Exhibit 2.2

                         UNITED STATES BANKRUPTCY COURT
                              DISTRICT OF DELAWARE

In re:                                  )    Chapter 11
                                        )
LOEHMANN'S, INC.,                       )    Case No. 99-1138 (MFW)
                                        )
                      Debtor.           )

                    AMENDED DISCLOSURE STATEMENT ACCOMPANYING
               AMENDED PLAN OF REORGANIZATION OF LOEHMANN'S, INC.
                     UNDER CHAPTER 11 OF THE BANKRUPTCY CODE

PAUL, WEISS, RIFKIND, WHARTON            YOUNG CONAWAY STARGATT
  & GARRISON                               & TAYLOR, LLP
Alan W. Kornberg                         James L. Patton, Jr.
Jeffrey D. Saferstein                    Pauline K. Morgan
1285 Avenue of the Americas              1110 N. Market Street
New York, New York  10019-6064           P.O. Box 391
(212) 373-3000                           Rodney Square North, 11th Floor
                                         Wilmington, Delaware  19801
                                         (302) 571-6600

                              Dated: April 24, 2000
<PAGE>

                                TABLE OF CONTENTS

                                                                    Page
                                                                    ----

I.    INTRODUCTION.....................................................1

      A.    Holders of Claims Entitled to Vote.........................3
      B.    Voting Procedures..........................................3
      C.    Confirmation Hearing.......................................4

II.   OVERVIEW OF THE PLAN.............................................5

III.  OVERVIEW OF CHAPTER 11...........................................7

IV.   DESCRIPTION OF THE DEBTOR'S BUSINESS.............................8

      A.    Overview...................................................8
      B.    History....................................................8
      C.    Merchandising..............................................9
      D.    Pricing...................................................10
      E.    Distribution..............................................10
      F.    Store Operations..........................................10
      G.    Store Layout..............................................11
      H.    Marketing and Advertising.................................11
      I.    Store Locations...........................................12
      J.    Competition...............................................13
      K.    Employees.................................................13
      L.    Trademark and Service Mark................................13
      M.    Properties................................................13
      N.    The Prepetition Loan Documents............................14
      O.    Industrial Development Bonds..............................15

V.    KEY EVENTS LEADING TO COMMENCEMENT
      OF THE CHAPTER 11 CASE..........................................15

      A.    Decrease in Overall Store Performance and Operating
            Results...................................................15
            1     Market Trends ......................................15
            2     Effects of High Leverage............................16
      B.    Discussions with Financial Advisors and Trade Creditors...16
      C.    Defaults under Indenture..................................17

                                        i
<PAGE>

                                                                    Page
                                                                    ----
VI.   STEPS TAKEN TO STRENGTHEN THE DEBTOR'S FINANCIAL
      PERFORMANCE AND OPERATIONS......................................17

      A.    Re-Emphasize The Back Room................................17
      B.    Offer Consistent Value....................................17
      C.    Enhance Brand Image.......................................18
      D.    Re-Emphasize Core Assortment .............................18
      E.    Focus on Core Markets.....................................19
      F.    Improve Customer Service..................................19

VII.  THE CHAPTER 11 CASE.............................................19

      A.    Significant "First Day" Motions During the Chapter 11
            Case......................................................19
      B.    DIP Credit Facility.......................................20
      C.    The Official Committee of Unsecured Creditors.............21
      D.    Other Professionals Retained by Debtor....................21
      E.    Management Retention and Severance Plan...................22
      F.    Store Closings............................................22
      G.    Last Date to File Proofs of Claim.........................22
      H.    Assumption/Rejection of Leases and Executory Contracts....23
      I.    Disclosure Statement/Plan Confirmation Hearings...........23

VIII. SUMMARY OF THE PLAN OF REORGANIZATION...........................23

      A.    Introduction..............................................23
      B.    Classification and Treatment of Administrative Claims,
            Claims and Equity Interests Under the Plan................24
            1     Unclassified -- Administrative Claims...............25
            2     Unclassified -- Professional Compensation and
                  Reimbursement Claims................................26
            3     Unclassified -- Priority Tax Claims.................27
            4     Class 1 -- Other Priority Claims....................28
            5     Class 2 -- Other Secured Claims.....................28
            6     Class 3 -- DIP Financing Claims.....................29
            7     Class 4 -- Convenience Claims.......................29
            8     Class 5 -- General Unsecured Claims.................30
            9     Class 6 -- Equity Interests.........................31
      C.    Provisions Regarding Corporate Governance and Management
            of the Reorganized Debtor.................................31
            1     Directors and Officers of Reorganized Loehmann's....31
                  (a)   Board of Directors............................31

