**Exhibit 10.3**

 

**THIRD AMENDMENT TOAMENDED AND RESTATED LOAN AND SECURITY AGREEMENT**

** **

 

THIS THIRD AMENDMENT TO AMENDED AND RESTATED LOAN ANDSECURITY AGREEMENT (this “Amendment”), dated as of July 19, 2005,is entered into by and among the lenders signatory hereto (the “Lenders”),WACHOVIA BANK, NATIONAL ASSOCIATION, as successor by merger to CongressFinancial Corporation, as agent for the Lenders (in such capacity, “Agent”),THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation, as documentationagent (“Documentation Agent”), and LERNER NEW YORK, INC., a Delawarecorporation (“Lerner”) and LERNCO, INC., a Delaware corporation (“Lernco”and together with Lerner, “Borrowers” and each a “Borrower”).

 

**RECITALS**

 

A.            Borrowers,Agent, Documentation Agent and the Lenders have previously entered into thatcertain Amended and Restated Loan and Security Agreement, dated March 16,2004, as amended by that certain First Amendment to Amended and Restated Loanand Security Agreement dated May 19, 2004, and that certain SecondAmendment to Amended and Restated Loan and Security Agreement dated December 17,2004 (as amended, the “Loan Agreement”), pursuant to which the Lendershave made certain loans and financial accommodations available toBorrowers.  Terms used herein withoutdefinition shall have the meanings ascribed to them in the Loan Agreement.

 

B.            Borrowers,Agent, Documentation Agent and the Lenders now wish to further amend the LoanAgreement on the terms and conditions set forth herein.

 

C.            Borrowersare entering into this Amendment with the understanding and agreement that,except as specifically provided herein, none of Agent’s, Documentation Agent’sor any Lender’s rights or remedies as set forth in the Loan Agreement is beingwaived or modified by the terms of this Amendment.

 

**AGREEMENT**

 

NOW, THEREFORE, in consideration of the foregoing andthe mutual covenants herein contained, and for other good and valuableconsideration, the receipt and sufficiency of which are hereby acknowledged,the parties hereby agree as follows:

 

1.             Amendmentto Loan Agreement.

 

(a)           Section 9.10(b)(viii) ofthe Loan Agreement is hereby amended and restated in its entirety to read asfollows:

 

“(viii)      investmentsmade by such Borrower in connection with the purchase of assets or CapitalStock of a Person engaged in substantially the same or a related business assuch Borrower in an amount not to exceed $10,000,000 in the aggregate for allBorrowers, so long as (A) no

 

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Event of Defaulthas occurred and is continuing, (B) Borrowers have Excess Availability ofat least $15,000,000 after giving effect to such investment, and (C) suchPerson shall have executed and delivered a Guaranty to Agent, for itself andthe ratable benefit of the Lenders and the Bank Product Providers, and the assetsof such Person shall not be included in the calculation of the Borrowing Base; provided,however, that in addition to the foregoing permitted investments of$10,000,000 in the aggregate for all Borrowers, Borrowers may make additionalinvestments as provided herein in an amount not to exceed $20,000,000 in theaggregate for all Borrowers so long as (A) no Event of Default hasoccurred and is continuing, (B) Borrowers have Excess Availability plusQualified Cash of at least $40,000,000 after giving effect to such investment,and (C) such Person shall have executed and delivered a Guaranty to Agent,for itself and the ratable benefit of the Lenders and the Bank ProductProviders, and the assets of such Person shall not be included in thecalculation of the Borrowing Base; and

 

2.             Effectivenessof this Amendment.  Agent must havereceived the following items, each in form and content acceptable to Agent, andbe satisfied that the following conditions have been met, before this Agreementis effective:

 

(a)           thisAmendment and the attached Acknowledgement by Guarantors, each fully executedin a sufficient number of counterparts for distribution to all parties;

 

(b)           noDefault or Event of Default shall exist;

 

(c)           therepresentations and warranties set forth herein and in the Loan Agreement mustbe true and correct;

 

(d)           allother documents and legal matters in connection with the transactionscontemplated by this Amendment shall have been delivered or executed orrecorded and shall be in form and substance satisfactory to Agent.

