**Exhibit10.8**

**SECOND AMENDED AND RESTATED INTERCOMPANYSUBORDINATIONAGREEMENT**

THIS SECOND AMENDED ANDRESTATED INTERCOMPANY SUBORDINATION AGREEMENT (this “Agreement”), datedas of August 22, 2007, is made among the Obligors (as defined below), andWACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association, as agent(in such capacity, “Agent”) for the Lenders (as defined below) and BankProduct Providers (as defined in the Loan Agreement (as defined below)).

WHEREAS, Lerner New York,Inc. (“Lerner”), Lernco, Inc. (“Lernco”), NY & Co. Group,Inc. (“NY&Co”), Lerner New York Holdings, Inc. (“Parent”),Nevada Receivable Factoring, Inc. (“Nevada Factoring”), Jasmine Company,Inc. (“Jasmine”), Associated Lerner Shops of America, Inc. (“AssociatedLerner”) and Lerner New York GC, LLC (“Lerner GC” and together withLerner, Lernco, NY&Co, Parent, Nevada Factoring, Jasmine, Associated Lernerand any other “Borrower”, or “Guarantor” or “Obligor” under the Loan Agreement(as defined below), “Obligors” and each an “Obligor”), and Agenthave previously entered into the Amended and Restated IntercompanySubordination Agreement, dated March 16, 2004 (the “Existing IntercompanyAgreement”).

WHEREAS, Lerner,Lernco and Jasmine (each a “Borrower” and collectively, “Borrowers”),Agent and the persons from time to time party to the Loan Agreement (ashereinafter defined) as lenders (collectively, “Lenders”), have amendedand restated or are about to amend and restate the existing financingarrangements of Agent, Lenders, Borrowers and Guarantors pursuant to whichLenders (or Agent on behalf of Lenders) may make loans and advances and provideother financial accommodations to Borrowers as set forth in the Second Amendedand Restated Loan and Security Agreement, dated as of the date hereof, by andamong Agent, Lenders, Borrowers and Guarantors (as the same now exists or mayhereafter be amended, modified, supplemented, extended, renewed, restated orreplaced, the “Loan Agreement”) and other agreements, documents andinstruments referred to therein or at any time executed and/or delivered inconnection therewith or related thereto, including, but not limited to, thisAgreement (all of the foregoing, together with the Loan Agreement, as the samenow exist or may hereafter be amended, modified, supplemented, extended,renewed, restated or replaced, being collectively referred to herein as the “FinancingAgreements”);

WHEREAS, the Obligors,other than Borrowers, have each entered into a Second Amended and RestatedGuarantee, dated as of the date hereof (as amended, modified, supplemented,renewed, extended, or replaced from time to time, the “Guarantees” andeach a “Guarantee”);

WHEREAS, the Obligorshave or may from time to time enter into certain transactions with one anotherpursuant to which certain sums are or may be owing from one Obligor to another;

WHEREAS, in connectionwith the Loan Agreement and in order to induce Agent and the Lenders to enterinto the Loan Agreement, Agent and the Obligors now wish to amend and 

----

restate theExisting Intercompany Agreement, in its entirety, on the terms and conditionsset forth herein in order to subordinate all such intercompany indebtednessupon the terms set forth herein.

NOW, THEREFORE, inconsideration of the mutual promises, covenants, conditions, representations,and warranties set forth herein and for other good and valuable consideration,the parties hereto agree as follows:

# SECTION 1.           Definitions; Interpretation.

## (a)           TermsDefined in Loan Agreement.  Allcapitalized terms used in this Agreement and not otherwise defined herein shallhave the meanings assigned to them in the Loan Agreement.

## (b)           CertainDefined Terms.  As used in thisAgreement, the following terms shall have the following meanings:

“Agent” has the meaning set forth in the preamble to thisAgreement.

“Agreement” has the meaning set forth in the preamble to thisAgreement.

“Insolvency Event” has the meaning set forth in Section 3.

“Lenders” has the meaning set forth in the recitals to thisAgreement.

“Obligors” has the meaning set forth in the recitals to thisAgreement.