                                       ii
<PAGE>

                                                                    Page
                                                                    ----

                  (b)   Officers of Reorganized Loehmann's............31
            2     Amended Certificate of Incorporation and Amended
                  Loehmann's By-Laws..................................32
            3     Securities to be Issued Pursuant to the Plan; New
                  Common Stock........................................32
      D.    Equity Incentive Plan.....................................33
            1     Reorganized Loehmann's Equity Incentive Plan........33
            2     Description of Reorganized Loehmann's Equity
                  Incentive Plan......................................33
      E.    Distributions Under the Plan..............................34
            1     Method of Distributions under the Plan..............34
                  (a)   Date and Delivery of Distributions............34
                  (b)   Distribution of Cash..........................35
                  (c)   Effective Date Distributions..................35
                  (d)   Distributions on Subsequent Distribution
                        Dates.........................................35
                  (e)   Distributions on the Final Distribution Date..36
                  (f)   Reserve Shares for Disputed Claims............36
                  (g)   Unclaimed Distributions.......................37
                  (h)   Saturdays, Sundays, or Legal Holidays.........37
                  (i)   Fractional Shares.............................37
                  (j)   Distributions to Holders as of the Record
                        Date..........................................37
                  (k)   Senior Note Indenture Trustee's Fees and
                        Expenses......................................38
            2     Disputed General Unsecured Claims...................38
      F.    Objections to and Resolution of Administrative Claims and
            Claims; Administrative and Priority Claims Reserve........38
            1     Objections to and Resolution of Administrative Claims
                  and Claims..........................................38
            2     Administrative, Priority and Convenience Claims
                  Reserve.............................................38
                  (a)   Establishment of Administrative, Priority and
                  Convenience Claims Reserve..........................38
                  (b)   Cash Held in Administrative, Priority and
                        Convenience Priority Claims Reserve...........39
            3     Allowance of Disputed Administrative, Priority and
                  Convenience Claims..................................39
            4     Release of Shares from Disputed Claims Reserve......40
      G.    Allocation of Consideration...............................40
      H.    Cancellation and Surrender of Existing Securities and
            Agreements................................................40
      I.    Administrative Claims of Indenture Trustee................41
      J.    Nonconsensual Confirmation................................41

                                       iii
<PAGE>

                                                                    Page
                                                                    ----

      K.    Implementation of the Plan................................41
      L.    Effect of Confirmation of the Plan........................42
            1     Continued Corporate Existence.......................42
            2     Vesting of Assets...................................42
            3     Discharge of the Debtor.............................42
            4     Injunction..........................................43
            5     Extinguishment of Causes of Action Under the
                  Avoiding Power Provisions...........................43
            6     Votes Solicited in Good Faith.......................43
            7     Administrative Claims Incurred after the
                  Confirmation Date...................................44
            8     The Debtor's Release................................44
            9     Exculpation and Release and Injunction of Released
                  Parties.............................................45
                  (a)   Exculpation...................................45
                  (b)   Injunction....................................45
            10    Limitation of Governmental Release..................45
            11    Term of Bankruptcy Injunction or Stays..............46
            12    Preservation of Insurance...........................46
            13    Officers' and Directors' Indemnification Rights and
                  Insurance...........................................46
      M.    Retention of Jurisdiction.................................46
      N.    Miscellaneous Provisions..................................47
            1     Payment of Statutory Fees...........................47
            2     Dissolution of Creditors Committee..................47
            3     Modification of the Plan............................47
            4     Governing Law.......................................48
            5     Filing or Execution of Additional Documents.........48
            6     Withholding and Reporting Requirements..............48
            7     Exemption from Transfer Taxes.......................48
            8     Section 1145 Exemption..............................48
            9     Waiver of Federal Rule of Civil Procedure 62(a).....49
            10    Plan Supplement.....................................49
            11    Setoff by the United States.........................49
      O.    Executory Contracts and Unexpired Leases..................49
      P.    Benefit Plans.............................................50

