12 * None
Louisiana Workers' Compensation
Corporation................................ 760,000 0.09 7,455.98 * None
Macomb County Employees' Retirement
System..................................... 2,050,000 0.25 20,111.53 * None
Mag Mutual Insurance Company............... 475,000 0.06 4,659.99 * None
Medical Liability Mutual Insurance
Company.................................... 55,000,000 6.83 539,577.50 * None
Merrill Lynch Insurance Group.............. 793,000 0.10 7,779.73 * None
Morgan Stanley & Co. 5,000,000 0.62 49,052.50 * (7)
Morgan Stanley Dean Witter Convertible
Securities Trust........................... 5,000,000 0.62 49,052.50 * (7)
Municipal Employees........................ 242,000 0.03 2,374.14 * None
Museum of Fine Arts, Boston................ 49,000 0.01 480.71 * None
Nabisco Holdings........................... 71,000 0.01 696.55 * None
Nashville Electric Service................. 700,000 0.09 6,867.35 * None
Nations Convertible Securities Fund........ 10,000,000 1.24 98,105.00 * None
-36-
New Orleans Firefighters Pension/Relief
Fund....................................... 252,000 0.03 2,472.25 * None
New York Life Insurance Company............ 18,000,000 2.23 176,589.00 * None
New York Life Insurance and Annuity
Corporation................................ 2,000,000 0.25 19,621.00 * None
NCMIC Insurance Company.................... 650,000 0.08 6,376.83 * None
NORCAL Mutual Insurance Company............ 850,000 0.11 8,338.93 * None
Occidental Petroleum Corporation........... 471,000 0.06 4,620.75 * None
OHIL Insurance Company..................... 1,000,000 0.12 9,810.50 * None
Ohio Bureau of Workers' Compensation....... 300,000 0.04 2,943.15 * None
Oxford, Lord Abbett & Co................... 4,500,000 0.56 44,147.25 * None
Palladin Securities LLC.................... 750,000 0.09 7,357.88 * (8)
Parker-Hannifin Corporation................ 162,000 0.02 1,589.30 * None
Pell Rudman Trust Company.................. 4,950,000 0.61 48,561.98 * None
PGEP III LLC............................... 750,000 0.09 7,357.88 * None
Physicians' Reciprocal Insurers Account
#7......................................... 5,500,000 0.68 53,957.75 * None
Policemen and Firemen Retirement
System of the City of Detroit.............. 1,216,000 0.15 11,929.57 * None
Port Authority of Allegheny County
Retirement and Disability Allowance Plan
for the Employees Represented by Local
85 of the Amalgamated Transit Union........ 5,900,000 0.73 57,881.95 * None
Promutual.................................. 1,381,000 0.17 13,548.30 * None
Putnam Asset Allocation Funds -
Balanced Portfolio......................... 796,000 0.10 7,809.16 * None
Putnam Asset Allocation Funds -
Conservative Portfolio..................... 613,000 0.08 6,013.84 * None
Putnam Convertible Income - Growth
Trust...................................... 6,604,000 0.82 64,788.54 * None
Putnam Convertible Opportunities and
Income Trust............................... 212,000 0.03 2,079.83 * None
Putnam Variable Trust - Putnam VT
Global Asset Allocation Fund............... 214,000 0.03 2,099.45 * None
Radian Guaranty Inc........................ 4,500,000 0.56 44,147.25 * None
Raytheon Master Pension Trust.............. 1,236,000 0.15 12,125.78 * None
RJR Reynolds............................... 213,000 0.03 2,089.64 * None
Salomon Smith Barney Inc................... 15,467,000 1.92 151,739.00 * (9)
San Diego County Employees Retirement
Association................................ 4,000,000 0.50 39,242.00 * None
SCI Endowment Care Common Trust
Fund - Suntrust............................ 180,000 0.02 1,765.89 * None
Scudder Dividend & Growth Fund............. 780,000 0.10 7,652.19 * None
SG Cowen Securities Corp................... 39,000,000 4.84 382,609.50 * None
Shell Pension Trust........................ 972,000 0.12 9,535.81 * None
Southern Farm Bureau Life Insurance
Company.................................... 2,750,000 0.34 26,978.88 * None
SPT........................................ 4,480,000 0.56 43,951.04 * None
State of Florida, Office of the Treasurer.. 4,500,000 0.56 44,147.25 * None
State of Maryland Retirement Agency........ 5,843,000 0.73 57,322.75 * None