“Senior Debt” means the Obligations and other indebtedness andliabilities of the Borrowers to Agent or the Lenders under or in connectionwith the Loan Agreement, the Guaranteed Obligations and other indebtedness andliabilities of the Guarantors under or in connection with the Guarantees andall other indebtedness and liabilities of any Obligor to Agent or the Lendersunder or in connection with any other Financing Agreements, including allunpaid principal of the Loans, all interest accrued thereon (including allinterest that, but for the provisions of the United States Bankruptcy Code,would have accrued), all fees due under the Loan Agreement and the otherFinancing Agreements (including all fees that, but for the provisions of theUnited States Bankruptcy Code, would have accrued), and all other amountspayable by the Obligors, or any of them, to Agent or the Lenders thereunder orin connection therewith, whether now existing or hereafter arising, and whetherdue or to become due, absolute or contingent, liquidated or unliquidated,determined or undetermined.

“Subordinated Debt” means, with respect to each Obligor, allindebtedness, liabilities, and other obligations of any other Obligor owing tosuch Obligor in respect of any and all loans or advances made by such Obligorto such other Obligor whether now existing or hereafter arising, and whetherdue or to become due, absolute or contingent, liquidated or unliquidated,determined or undetermined, including all fees and all other amounts payable byany other Obligor to such Obligor under or in connection with any documents orinstruments related thereto.

2

----

“SubordinatedDebt Payment” means any payment or distribution by or on behalf of theObligors, directly or indirectly, of assets of the Obligors of any kind orcharacter, whether in cash, property, or securities, including on account ofthe purchase, redemption, or other acquisition of Subordinated Debt, as aresult of an collection, sale, or other disposition of collateral, or bysetoff, exchange, or in any other manner, for or on account of the SubordinatedDebt.

## (c)           Interpretation.  Unless the context of this Agreement clearlyrequires otherwise, references to the plural include the singular, referencesto the singular include the plural, the term “including” is not limiting, andthe term “or” has, except where otherwise indicated, the inclusive meaningrepresented by the phrase “and/or.”  Thewords “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in thisAgreement refer to this Agreement as a whole and not to any particularprovision of this Agreement.  Section,subsection, clause, schedule, and exhibit references are to this Agreement unlessotherwise specified.  References toagreements and other contractual instruments shall be deemed to include all subsequent amendments and othermodifications thereto.  References tostatutes or regulations are to be construed as including all statutory andregulatory provisions consolidating, amending, or replacing the statute orregulation referred to.  The captions andheadings are for convenience of reference only and shall not affect theconstruction of this Agreement.

# SECTION 2.           Subordination to Payment of SeniorDebt.  As to each Obligor, allpayments on account of the Subordinated Debt shall be subject, subordinate, andjunior, in right of payment and exercise of remedies, to the extent and in themanner set forth herein, to the prior payment, in full, in cash or cashequivalents of the Senior Debt.  To theextent required under any agreements to which any of the Obligors are party,each Obligor hereby consents to the security interest of Agent in each of theObligor’s personal property and other assets.

# SECTION 3.           Subordination Upon AnyDistribution of Assets of the Obligors. As to each Obligor, in the event of any payment or distribution ofassets of any other Obligor of any kind or character, whether in cash,property, or securities, upon the dissolution, winding up, or total or partialliquidation or reorganization, readjustment, arrangement, or similar proceedingrelating to such other Obligor or its property, whether voluntary orinvoluntary, or in bankruptcy, insolvency, receivership, arrangement, orsimilar proceedings or upon an assignment for the benefit of creditors, or uponany other marshaling or composition of the assets and liabilities of such otherObligor, or otherwise (such events, collectively, the “Insolvency Events”)except as otherwise permitted under Section 9.7(a) of the Loan Agreement, butin any event, if an Event of Default has occurred and is continuing:  (i) all amounts owing on account of theSenior Debt shall first be paid, in full, in cash, or payment provided for incash or in cash equivalents, before any Subordinated Debt Payment is made; and(ii) to the extent permitted by applicable law, any Subordinated DebtPayment to which such Obligor would be entitled except for the provisionshereof, shall be paid or delivered by the trustee in bankruptcy, receiver,assignee for the benefit of creditors, or other liquidating agent making suchpayment or distribution directly to Agent for application to the payment of theSenior Debt in accordance with clause (i), after giving effect to anyconcurrent payment or distribution or provision therefor to Agent or any Lenderin respect of such Senior Debt.

3

----

# SECTION 4.           Payments on Subordinated Debt.

## (a)           PermittedPayments.  Except as otherwisepermitted under the terms of the Loan Agreement, each Obligor may make, andeach other Obligor shall be entitled to accept and receive, payments on accountof the Subordinated Debt in the ordinary course of business.  Notwithstanding the foregoing, and without inany way limiting the generality of any provision of this Agreement, NevadaFactoring hereby acknowledges that it has no right to chargeback against anyamounts owing to or seek recapture of any payments or other remittances at anytime made to Lerner.