IX.   PROJECTIONS AND VALUATION ANALYSIS..............................50

      A.    Projections...............................................51
      B.    Valuation.................................................53

                                       iv
<PAGE>

                                                                    Page
                                                                    ----

X.    CERTAIN RISK FACTORS TO BE CONSIDERED...........................54

      A.    Projected Financial Information...........................54
      B.    Ability to Refinance Certain Indebtedness and Restrictions
            Imposed by Indebtedness...................................55
      C.    Competitive Conditions and Need to Fund Future Capital
            Requirements..............................................55
      D.    Significant Holders.......................................56
      E.    Lack of Established Market for New Common Stock...........56
      F.    Dividend Policies.........................................56
      G.    Certain Bankruptcy Law Considerations.....................57
            1     Risk of Non-Confirmation of the Plan................57
            2     Risk of Non-Occurrence of the Effective Date........57
      H.    Certain Tax Matters.......................................57

XI.   CONFIRMATION PROCEDURE..........................................57

      A.    Solicitation of Votes.....................................57
      B.    The Confirmation Hearing..................................58
      C.    Confirmation..............................................59
            1     Acceptance..........................................59
            2     Unfair Discrimination and Fair and Equitable Tests..60
                  (a)   Secured Creditors.............................60
                  (b)   Unsecured Creditors...........................60
                  (c)   Equity Interests..............................60
            3     Feasibility.........................................60
            4     Best Interests Test.................................62

XII.  EFFECTIVENESS OF THE PLAN.......................................64

      A.    Conditions Precedent to Effectiveness.....................64
      B.    Waiver of Conditions......................................64
      C.    Effect of Failure of Conditions...........................64
      D.    Vacatur of Plan...........................................64

XIII. SECURITIES LAWS MATTERS.........................................65

      A.    Bankruptcy Code Exemptions from Registration Requirements.65
            1     Initial Offer and Sale of Plan Securities...........65
            2     Subsequent Transfers of Plan Securities.............65

                                        v
<PAGE>

                                                                    Page
                                                                    ----

            3     Certain Transactions by Stockbrokers................68

XIV.  FINANCIAL INFORMATION...........................................68

      A.    Financial Statements......................................68
      B.    Management's Discussion and Analysis of Financial
            Condition and Results of Operations.......................69
      C.    Recent Performance........................................69

XV.   ALTERNATIVES TO CONFIRMATION AND
      CONSUMMATION OF THE PLAN........................................69

      A.    Liquidation Under Chapter 7...............................69
      B.    Alternative Plan of Reorganization........................70

XVI.  CERTAIN FEDERAL INCOME TAX CONSEQUENCES
      OF THE PLAN.....................................................70

      A.    Consequences to Creditors.................................71
            1     Tax Securities......................................71
            2     Claims and Consideration Constituting Tax
                  Securities..........................................72
            3     Claims not Constituting Tax Securities..............72
      B.    Consequences to the Debtor................................73
            1     Cancellation of Debt................................73
            2     Alternative Minimum Tax.............................74
      C.    Additional Tax Considerations for All Claim Holders.......74
            1     Distributions in Discharge of Accrued Interest......74
            2     Subsequent Sale of New Common Stock.................75
            3     Market Discount.....................................75

XVII. CONCLUSION......................................................76

                                       vi
<PAGE>

      ALL CREDITORS ARE ADVISED AND ENCOURAGED TO READ THIS DISCLOSURE STATEMENT
AND THE PLAN IN THEIR ENTIRETY BEFORE VOTING TO ACCEPT OR REJECT THE PLAN. PLAN
SUMMARIES AND STATEMENTS MADE IN THIS DISCLOSURE STATEMENT, INCLUDING THE
FOLLOWING SUMMARY, ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE PLAN,
OTHER EXHIBITS ANNEXED TO THE PLAN, THE PLAN SUPPLEMENT AND THIS DISCLOSURE
STATEMENT. THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT ARE MADE ONLY
AS OF THE DATE HEREOF UNLESS OTHERWISE SPECIFIED, AND THERE CAN BE NO ASSURANCE
THAT THE STATEMENTS CONTAINED HEREIN WILL BE CORRECT AT ANY TIME AFTER SUCH
DATE. ALL CREDITORS SHOULD READ CAREFULLY THE "RISK FACTORS" SECTION HEREOF
BEFORE VOTING FOR OR AGAINST THE PLAN. SEE "CERTAIN RISK FACTORS" SECTION X.