The Cockrell Foundation.................... 150,000 0.02 1,471.58 * None
The Dow Chemical Company Employees'
Retirement Plan............................ 11,000,000 1.37 107,915.50 * None
The Fondren Foundation..................... 355,000 0.04 3,482.73 * None
The Greble Foundation...................... 213,000 0.03 2,089.64 * None
The Reciprocal of America.................. 725,000 0.10 7,112.61 * None
Tokai Asia Limited......................... 32,000,000 3.97 313,936.00 * None
Triborough Partners QP, LLC................ 3,000,000 0.37 29,431.50 * None
UBS O'Connor LLC F/B/O UBS Global
Equity Arbitrage Master Limited............ 19,000,000 2.36 186,399.50 * None
UBS Warburg LLC............................ 2,050,000 0.25 20,111.53 * None
Unifi, Inc. Profit Sharing Plan and Trust.. 545,000 0.07 5,346.72 * None
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United Food and Commercial Workers
Local 1262 and Empoyees' Pension
Fund....................................... 2,435,000 0.30 23,888.57 * None
University of Rochester.................... 83,000 0.01 814.27 * None
Value Line Convertible Fund, Inc........... 2,000,000 0.25 19,621.00 * None
Van Kampen Harbor Fund..................... 14,000,000 1.74 137,347.00 * None
Van Waters & Rogers, Inc. Retirement
Plan....................................... 1,545,000 0.19 15,157.22 * None
White River Securities L.L.C............... 7,500,000 0.93 73,578.75 * None
Worldwide Transactions, Ltd................ 766,000 0.10 7,514.84 * None
Zurich Institutional Benchmarks Master
Fund LTD................................... 2,000,000 0.25 19,621.00 * None
Any other holder of notes or future
transferee, pledgee, donee, or successor
of any such holder(3).................. 115,076,000 14.28 1,128,953.10 * None
*Less than 1%.
(1) Assumes conversion of all of the holder's notes at a conversion
price of 9.8105 shares of Jones Apparel Group common stock per
$1,000 principal amount at maturity of the notes. This
conversion price, however, will be subject to adjustment as
described under "Description of the Notes--Conversion Rights."
As a result, the number of shares of Jones Apparel Group common
stock issuable upon conversion of the notes may increase or
decrease in the future.
(2) Calculated based on Rule 13d-3(d)(i) of the Exchange Act using
119,840,155 shares of common stock outstanding as of April 2,
2001. In calculating this amount, we treated as outstanding the
number of shares of common stock issuable upon conversion of
all of that particular holder's notes. However, we did not
assume the conversion of any other holder's notes.
(3) Information about other selling securityholders will be set
forth in one or more prospectus supplements, if required.
Assumes that any other holders of notes, or any future
transferees, pledgees, donees or successors of or from any such
other holders of notes, do not beneficially own any common
stock other than the common stock issuable upon conversion of
the notes at the initial conversion rate.
(4) Banc of America Corporation, the parent company of Banc of
America Securities LLC, is a lender under the Senior Credit
Facilities.
(5) Bear, Stearns & Co. Inc. was an initial purchaser of the notes.
The notes being sold by Bear, Stearns & Co. Inc. pursuant to
this prospectus were purchased in secondary market trading. In
1999, Bear, Stearns & Co. Inc. served as financial advisor to
Nine West in connection with Jones Apparel Group's acquisition
of Nine West. In that capacity, Bear, Stearns & Co. Inc.
rendered an opinion that, among other things, the consideration
to be received in the transaction by the stockholders of Nine
West was fair, from a financial point of view, to the
stockholders of Nine West. Bear, Stearns & Co. Inc. was an
initial purchaser of the 6 1/4% Notes in 1998 and was an
initial purchaser of the 7 1/2% Notes and the 77/8% Notes in
1999.
(6) J.P. Morgan Chase & Co., the parent company of J.P. Morgan
Securities, Inc., is a lender under the Senior Credit
Facilities.
(7) Morgan Stanley Dean Witter, the parent company of Morgan
Stanley & Co. and Morgan Stanley Dean Witter Convertible
Securities Trust, is serving as our financial advisor in
connection with the Merger.