## (b)           NoPayment Upon Senior Debt Defaults. Except as otherwise permitted under the terms of the Loan Agreement,upon the occurrence of any Event of Default, and until such Event of Default iscured or waived, no Obligor shall make, and no other Obligor shall accept orreceive, any Subordinated Debt Payment; provided, however, Obligorsmay continue to make any payments due to any Borrower.

# SECTION 5.           Subordination of Remedies.  As long as any Senior Debt shall remainoutstanding and unpaid, following the occurrence of any Event of Default anduntil such Event of Default is cured or waived, each Obligor other than anyBorrower shall not, without the prior written consent of Agent:

## (a)           accelerate,make demand, or otherwise make due and payable prior to the original due datethereof any Subordinated Debt or bring suit or institute any other actions orproceedings to enforce its rights or interests in respect of the obligations ofany other Obligor owing to such Obligor;

## (b)           exerciseany rights under or with respect to guaranties of the Subordinated Debt, ifany;

## (c)           exerciseany rights to set-offs and counterclaims in respect of any indebtedness,liabilities, or obligations of such Obligor to any other Obligor against any ofthe Subordinated Debt; or

## (d)           commence,or cause to be commenced, or join with any creditor other than Agent and theLenders in commencing, any bankruptcy, insolvency, or receivership proceedingagainst the other Obligors.

# SECTION 6.           Payment Over to Agent.  In the event that, notwithstanding theprovisions of Section 3, Section 4, and Section 5, anySubordinated Debt Payments shall be received in contravention of Section 3,Section 4, or Section 5 by any Obligor before all Senior Debt ispaid, in full, in cash or cash equivalents, such Subordinated Debt Paymentsshall be held in trust for the benefit of Agent, the Lenders and Bank ProductProviders (as defined in the Loan Agreement) and shall be paid over ordelivered to Agent for application to the payment, in full, in cash or cashequivalents of all Senior Debt remaining unpaid to the extent necessary to giveeffect to Section 3, Section 4, and Section 5, aftergiving effect to any concurrent payments or distributions to Agent or anyLender in respect of the Senior Debt.

# SECTION 7.           Authorization to Agent.  If, while any Subordinated Debt isoutstanding, any Insolvency Event shall occur and be continuing with respect toany other Obligor or its property: (i) Agent hereby is irrevocably authorized and empowered (in thename of each 

4

----

# Obligor or otherwise),but shall have no obligation, to demand, sue for, collect, and receive everypayment or distribution in respect of the Subordinated Debt and giveacquittance therefor and to file claims and proofs of claim and take such otheraction (including voting the Subordinated Debt) as it may deem necessary oradvisable for the exercise or enforcement of any of the rights or interests ofAgent or any Lender; and (ii) each Obligor shall promptly take such actionas Agent reasonably may request (A) to collect the Subordinated Debt forthe account of Agent and the Lenders and to file appropriate claims or proofsof claim in respect of the Subordinated Debt, (B) to execute and deliverto Agent such powers of attorney, assignments, and other instruments as it mayrequest to enable it to enforce any and all claims with respect to the SubordinatedDebt, and (C) to collect and receive any and all Subordinated DebtPayments.

# SECTION 8.           Certain Agreements of Each Obligor.

## (a)           NoBenefits.  Each Obligor understandsthat there may be various agreements between Agent, the Lenders and any otherObligor evidencing and governing the Senior Debt, and each Obligor acknowledgesand agrees that such agreements are not intended to confer any benefits on suchObligor and that neither Agent nor any Lender shall have any obligation to suchObligor or any other Person to exercise any rights, enforce any remedies, ortake any actions which may be available to them under such agreements.

## (b)           NoInterference.  Each Obligoracknowledges that each other Obligor has granted to Agent, for itself and thebenefit of the Lenders and Bank Product Providers, security interests in all ofsuch other Obligor’s assets, and agrees not to interfere with or in any manneroppose a disposition of any Collateral by Agent in accordance with applicablelaw.

## (c)           Relianceby Agent and the Lenders.  EachObligor acknowledges and agrees that Agent and the Lenders will have reliedupon and will continue to rely upon the subordination provisions provided forherein and the other provisions hereof in entering into the FinancingAgreements and making or issuing the Advances, the Letters of Credit, or otherfinancial accommodations thereunder.