      THIS DISCLOSURE STATEMENT HAS BEEN PREPARED IN ACCORDANCE WITH SECTION
1125 OF THE BANKRUPTCY CODE AND RULE 3016 OF THE FEDERAL RULES OF BANKRUPTCY
PROCEDURE AND NOT NECESSARILY IN ACCORDANCE WITH FEDERAL OR STATE SECURITIES
LAWS OR OTHER APPLICABLE LAW. THIS DISCLOSURE STATEMENT HAS NEITHER BEEN
APPROVED NOR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC")
NOR HAS THE SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED
HEREIN. PERSONS OR ENTITIES TRADING IN OR OTHERWISE PURCHASING, SELLING, OR
TRANSFERRING SECURITIES OF THE DEBTOR SHOULD EVALUATE THIS DISCLOSURE STATEMENT
AND THE PLAN IN LIGHT OF THE PURPOSES FOR WHICH THEY WERE PREPARED.

      CERTAIN STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT, INCLUDING
PROJECTED FINANCIAL INFORMATION AND OTHER FORWARD-LOOKING STATEMENTS, ARE BASED
ON ESTIMATES AND ASSUMPTIONS. THERE CAN BE NO ASSURANCE THAT SUCH STATEMENTS
WILL REFLECT ACTUAL OUTCOMES.

      THE INFORMATION IN THIS DISCLOSURE STATEMENT IS BEING PROVIDED SOLELY FOR
PURPOSES OF VOTING TO ACCEPT OR REJECT THE PLAN. NOTHING IN THIS DISCLOSURE
STATEMENT MAY BE USED BY ANY ENTITY FOR ANY OTHER PURPOSE. THE FACTUAL
INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT, INCLUDING THE DESCRIPTION OF
THE DEBTOR, ITS BUSINESS AND EVENTS LEADING TO THE COMMENCEMENT OF THE CHAPTER
11 CASE, HAS BEEN OBTAINED FROM VARIOUS DOCUMENTS, AGREEMENTS, AND OTHER
WRITINGS RELATING TO THE DEBTOR. NEITHER THE DEBTOR NOR ANY OTHER PARTY MAKES
ANY REPRESENTATION OR WARRANTY REGARDING SUCH INFORMATION.

                                        i
<PAGE>

      THE TERMS OF THE PLAN GOVERN IN THE EVENT OF ANY INCONSISTENCY WITH THE
SUMMARIES IN THIS DISCLOSURE STATEMENT. ALL EXHIBITS TO THE DISCLOSURE STATEMENT
ARE INCORPORATED INTO AND ARE A PART OF THIS DISCLOSURE STATEMENT AS IF SET
FORTH IN FULL HEREIN.

      AS TO CONTESTED MATTERS, EXISTING LITIGATION INVOLVING THE DEBTOR,
ADVERSARY PROCEEDINGS, AND OTHER ACTIONS OR THREATENED ACTIONS, THIS DISCLOSURE
STATEMENT SHALL NOT CONSTITUTE OR BE CONSTRUED AS AN ADMISSION OF ANY FACT OR
LIABILITY, STIPULATION, OR WAIVER, BUT RATHER AS A STATEMENT MADE WITHOUT
PREJUDICE SOLELY FOR SETTLEMENT PURPOSES, WITH FULL RESERVATION OF RIGHTS, AND
IS NOT TO BE USED FOR ANY LITIGATION PURPOSE WHATSOEVER. AS SUCH, THIS
DISCLOSURE STATEMENT SHALL NOT BE ADMISSIBLE IN ANY NONBANKRUPTCY PROCEEDING
INVOLVING THE DEBTOR, OR ANY OTHER PARTY IN INTEREST, NOR SHALL IT BE CONSTRUED
TO BE CONCLUSIVE ADVICE ON THE TAX, SECURITIES, FINANCIAL OR OTHER EFFECTS OF
THE REORGANIZATION AS TO HOLDERS OF CLAIMS AGAINST OR EQUITY INTERESTS IN THE
DEBTOR.

                                       ii
<PAGE>

                                       I.