 

3.             Representationsand Warranties.  Each Borrowerrepresents and warrants as follows:

 

(a)           Authority.  Each Borrower has the requisite corporatepower and authority to execute and deliver this Amendment, and to perform itsobligations hereunder and under the Financing Agreements (as amended ormodified hereby) to which it is a party. The execution, delivery and performance by each Borrower of thisAmendment have been duly approved by all necessary corporate action and noother corporate proceedings are necessary to consummate such transactions.

 

(b)           Enforceability.  This Amendment has been duly executed anddelivered by each Borrower.  ThisAmendment and each Financing Agreement (as amended or modified hereby) is thelegal, valid and binding obligation of each Borrower, enforceable against eachBorrower in accordance with its terms, and is in full force and effect.

 

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(c)           DueExecution.  The execution, deliveryand performance of this Amendment are within the power of each Borrower, havebeen duly authorized by all necessary corporate action, have received allnecessary governmental approval, if any, and do not contravene any law or anycontractual restrictions binding on any Borrower.

 

4.             Choiceof Law.  The validity of thisAmendment, its construction, interpretation and enforcement, the rights of theparties hereunder, shall be governed by the internal laws of the State of NewYork but excluding any principles of conflicts of law or other rule of lawthat would cause the application of the law of any jurisdiction other than thelaws of the State of New York.

 

5.             Counterparts.  This Amendment may be executed in any numberof counterparts and by different parties and separate counterparts, each ofwhich when so executed and delivered, shall be deemed an original, and all ofwhich, when taken together, shall constitute one and the same instrument.  Delivery of an executed counterpart of asignature page to this Amendment by telefacsimile shall be effective asdelivery of a manually executed counterpart of this Amendment.

 

6.             Referenceto and Effect on the Financing Agreements.

 

(a)           Uponand after the effectiveness of this Amendment, each reference in the LoanAgreement to “this Agreement”, “hereunder”, “hereof” or words of like importreferring to the Loan Agreement, and each reference in the other FinancingAgreements to “the Loan Agreement”, “thereof” or words of like import referringto the Loan Agreement, shall mean and be a reference to the Loan Agreement asmodified and amended hereby.

 

(b)           Exceptas specifically amended above, the Loan Agreement and all other FinancingAgreements, are and shall continue to be in full force and effect and arehereby in all respects ratified and confirmed and shall constitute the legal,valid, binding and enforceable obligations of Borrowers to Agent, DocumentationAgent and the Lenders.

 

(c)           Theexecution, delivery and effectiveness of this Amendment shall not, except asexpressly provided herein, operate as a waiver of any right, power or remedy ofAgent, Documentation Agent or any Lender under any of the Financing Agreements,nor constitute a waiver of any provision of any of the Financing Agreements.

 

(d)           Tothe extent that any terms and conditions in any of the Financing Agreementsshall contradict or be in conflict with any terms or conditions of the LoanAgreement, after giving effect to this Amendment, such terms and conditions arehereby deemed modified or amended accordingly to reflect the terms and conditionsof the Loan Agreement as modified or amended hereby.

 

7.             Ratification.  Each Borrower hereby restates, ratifies andreaffirms each and every term and condition set forth in the Loan Agreement, asamended hereby, and the Financing Agreements effective as of the date hereof.

 

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8.             Integration.  This Amendment, together with the otherFinancing Agreements, incorporates all negotiations of the parties hereto withrespect to the subject matter hereof and is the final expression and agreementof the parties hereto with respect to the subject matter hereof.

 

9.             Severability.  In case any provision in this Amendment shallbe invalid, illegal or unenforceable, such provision shall be severable fromthe remainder of this Amendment and the validity, legality and enforceabilityof the remaining provisions shall not in any way be affected or impairedthereby.