(8) Palladin Capital Group, Inc., the parent company of Palladin
Securities LLC, served as our investment advisor in 1999 in
connection with our acquisition of Nine West. For its services
as such, Palladin Capital Group, Inc. received a fee of $9.6
million, plus reimbursement of out-of-pocket expenses. Palladin
Capital Group, Inc. also served as our investment advisor in
1998 in connection with our acquisition of Sun Apparel, Inc.
For its services as such, Palladin Capital Group, Inc. received
a fee of $2.3 million, plus reimbursement of out-of-pocket
expenses. In addition, as part of its fee for services in the
Sun Apparel, Inc. acquisition, Palladin Capital Group, Inc.
received $178,370 in April 1999 and $227,930 in April 2000,
will receive $5,150 in April 2001 and will receive 0.5% of the
additional consideration which may become payable to the former
Sun Apparel, Inc. stockholders based on Sun Apparel, Inc.'s
performance for the year 2001. From June 15, 1999 until
February 6, 2000, Mark J. Schwartz, President and Chief
Executive Officer of Palladin Capital Group, Inc., served as
Chairman and Chief Executive Officer of Nine West.
-38-
(9) Salomon Smith Barney Inc. was an initial purchaser of the
notes. The notes being sold by Salomon Smith Barney Inc.
pursuant to this prospectus were purchased in secondary market
trading. Salomon Smith Barney Inc. is also a co-arranger for
the Senior Credit Facilities.
We prepared this table based on the information supplied to us by
the selling securityholders named in the table, and we have not sought to
verify such information.
The selling securityholders listed in the above table may have sold
or transferred, in transactions exempt from the registration requirements
of the Securities Act, some or all of their notes or shares of Jones
Apparel Group common stock since the date on which the information in the
above table was provided to us. Information about the selling
securityholders may change over time.
Because the selling securityholders may offer all or some of their
notes or the shares of Jones Apparel Group common stock issuable upon
conversion of the notes from time to time, we cannot estimate the amount
of the notes or number of shares of Jones Apparel Group common stock that
will be held by the selling securityholders upon the termination of any
particular offering by such selling securityholder. See "Plan of
Distribution."
PLAN OF DISTRIBUTION
The selling securityholders intend to distribute the notes and the
shares of Jones Apparel Group common stock issuable upon conversion of
the notes from time to time only as follows (if at all):
o to or through underwriters, brokers or dealers;
o directly to one or more other purchasers;
o through agents on a best-efforts basis; or
o otherwise through a combination of any such methods of sale.
If a selling securityholder sells the notes or shares of Jones
Apparel Group common stock issuable upon conversion of the notes through
underwriters, dealers, brokers or agents, such underwriters, dealers,
brokers or agents may receive compensation in the form of discounts,
concessions or commissions from the selling securityholder and/or the
purchasers of the notes or shares of Jones Apparel Group common stock.
The notes and the shares of Jones Apparel Group common stock
issuable upon conversion of the notes may be sold from time to time:
o in one or more transactions at a fixed price or prices, which
may be changed;
o at market prices prevailing at the time of sale;
o at prices related to such prevailing market prices;
o at varying prices determined at the time of sale; or
o at negotiated prices.
Such sales may be effected in transactions:
o on any national securities exchange or quotation service on
which the notes or the Jones Apparel Group common stock may be
listed or quoted at the time of sale;
o in the over-the-counter market;
o in block transactions in which the broker or dealer so engaged
will attempt to sell the notes or shares of Jones Apparel Group
common stock issuable upon conversion thereof as agent but may
position and resell a portion of the block as principal to
facilitate the transaction, or in crosses, in which the same
broker acts as an agent on both sides of the trade;
o in transactions otherwise than on such exchanges or services or
in the over-the-counter market;
o through the writing of options; or
o through other types of transactions.