                                  INTRODUCTION

            On May 18, 1999 (the "Petition Date"), Loehmann's, Inc.
("Loehmann's" or the "Debtor") filed a petition for relief under chapter 11 of
the Bankruptcy Code with the United States Bankruptcy Court for the District of
Delaware. On March 24, 2000, Loehmann's filed its proposed plan of
reorganization, dated March 24, 2000. On April 24, 2000, Loehmann's filed its
Amended Plan of Reorganization (as it may be amended, modified or supplemented,
the "Plan") which sets forth the manner in which Claims against and Equity
Interests in the Debtor will be treated. This Amended Disclosure Statement (the
"Disclosure Statement") describes certain aspects of the Plan, the Debtor's
business and related matters. Unless otherwise defined herein, all capitalized
terms contained herein have the meanings ascribed to them in the Plan.

            After a long and careful review of the Debtor's business and its
prospects as a going concern, the Debtor, in consultation with its legal and
financial advisors and the official committee of unsecured creditors appointed
by the United States Trustee in this case (the "Creditors Committee") and the
Creditors Committee's legal and financial advisors, concluded that recoveries to
creditors and equity holders would be maximized by the Debtor's continued
operation as a going concern under the terms of the Plan. In other words, the
Debtor is worth more to its creditors and equity holders as a going concern than
it would be upon liquidation. To achieve that higher value, the Plan
contemplates: (i) payment in full of (a) Priority Tax Claims, (b) Other Priority
Claims, (c) Other Secured Claims, and (d) DIP Financing Claims; (ii) Cash
payment to holders of Allowed Claims of less than $2,000 or to those who elect
to reduce their Claim to $2,000; (iii) the Pro Rata distribution of 5,000,000
shares in New Common Stock (subject to dilution in accordance with the
management Equity Incentive Plan described in Section VIII.D) to holders of
Allowed General Unsecured Claims, including holders of Senior Notes; and (iv)
the cancellation of Equity Interests in the Debtor.

            This Disclosure Statement is submitted pursuant to section 1125 of
the Bankruptcy Code to holders of Claims against the Debtor in connection with
(i) the solicitation of acceptances of the Debtor's Plan and (ii) the hearing to
consider confirmation of the Plan (the "Confirmation Hearing") scheduled for
June 27, 2000, at 2:00 p.m., Eastern Time.

            Attached as Exhibits to this Disclosure Statement are copies of the
following:

      o     The Plan (Exhibit A);

      o     An Order of the Court dated April 24, 2000 (the "Disclosure
            Statement Order"), among other things,
<PAGE>

            approving the Disclosure Statement and establishing certain
            procedures with respect to the solicitation and tabulation of votes
            to accept or reject the Plan (Exhibit B);

     o      Loehmann's, Inc. 1998 Form 10-K and Annual Report
            (Exhibit C);

     o      Loehmann's, Inc. Projected Financial Information
            (Exhibit D);

     o      Loehmann's, Inc. Liquidation Analysis (Exhibit E);

     o      Loehmann's, Inc. October 30, 1999 Form 10-Q (Exhibit F);

     o      Loehmann's, Inc. Recovery Analysis (Exhibit G); and

            In addition, a Ballot for the acceptance or rejection of the Plan is
enclosed with the Disclosure Statement submitted to the holders of Claims that
are entitled to vote to accept or reject the Plan.

            On April 24, 2000, after notice and a hearing, the Bankruptcy Court
signed the Disclosure Statement Order approving this Disclosure Statement as
containing adequate information of a kind and in sufficient detail to enable
hypothetical, reasonable investors typical of the Debtor's creditors to make an
informed judgment whether to accept or reject the Plan. APPROVAL OF THIS
DISCLOSURE STATEMENT DOES NOT, HOWEVER, CONSTITUTE A DETERMINATION BY THE COURT
AS TO THE FAIRNESS OR MERITS OF THE PLAN.

            The Disclosure Statement Order, a copy of which is annexed hereto as
Exhibit B, sets forth in detail the deadlines, procedures and instructions for
voting to accept or reject the Plan and for filing objections to confirmation of
the Plan, the record date for voting purposes, and the applicable standards for
tabulating Ballots. In addition, detailed voting instructions accompany each
Ballot. Each holder of a Claim entitled to vote on the Plan should read in their
entirety the Disclosure Statement, the Plan, the Disclosure Statement Order and
the instructions accompanying the Ballots before voting on the Plan. These
documents contain, among other things, important information concerning the
classification of Claims and Equity Interests for voting purposes and the
tabulation of votes. No solicitation of votes to accept the Plan may be made
except pursuant to section 1125 of the Bankruptcy Code.