 

[Remainder of Page LeftIntentionally Blank]

 

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IN WITNESS WHEREOF, the parties have entered into thisAmendment as of the date first above written.

 
|   | LERNER NEW YORK,  INC.,                                     |
|--------|-------------------------------------------------------------|
|   | a Delaware  corporation                                     |
|   |                                                        |
|   |                                                        |
|   | By:                                                         |   | /s/ Ronald W.  Ristau |   |
|   | Name:                                                       | Ronald W. Ristau |
|   | Title:                                                      | Chief Operating  Officer, |
|   |                                                        | Chief Financial  Officer and Secretary |
|   |                                                        |   |
|   |                                                        |   |
|   | LERNCO, INC.,                                               |
|   | a Delaware  corporation                                     |
|   |                                                        |
|   |                                                        |
|   | By:                                                         |   | /s/ Ronald W.  Ristau |   |
|   | Name:                                                       | Ronald W. Ristau |
|   | Title:                                                      | President |
|   |                                                        |   |
|   |                                                        |   |
|   | WACHOVIA BANK,  NATIONAL  ASSOCIATION,                      |
|   | as successor by  merger to Congress Financial  Corporation, |
|   | as Agent and as  a Lender                                   |
|   |                                                        |
|   |                                                        |   |
|   | By:                                                         |   | /s/ John  Williammee, Jr. |   |
|   | Name:                                                       | John  Williammee, Jr. |
|   | Title:                                                      | Vice President |
|   |                                                        |   |
|   |                                                        |   |
|   | THE CIT  GROUP/BUSINESS CREDIT, INC.,                       |
|   | as Documentation  Agent and as a Lender                     |
|   |                                                        |   |
|   |                                                        |   |
|   | By:                                                         |   | /s/ Manuel  Borges |   |
|   | Name:                                                       | Manuel Borges |
|   | Title:                                                      | Vice President |

 

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|   | LASALLE RETAIL  FINANCE,                               |
|--------|--------------------------------------------------------|
|   | a division of  LaSalle Business Credit, Inc.,     |
|   | as agent for  Standard Federal Bank, National          |
|   | Association,                                           |
|   | as a Lender                                            |
|   |                                                   |
|   |                                                   |
|   | By:                                                    |   | /s/ Mark D.  Twomey |   |
|   | Name:                                                  | Mark D. Twomey |
|   | Title:                                                 | Assistant Vice  President |
|   |                                                   |   |
|   |                                                   |   |
|   | ABLECO FINANCE  LLC,                                   |
|   | on its behalf  and on behalf of its Affiliate assigns, |
|   | as Lenders                                             |
|   |                                                   |
|   |                                                   |
|   | By:                                                    |   | /s/ Kevin P.  Genda |   |
|   | Name:                                                  | Kevin P. Genda |
|   | Title:                                                 | Senior Vice  President |
|   |                                                   |   |
|   |                                                   |   |
|   | AZURE FUNDING,                                         |
|   | as a Lender                                            |
|   |                                                   |
|   |                                                   |
|   | By:                                                    |   | /s/ Susanne  Smith |   |
|   | Name:                                                  | Suzanne Smith |
|   | Title:                                                 | As  Attorney-In-Fact |
|   |                                                   |   |
|   |                                                   |   |
|   | BERNARD NATIONAL  LOAN INVESTORS,                      |
|   | LTD.,                                                  |
|   | as a Lender                                            |
|   |                                                   |
|   |                                                   |   |
|   | By:                                                    |   | /s/ Perry A.  Gruss |   |
|   | Name:                                                  | Perry A. Gruss |
|   | Title:                                                 | Authorized  Signatory |
|   |                                                   |   |
|   |                                                   |   |
|   | FORTRESS CREDIT  OPPORTUNITIES I LP,                   |
|   | as a Lender                                            |
|   |                                                   |
|   |                                                   |
|   | By:                                                    |   | /s/ Constantine  Dakolias |   |
|   | Name:                                                  | Constantine  Dakolias |
|   | Title:                                                 | Chief Credit  Officer |

 