## (d)           Waivers.  Except as provided under the Loan Agreement,each Obligor hereby waives any and all notice of the incurrence of the SeniorDebt or any part thereof and any right to require marshaling of assets.

## (e)           Obligationsof Each Obligor Not Affected.  EachObligor hereby agrees that at any time and from time to time, without notice toor the consent of such Obligor, without incurring responsibility to suchObligor, and without impairing or releasing the subordination provided forherein or otherwise impairing the rights of Agent or any Lender hereunder,(i) the time for any other Obligor’s performance of or compliance with anyof its agreements contained in the Financing Agreements may be extended or suchperformance or compliance may be waived by Agent (in accordance with theFinancing Agreements); (ii) the agreements of any other Obligor withrespect to the Financing Agreements may from time to time be modified by suchother Obligor, Agent and the Lenders (in accordance with the FinancingAgreements) for the purpose of adding any requirements thereto or changing inany manner the rights and obligations of such other Obligor, Agent or theLenders thereunder; (iii) the manner, place, or terms for payment ofSenior Debt or any portion thereof may be altered or the terms for paymentextended, or the Senior Debt may be renewed in whole or in part; (iv) thematurity of the Senior Debt may be accelerated in accordance with the terms ofany present or future agreement by any 

5

----

## other Obligor, Agent and the Lenders (in accordance with the FinancingAgreements); (v) any Collateral may be sold, exchanged, released, orsubstituted and any Lien in favor of Agent or any Lender may be terminated,subordinated, or fail to be perfected or become unperfected; (vi) anyPerson liable in any manner for Senior Debt may be discharged, released, orsubstituted; and (vii) all other rights against the other Obligors, any otherPerson, or with respect to any Collateral may be exercised (or Agent or anyLender may waive or refrain from exercising such rights in accordance with theFinancing Agreements).

## (f)            Rights of Agent and the Lenders Not to Be Impaired.  No right of Agent or any Lender to enforcethe subordination provided for herein or to exercise its other rights hereundershall at any time in any way be prejudiced or impaired by any act or failure toact by any other Obligor, Agent or any Lender hereunder or under or in connectionwith the other Financing Agreements or by any noncompliance by the otherObligors with the term and provisions and covenants herein or in any other LoanDocument, regardless of any knowledge thereof Agent or any Lender may have orotherwise be charged with.

## (g)           Financial Condition of the Obligors.  Except as provided under the Loan Agreement,each Obligor shall not have any right to require Agent or any Lender to obtainor disclose any information with respect to: (i) the financial condition or character of any other Obligor orthe ability of the other Obligors to pay and perform Senior Debt; (ii) theSenior Debt; (iii) the Collateral or other security for any or all of theSenior Debt; (iv) the existence or nonexistence of any guarantees of, orany other subordination agreements with respect to, all or any part of theSenior Debt; (v) any action or inaction on the part of Agent, any Lenderor any other Person; or (vi) any other matter, fact, or occurrencewhatsoever.

## (h)           Acquisition of Liens or Guarantees.  Each Obligor shall not, without the priorconsent of Agent, acquire any right or interest in or to any Collateral notowned by such Obligor or accept any guaranties for the Subordinated Debt.

# SECTION 9.           Subrogation.

## (a)           Subrogation. Until the payment and performance in full in cash of all Senior Debt,each Obligor shall not have, and shall not directly or indirectly exercise, anyrights that it may acquire by way of subrogation under this Agreement, by anypayment or distribution to Agent or any Lender hereunder or otherwise.  Upon the payment and performance in full incash of all Senior Debt, each Obligor shall be subrogated to the rights ofAgent and the Lenders to receive payments or distributions applicable to theSenior Debt until the Subordinated Debt shall be paid in full.  For the purposes of the foregoingsubrogation, no payments or distributions to Agent or any Lender of any cash,property, or securities to which any Obligor would be entitled except for theprovisions of Section 3, Section 4, or Section 5 shall, asamong such Obligor, its creditors (other than Agent and the Lenders), and theother Obligors, be deemed to be a payment by the other Obligors to or onaccount of the Senior Debt.

## (b)           Payments Over to the Obligors.  If any payment or distribution to which anyObligor would otherwise have been entitled but for the provisions of Section3, Section 4, or Section 5 shall have been applied pursuantto the provisions of Section 3, Section 4, or Section 5 tothe payment of all amounts payable under the Senior Debt, such Obligor shall beentitled to receive from Agent or any Lender, as the case may be, any paymentsor distributions received by such Person in excess of the amount sufficient topay in full in cash all amounts payable under or 

6

----

## in respect of the Senior Debt.  If any such excess payment is made to Agentor any Lender, such Person shall promptly remit such excess to such Obligor anduntil so remitted shall hold such excess payment for the benefit of suchObligor.