                                        2
<PAGE>

      A.    Holders of Claims Entitled to Vote

            Pursuant to the provisions of the Bankruptcy Code, only holders of
allowed claims or equity interests in classes of claims or equity interests that
are impaired are entitled to vote to accept or reject a proposed chapter 11
plan. Classes of claims or equity interests in which the holders of claims or
equity interests are unimpaired under a chapter 11 plan are deemed to have
accepted the plan and are not entitled to vote to accept or reject the plan.

            Classes 4 (Convenience Claims), 5 (General Unsecured Claims) and 6
(Equity Interests) of the Plan are impaired. To the extent Claims in Classes 4
and 5 are Allowed Claims, the holders of such Claims are entitled to vote to
accept or reject the Plan. Holders of Equity Interests in Class 6 shall receive
no distribution under the Plan and pursuant to section 1126(g) of the Bankruptcy
Code are therefore deemed to have rejected the Plan. Classes 1, 2 and 3 of the
Plan are unimpaired. Pursuant to section 1126(f) of the Bankruptcy Code, holders
of Claims in Classes 1, 2 and 3 are conclusively deemed to have accepted the
Plan.

            The Bankruptcy Code defines "acceptance" of a plan by a class of
claims as acceptance by creditors in that class that hold at least two-thirds in
dollar amount and more than one-half in number of the claims that cast ballots
for acceptance or rejection of the plan. For a more detailed description of the
requirements for confirmation of the Plan, see Section XI, "Confirmation
Procedure."

            If either of the classes of Claims entitled to vote on the Plan
votes to reject the Plan, the Debtor intends to request confirmation of the Plan
pursuant to section 1129(b) of the Bankruptcy Code. Section 1129(b) permits the
confirmation of a plan of reorganization notwithstanding the nonacceptance of a
plan by one or more impaired classes of claims or equity interests. Under that
section, a plan may be confirmed by a bankruptcy court if it does not
"discriminate unfairly" and is "fair and equitable" with respect to each
nonaccepting class. The determination as to whether to seek confirmation of the
Plan under such circumstances will be announced before or at the Confirmation
Hearing. For a more detailed description of the requirements for confirmation of
a nonconsensual plan, see Section XI.C, "Confirmation Procedure" and "Unfair
Discrimination and Fair and Equitable Tests."

      B.    Voting Procedures

            If you are entitled to vote to accept or reject the Plan, a Ballot
is enclosed for the purpose of voting on the Plan. If you hold a Claim in more
than one Class and you are entitled to vote Claims in more than one Class, you
will receive separate Ballots that must be used for each separate Class of
Claims. Please vote and return your Ballot(s).

            If you received a Ballot from a broker, bank or other institution,
return the completed Ballot to such broker, bank or institution promptly so that
it can be

                                        3
<PAGE>

forwarded to the Debtor's tabulation agent, Logan & Company, Inc. If you
received Ballot(s) from the Debtor, please vote and return your Ballot(s)
directly to the following address:

                        Logan & Company, Inc.
                        546 Valley Road
                        Upper Montclair, NJ  07043
                        Attn: Loehmann's, Inc.
                              Balloting Center

            DO NOT RETURN YOUR NOTES OR ANY OTHER INSTRUMENTS OR AGREEMENTS THAT
YOU MAY HAVE WITH YOUR BALLOT.

            TO BE COUNTED, YOUR BALLOT INDICATING ACCEPTANCE OR REJECTION OF THE
PLAN MUST BE RECEIVED NO LATER THAN 5:00 P.M., EASTERN STANDARD TIME, ON June
20, 2000.

            Any Claim in Class 4 or 5 as to which an objection or request for
estimation is pending or which is scheduled by the Debtor as unliquidated,
disputed or contingent is not entitled to vote unless the holder of such Claim
has obtained an order of the Court temporarily allowing such Claim for the
purpose of voting on the Plan.

            Pursuant to the Disclosure Statement Order, the Court set April 18,
2000 as the record date for voting on the Plan. Accordingly, only holders of
record as of April 18, 2000 that are otherwise entitled to vote under the Plan
will receive a Ballot and may vote on the Plan.