-39-
In connection with sales of the notes or Jones Apparel Group common
stock or otherwise, the selling securityholder may enter into hedging
transactions with brokers-dealers or others, which may in turn engage in
short sales of the notes or Jones Apparel Group common stock in the
course of hedging the positions they assume. The selling securityholder
may also sell notes or Jones Apparel Group common stock short and deliver
notes or Jones Apparel Group common stock to close out such short
positions, or loan or pledge notes or Jones Apparel Group common stock to
brokers-dealers or others that in turn may sell such securities. The
selling securityholder may pledge or grant a security interest in some or
all of the notes or Jones Apparel Group common stock issued upon
conversion of the notes owned by it and, if it defaults in the
performance of its secured obligations, the pledgees or secured parties
may offer and sell the notes or the Jones Apparel Group common stock from
time to time pursuant to this prospectus. The selling securityholder also
may transfer and donate notes or shares of Jones Apparel Group common
stock issuable upon conversion of the notes in other circumstances in
which case the transferees, donees, pledgees or other successors in
interest will be the selling securityholder for purposes of the
prospectus. The selling securityholder may sell short the Jones Apparel
Group common stock and may deliver this prospectus in connection with
such short sales and use the shares of Jones Apparel Group common stock
covered by the prospectus to cover such short sales. In addition, any
notes or shares of Jones Apparel Group common stock covered by this
prospectus that qualify for sale pursuant to Rule 144, Rule 144A or any
other available exemption from registration under the Securities Act may
be sold under Rule 144, Rule 144A or such other available exemption.
At the time a particular offering of notes or shares of Jones
Apparel Group common stock issuable upon conversion thereof is made, a
prospectus supplement, if required, will be distributed which will set
forth the aggregate amount of notes or number of shares of Jones Apparel
Group common stock being offered and the terms of the offering, including
the name or names of any underwriters, dealers, brokers or agents, if
any, and any discounts, commissions or concessions allowed or reallowed
to be paid to brokers or dealers.
Selling securityholders and any underwriters, dealers, brokers or
agents who participate in the distribution of the notes or shares of
Jones Apparel Group common stock may be deemed to be "underwriters"
within the meaning of the Securities Act and any profits on the sale of
the notes or shares of Jones Apparel Group common stock by them and any
discounts, commissions or concessions received by any such underwriters,
dealers, brokers or agents may be deemed to be underwriting discounts and
commissions under the Securities Act.
The selling securityholders and any other person participating in
such distribution will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including, without
limitation, Regulation M which may limit the timing of purchases and
sales of the notes and shares of Jones Apparel Group common stock by the
selling securityholders and any other such person. Furthermore,
Regulation M under the Exchange Act may restrict the ability of any
person engaged in a distribution of the notes or shares of Jones Apparel
Group common stock to engage in market-making activities with respect to
the notes and shares of Jones Apparel Group common stock being
distributed for a period of up to five business days prior to the
commencement of such distribution. All of the foregoing may affect the
marketability of the notes and shares of Jones Apparel Group common stock
and the ability of any person or entity to engage in market-making
activities with respect to the notes and shares of Jones Apparel Group
common stock.
Pursuant to the registration rights agreement entered into in
connection with the offer and sale of the notes by us, each of us on the
one hand and the selling securityholders on the other hand will be
indemnified by the other against certain liabilities, including certain
liabilities under the Securities Act, or will be entitled to contribution
in connection therewith.
We will pay all expenses of the shelf registration statement,
provided that each selling securityholder will pay any broker's
commission, agency fee or underwriter's discount or commission.
LEGAL MATTERS
The validity of the securities offered by this prospectus has been
passed upon by Ira M. Dansky, Esq., our General Counsel. With respect to
certain matters concerning Pennsylvania law, he will rely on Schnader,
Harrison, Segal & Lewis LLP, Philadelphia, Pennsylvania. As of May 7,
2001, Mr. Dansky owned no shares of Jones Apparel Group common stock but
had options to purchase 205,585 shares of Jones Apparel Group common
stock.
EXPERTS
The consolidated financial statements and financial statement
schedule of Jones incorporated by reference in this prospectus to the
Annual Report on Form 10-K for the year ended December 31, 2000 have been
audited by BDO Seidman, LLP, independent certified public accountants, to
the extent and for the periods set forth in their reports incorporated
herein, and are incorporated herein in reliance upon such reports given
upon the authority of said firm as experts in accounting and auditing.
-40-
-41-
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$805,645,000
Jones Apparel Group, Inc.
Jones Apparel Group Holdings, Inc.
Jones Apparel Group USA, Inc.
Nine West Group Inc.
Zero Coupon Convertible Senior Notes due 2021
and Shares of Common Stock of Jones Apparel Group, Inc.
Issuable Upon Conversion of the Notes
--------------------------
Prospectus
--------------------------
May 8, 2001
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