# SECTION 10.         ContinuingAgreement; Reinstatement.

## (a)           Continuing Agreement.  This Agreement is a continuing agreement ofsubordination and shall continue in effect and be binding upon each Obligoruntil payment and performance in full in cash of the Senior Debt.  The subordinations, agreements, andpriorities set forth herein shall remain in full force and effect regardless ofwhether any party hereto in the future seeks to rescind, amend, terminate, orreform, by litigation or otherwise, its respective agreements with the otherObligors.

## (b)           Reinstatement. This Agreement shall continue to be effective or shall be reinstated, asthe case may be, if, for any reason, any payment of the Senior Debt by or onbehalf of any other Obligor shall be rescinded or must otherwise be restored byAgent or any Lender, whether as a result of an Insolvency Event or otherwise.

# SECTION 11.         Transfer ofSubordinated Debt.  Each Obligor maynot assign or transfer its rights and obligations in respect of theSubordinated Debt without the prior written consent of Agent, and any suchtransferee or assignee, as a condition to acquiring an interest in theSubordinated Debt shall agree to be bound hereby, in form satisfactory toAgent.

# SECTION 12.         Obligationsof the Obligors Not Affected.  Theprovisions of this Agreement are intended solely for the purpose of definingthe relative rights of each Obligor against the other Obligors, on the onehand, and of Agent and the Lenders against the Obligors, on the otherhand.  Nothing contained in thisAgreement shall (i) impair, as between each Obligor and the otherObligors, the obligation of the other Obligors to pay their respectiveobligations with respect to the Subordinated Debt as and when the same shallbecome due and payable, or (ii) otherwise affect the relative rights ofeach Obligor against the other Obligors, on the one hand, and of the creditors(other than Agent and the Lenders) of the other Obligors against the otherObligors, on the other hand.

# SECTION 13.         Endorsement ofObligor Documents; Further Assurances and Additional Acts.

## (a)           Endorsement of Obligor Documents.  At the request of Agent, all documents andinstruments evidencing any of the Subordinated Debt, if any, shall be endorsedwith a legend noting that such documents and instruments are subject to thisAgreement, and each Obligor shall promptly deliver to Agent evidence of thesame.

## (b)           Further Assurances and Additional Acts.  Each Obligor shall execute, acknowledge,deliver, file, notarize, and register at its own expense all such further agreements,instruments, certificates, financing statements, documents, and assurances, andperform such acts as Agent reasonably shall deem necessary or appropriate toeffectuate the purposes of this Agreement, and promptly provide Agent withevidence of the foregoing reasonably satisfactory in form and substance toAgent.

# SECTION 14.         Notices.  All notices and other communications providedfor hereunder shall, unless otherwise stated herein, be in writing (includingby facsimile transmission) and shall 

7

----

# be mailed, sent,or delivered in accordance with the notice provisions contained in the LoanAgreement.

# SECTION 15.         No Waiver;Cumulative Remedies.  No failure onthe part of Agent or any Lender to exercise, and no delay in exercising, anyright, remedy, power, or privilege hereunder shall operate as a waiver thereof,nor shall any single or partial exercise of any such right, remedy, power, orprivilege preclude any other or further exercise thereof or the exercise of anyother right, remedy, power, or privilege. The rights and remedies under this Agreement are cumulative and notexclusive of any rights, remedies, powers, and privileges that may otherwise beavailable to Agent or any Lender.

# SECTION 16.         Costs andExpenses.  Each of the Obligors,jointly and severally, agrees to pay to Agent and the Lenders on demand (a) thereasonable out-of-pocket costs and expenses of such Person, and the reasonablefees and disbursements of counsel to such Person, in connection with thenegotiation, preparation, execution, delivery, and administration of thisAgreement, and any amendments, modifications, or waivers of the terms thereofand (b) all costs and expenses of such Person, and the fees and disbursementsof counsel to such Person, in connection with the enforcement or attemptedenforcement of, and preservation of rights or interests under, this Agreement,including any losses, costs and expenses sustained by such Person as a resultof any failure by any Obligor to perform or observe its obligations containedin this Agreement.