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|   | OAK HILL CREDIT  PARTNERS I, LIMITED,   |
|--------|-----------------------------------------|
|   | as a Lender                             |
|   |                                    |
|   | By:                                     | Oak Hill CLO  Management I, LLC, as |
|   |                                    | Investment  Manager |
|   |                                    |   |
|   |                                    |   |
|   |                                    | By: |   | /s/ Scott D.  Krase |   |
|   |                                    | Name:  Scott  D. Krase |
|   |                                    | Title:  Authorized  Signatory |
|   |                                    |
|   |                                    |
|   | OAK HILL CREDIT  PARTNERS II, LIMITED,  |
|   | as a Lender                             |
|   |                                    |
|   | By:                                     | Oak Hill CLO  Management II, LLC, as |
|   |                                    | Investment  Manager |
|   |                                    |   |
|   |                                    |   |
|   |                                    | By: |   | /s/ Scott D.  Krase |   |
|   |                                    | Name:  Scott  D. Krase |
|   |                                    | Title:  Authorized  Signatory |
|   |                                    |
|   |                                    |
|   | OAK HILL CREDIT  PARTNERS III, LIMITED, |
|   | as a Lender                             |
|   |                                    |
|   | By:                                     | Oak Hill CLO  Management III, LLC, as |
|   |                                    | Investment  Manager |
|   |                                    |   |
|   |                                    |   |
|   |                                    | By: |   | /s/ Scott D.  Krase |   |
|   |                                    | Name:  Scott  D. Krase |
|   |                                    | Title:  Authorized  Signatory |

 

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**ACKNOWLEDGEMENT BY GUARANTORS**

** **

Dated as of July 19,2005

 

Each of the undersigned, being a Guarantor (each a “Guarantor”and collectively, the “Guarantors”) under their respective Amended andRestated Guaranty and Security Agreements, each dated as of March 16,2004, made in favor of Agent (as amended, modified or supplemented, each a “Guaranty”and collectively, the “Guaranties”), hereby (a) acknowledges andagrees to the foregoing Third Amendment to Amended and Restated Loan andSecurity Agreement (the “Amendment”), (b) agrees to the amendmentto each Guaranty set forth in Section 2(b) of the Amendment, and (c) confirmsand agrees that its Guaranty is and shall continue to be, in full force andeffect and is hereby ratified and confirmed in all respects except that uponthe effectiveness of, and on and after the date of the Amendment, each referencein such Guaranty to the Loan Agreement (as defined in the Amendment), “thereunder”,“thereof” or words of like import referring to the “Loan Agreement”, shall meanand be a reference to the Loan Agreement as amended or modified by theAmendment.  Although Agent has informedGuarantors of the amendments to the Loan Agreement as set forth above, andGuarantors have acknowledged the same, each Guarantor understands and agreesthat none of Agent, Documentation Agent or any Lender has any duty under the LoanAgreement, the Guaranties or any other agreement with any Guarantor to sonotify any Guarantor or to seek such an acknowledgement, and nothing containedherein is intended to or shall create such a duty as to any advances ortransaction hereafter.

 
|   | NEW YORK &  COMPANY, INC., |
|--------|-------------------------------------|
|   | a Delaware  corporation             |
|   |                                |
|   |                                |
|   | By:                                 |   | /s/ Ronald W.  Ristau |   |
|   | Name:                               | Ronald W. Ristau |
|   | Title:                              | Chief Operating  Officer |
|   |                                | and Chief  Financial Officer |
|   |                                |
|   |                                |
|   | LERNER NEW YORK  HOLDING, INC.,     |
|   | a Delaware  corporation             |
|   |                                |
|   |                                |
|   | By:                                 |   | /s/ Ronald W.  Ristau |   |
|   | Name:                               | Ronald W. Ristau |
|   | Title:                              | Chief Operating  Officer |
|   |                                | and Secretary |

 

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|   | 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:                                         |   | /s/ Ronald W.  Ristau |   |
|   | Name:                                       | Ronald W. Ristau |
|   | Title:                                      | President |

 

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