# SECTION 17.         Survival.  All covenants, agreements, representationsand warranties made in this Agreement shall, except to the extent otherwiseprovided herein, survive the execution and delivery of this Agreement, andshall continue in full force and effect so long as any Senior Debt remainsunpaid.  Without limiting the generalityof the foregoing, the obligations of each Obligor under Section 16 shallsurvive the satisfaction of the Senior Debt.

# SECTION 18.         Benefits of Agreement.  This Agreement is entered into for the soleprotection and benefit of the parties hereto and their successors and assigns,and no other Person shall be a direct or indirect beneficiary of, or shall haveany direct or indirect cause of action or - claim in connection with,this Agreement.

# SECTION 19.         BindingEffect.  This Agreement shall bebinding upon, inure to the benefit of and be enforceable by each Obligor,Agent, each Lender, each Bank Product Provider and their respective successorsand permitted assigns.

# SECTION 20.         GoverningLaw; Choice of Forum; Service of Process; Jury Trial Waiver.

## (a)           The validity, interpretation and enforcement of thisAgreement and any dispute arising out of the relationship between any Obligorand Agent or any Lender, whether in contract, tort, equity or otherwise, shallbe governed by the internal laws of the State of New York, but excluding anyprinciples of conflicts of law or other rule of law that would cause theapplication of the law of any jurisdiction other than the laws of the State ofNew York.

## (b)           Each Obligor hereby irrevocably consents and submits tothe non-exclusive jurisdiction of the Supreme Court of the State of New Yorkfor New York County and the United States District Court for the SouthernDistrict of New York, whichever Agent may elect, and waives any objection basedon venue or forum non conveniens with respect to any action instituted thereinarising under this Agreement or any of the other Financing Agreements 

8

----

## or in any way connected with or related orincidental to the dealings of any Obligor and Agent or any Lender in respect ofthis Agreement or any of the other Financing Agreements or the transactionsrelated hereto or thereto, in each case whether now existing or hereafterarising and whether in contract, tort, equity or otherwise, and agrees that anydispute arising out of the relationship between any Obligor or any Borrower andAgent or any Lender or the conduct of any such persons in connection with thisAgreement, the other Financing Agreements or otherwise shall be heard only inthe courts described above (except that Agent and Lenders shall have the rightto bring any action or proceeding against any Obligor or its property in thecourts of any other jurisdiction which Agent deems necessary or appropriate in orderto realize on any collateral at any time granted by any Borrower or any Obligorto Agent or any Lender or to otherwise enforce its rights against any Obligoror its property).

## (c)           Each Obligor hereby waives personal service of any and allprocess upon it and consents that all such service of process may be made bycertified mail (return receipt requested) directed to its address set forthbelow and service so made shall be deemed to be completed five (5) days afterthe same shall have been so deposited in the U.S. mails, or, at Agent’s option,by service upon any Obligor in any other manner provided under the rules of anysuch courts.  Within thirty (30) daysafter such service, any Obligor so served shall appear in answer of suchprocess, failing which such Obligor shall be deemed in default and judgment maybe entered by Agent against such Obligor for the amount of the claim and otherrelief requested.

## (d)           EACH OBLIGOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OFANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENTOR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH ORRELATED OR INCIDENTAL TO THE DEALINGS OF ANY OF OBLIGORS AND AGENT OR ANYLENDER IN RESPECT OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS ORTHE TRANSACTIONS RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING ORHEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.  EACH OBLIGOR HEREBY AGREES AND CONSENTS THATANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURTTRIAL WITHOUT A JURY AND THAT ANY OBLIGOR, ANY LENDER OR AGENT MAY FILE ANORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTENEVIDENCE OF THE CONSENT OF OBLIGORS, LENDERS AND AGENT TO THE WAIVER OF THEIRRIGHT TO TRIAL BY JURY.

## (e)           Agent and Lenders shall not have any liability to Obligors(whether in tort, contract, equity or otherwise) for losses suffered byObligors in connection with, arising out of, or in any way related to thetransactions or relationships contemplated by this Agreement, or any act,omission or event occurring in connection herewith, unless it is determined bya final and non-appealable judgment or court order binding on Agent or suchLender that the losses were the result of acts or omissions constituting grossnegligence or willful misconduct.  In anysuch litigation, Agent and Lenders shall be entitled to the benefit of therebuttable presumption that it acted in good faith and with the exercise ofordinary care in the performance by it of the terms of the Loan Agreement andthe other Financing Agreements.

# SECTION 21.         SUBMISSIONTO JURISDICTION.  EACH OBLIGOR HEREBYirrevocably consents and submits to the non-exclusive jurisdiction of the Stateof New York and the State and Federal courts located in the Borough ofManhattan, County of New York, State of 

9

----

# New York**,** whichever Agent may elect, and waives any objection basedon venue or forumnonconveniens with respect to anyaction instituted therein arising under this Agreement or any of the otherFinancing Agreements or in any way connected with or related or incidental tothe dealings of the parties hereto in respect of this Agreement or any of theother Financing Agreements or the transactions related hereto or thereto, ineach case whether now existing or hereafter arising, and whether in contract,tort, equity or otherwise, and agreeS that any dispute with respect to any suchmatters shall be heard only in the courts described above (except that Agentand Lenders shall have the right to bring any action or proceeding against anyObligor or its or their property in the courts of any other jurisdiction whichAgent deems necessary or appropriate in order to realize on the Collateral orto otherwise enforce its rights against any Obligor or its or their property).

# SECTION 22.         EntireAgreement; Amendments and Waivers.

## (a)           Entire Agreement. This Agreement constitutes the entire agreement of each of the Obligors,Agent and each of the Lenders with respect to the matters set forth herein andsupersedes any prior agreements, commitments, draft, communications,discussions and understandings, oral or written, with respect thereto.

## (b)           Amendments and Waivers.  No amendment to any provision of thisAgreement shall in any event be effective unless the same shall be in writingand signed by each of the Obligors and Agent; and no waiver of any provision ofthis Agreement, or consent to any departure by any Obligor therefrom, shall inany event be effective unless the same shall be in writing and signed byAgent.  Any such amendment, waiver, orconsent shall be effective only in the specific instance and for the specificpurpose for which given.

# SECTION 23.         Conflicts.  In case of any conflict or inconsistencybetween any terms of this Agreement, on the one hand, and any documents orinstruments in respect of the Subordinated Debt, on the other hand, then theterms of this Agreement shall control.

# SECTION 24.         Severability.  Whenever possible, each provision of thisAgreement shall be interpreted in such manner as to be effective and validunder all applicable laws and regulations. If, however, any provision of this Agreement shall be prohibited by orinvalid under any such law or regulation in any jurisdiction, it shall, as tosuch jurisdiction, be deemed modified to conform to the minimum requirements ofsuch law or regulation, or, if for any reason it is not deemed so modified, itshall be ineffective and invalid only to the extent of such prohibition orinvalidity without affecting the remaining provisions of this Agreement or thevalidity or effectiveness of such provision in any other jurisdiction.

# SECTION 25.         Interpretation.  This Agreement is the result of negotiationsbetween, and have been reviewed by the respective counsel to, the Obligors, Agentand each Lender and is the product of all parties hereto.  Accordingly, this Agreement shall not beconstrued against Agent or any Lender merely because of their involvement inthe preparation hereof.

# SECTION 26.         Counterparts;Telefacsimile Execution.  ThisAgreement may be executed in any number of counterparts and by differentparties hereto in separate counterparts, each of which when so executed shallbe deemed to be an original and all of which taken together shall constitutebut one and the same agreement.  Deliveryof an executed counterpart of this Agreement by telefacsimile shall be equallyeffective as delivery of an original executed counterpart of thisAgreement.  Any party delivering anexecuted counterpart of this Agreement by telefacsimile also shall deliver anoriginal executed 

10

----

# counterpart ofthis Agreement but the failure to deliver an original executed counterpartshall not affect the validity, enforceability, and bind effect of thisAgreement.

# SECTION 27.         Terminationof Agreement.  Upon payment andperformance in full in cash of the Senior Debt, this Agreement shall terminateand Agent shall promptly execute and deliver to each Obligor such documents andinstruments as shall be reasonably necessary to evidence such termination; provided,however, that the obligations of each Obligor under Section 16 shallsurvive such termination.

# SECTION 28.         Acknowledgmentand Restatement.

## (a)           Each Obligor hereby acknowledges, confirms and agreesthat: (i) the Existing Intercompany Agreement has been duly executed anddelivered by Obligors and is in full force and effect as of the date hereof;(ii) the agreements and obligations of Obligors contained in the ExistingIntercompany Agreement constitute legal, valid and binding obligations ofObligors enforceable against it in accordance with the terms thereof, andObligors have no valid defense, offset or counterclaim to the enforcement ofsuch obligations; and (iii) Agent, Lenders and Bank Product Provider areentitled to all of the rights, remedies and benefits provided for in theExisting Intercompany Agreement.

## (b)           As of the date hereof, the terms, conditions, agreements,covenants, representations and warranties set forth in the ExistingIntercompany Agreement are hereby amended and restated in their entirety, andas so amended and restated, are replaced and superseded by the terms,conditions agreements, covenants, representations and warranties set forth inthis Agreement, except that nothing herein shall impair or adversely affect thecontinuation of the liability of Obligors for the obligations or the securityinterests and liens heretofore granted, pledged or assigned to Agent for itselfand the benefit of Lenders and Bank Product Provider.  The amendment and restatement containedherein shall not, in any manner, be construed to constitute payment of, orimpair, limit, cancel or extinguish, or constitute a novation in respect of,the indebtedness and other obligations and liabilities of Obligors evidenced byor arising under the Existing Intercompany Agreement and any of the otherExisting Financing Agreements to which Obligors are a party, and the liens andsecurity interests securing such indebtedness and other obligations andliabilities shall not in any manner be impaired, limited, terminated, waived orreleased.

 

[Signatures followon next page]

11

----

IN WITNESS WHEREOF, the undersigned has executed and delivered thisAgreement as of the date first written above.
|        | LERNER NEW YORK, INC.,         |
|--------|--------------------------------|
|   | a Delaware corporation         |
|   |                           |   |
|   | By:                            | /s/ Ronald W. Ristau |
|   | Name:                          | Ronald W. Ristau |
|   | Title:                         | President, Chief Financial Officer and Secretary |
|   |                           |   |
|   | NY & CO. GROUP, INC.,      |
|   | a Delaware corporation         |
|   |                           |   |
|   | By:                            | /s/ Ronald W. Ristau |
|   | Name:                          | Ronald W. Ristau |
|   | Title:                         | President, Chief Financial Officer and Secretary |
|   |                           |   |
|   | JASMINE COMPANY, INC.,         |
|   | a Massachusetts corporation    |
|   |                           |   |
|   | By:                            | /s/ Ronald W. Ristau |
|   | Name:                          | Ronald W. Wistau |
|   | Title:                         | President |
|   |                           |   |
|   | LERNER NEW YORK HOLDING, INC., |
|   | a Delaware corporation         |
|   |                           |   |
|   | By:                            | /s/ Ronald W. Ristau |
|   | Name:                          | Ronald W. Ristau |
|   | Title:                         | President, Chief Financial Officer and Secretary |
|   |                           |   |
|   | LERNCO, INC.,                  |
|   | a Delaware corporation         |
|   |                           |   |
|   | By:                            | /s/ Ronald W. Ristau |
|   | Name:                          | Ronald W. Ristau |
|   | Title:                         | President |

 

[SIGNATURES CONTINUE ONNEXT PAGE]

 

12

----

[SIGNATURES CONTINUEDFROM PREVIOUS PAGE]

 
|        |                                          |                       |
|--------|-----------------------------------------------|----------------------------|
|   | NEVADA RECEIVABLE FACTORING, INC.,            |
|   | a Nevada corporation                          |
|   |                                          |                       |
|   | By:                                           | /s/ Ronald W. Ristau       |
|   | Name:                                         | Ronald W. Ristau           |
|   | Title:                                        | Secretary                  |
|   |                                          |                       |
|   | ASSOCIATED LERNER SHOPS OF AMERICA, INC.,     |
|   | a New York corporation                        |
|   |                                          |                       |
|   | By:                                           | /s/ Ronald W. Ristau       |
|   | Name:                                         | Ronald W. Ristau           |
|   | Title:                                        | Secretary                  |
|   |                                          |                       |
|   | LERNER NEW YORK GC, LLC,                      |
|   | an Ohio limited liability company             |
|   |                                          |                       |
|   |                                          | By: LERNER NEW YORK, INC., |
|   |                                          | Its: Sole Member           |
|   |                                          |                       |
|   |                                          | By:                        | /s/ Ronald W. Ristau |
|   |                                          | Name:                      | Ronald W. Ristau |
|   |                                          | Title:                     | President, Chief Financial Officer and Secretary |
|   |                                          |                       |
|   | WACHOVIA BANK, NATIONAL ASSOCIATION, as Agent |
|   |                                          |                       |
|   | By:                                           | /s/ Laurence Forte         |
|   | Name:                                         | Laurence Forte             |
|   | Title:                                        | Managing Director          |
|        |                                               |                            |  |  |

 

13

----