            If you are a holder of a Claim entitled to vote on the Plan and did
not receive a Ballot, received a damaged Ballot or lost your Ballot, or if you
have any questions concerning the Disclosure Statement, the Plan or the
procedures for voting on the Plan, please call Logan & Company, Inc. at (973)
509-3190 from 10:00 a.m. to 4:00 p.m. Monday through Friday.

      C.    Confirmation Hearing

            Pursuant to section 1128 of the Bankruptcy Code, the Confirmation
Hearing will be held on June 27, 2000 at 2:00 p.m. Eastern Time, before the
Honorable Mary F. Walrath, United States Bankruptcy Court, 824 North Market
Street, Wilmington, Delaware. The Court has directed that objections, if any, to
confirmation of the Plan be served and filed so that they are received on or
before June 20, 2000 at 4:00 p.m., Eastern Time, in the manner described below
in Section XI.B, "The Confirmation Hearing." The Confirmation Hearing may be
adjourned from time to time by the Court without further notice except for the

                                        4
<PAGE>

announcement of the adjournment date made at the Confirmation Hearing or at any
subsequent adjourned Confirmation Hearing.

            THE DEBTOR BELIEVES THAT THE PLAN WILL ENABLE IT TO REORGANIZE
SUCCESSFULLY AND TO ACCOMPLISH THE OBJECTIVES OF CHAPTER 11 AND THAT ACCEPTANCE
OF THE PLAN IS IN THE BEST INTERESTS OF THE DEBTOR AND ITS CREDITORS. THE DEBTOR
URGES CREDITORS TO VOTE TO ACCEPT THE PLAN.

            AS DESCRIBED IN THE ENCLOSED LETTER, THE CREDITORS COMMITTEE
APPOINTED IN THE DEBTOR'S CHAPTER 11 CASE SUPPORTS THE PLAN AND RECOMMENDS THAT
UNSECURED CREDITORS VOTE TO ACCEPT THE PLAN.

                                       II.

                              OVERVIEW OF THE PLAN

            The following table briefly summarizes the classification and
treatment of Claims and Equity Interests under the Plan.

                     SUMMARY OF CLASSIFICATION AND TREATMENT
                OF CLAIMS AND EQUITY INTERESTS UNDER THE PLAN 1/

<TABLE>
<CAPTION>
        Type of Claim or                                      Estimated     Estimated
 Class  Equity Interest              Treatment               Claim Amount    Recovery
 -----  -----------------            ---------               ------------    --------
<S>     <C>              <C>                                 <C>             <C>
  --    Administrative    Unimpaired; paid in full, in Cash    $4.8mm 2/       100%
        Claims            on the Effective Date, or in
                          accordance with the terms and
                          conditions of transactions or
</TABLE>

--------
1/    This table is only a summary of the classification and treatment of Claims
      and Equity Interests under the Plan. Reference should be made to the
      entire Disclosure Statement and the Plan for a complete description of the
      classification and treatment of Claims and Equity Interests.

2/    This amount excludes claims of entities against the Debtor for (i) goods
      provided after the Petition Date by such entities to the Debtor for resale
      to the general public in the ordinary course of business, and (ii) goods
      (not resold to the general public) and services provided to the Debtor in
      the ordinary course of the Debtor's businesses. These claims are being
      paid in the ordinary course of business.

                                        5
<PAGE>
<TABLE>
<CAPTION>
        Type of Claim or                                      Estimated     Estimated
 Class  Equity Interest              Treatment               Claim Amount    Recovery
 -----  -----------------            ---------               ------------    --------
<S>     <C>              <C>                                 <C>             <C>
                          agreements relating to obligations
                          incurred in the ordinary course of
                          business during the pendency of the
                          Chapter 11 Case or assumed by the
                          Debtor in Possession.

  --    Priority Tax      Unimpaired; at the option of the     $1.2mm          100%
        Claims            Debtor either (i) paid in full, in
                          Cash on the Effective Date, or
                          (ii) paid over a six-year period
                          from the date of assessment as
                          provided in section 1129(a)(9)(c)
                          of the Bankruptcy Code with
                          interest at the statutory rate
                          provided for under applicable
                          federal, state or local law.

   1    Other Priority    Unimpaired; paid in full in Cash     $0.00           100%
        Claims            on the Effective Date.

   2    Other Secured     Unimpaired; at the option of the   de minimis        100%
        Claims            Debtor to be (i) reinstated by
                          curing all outstanding defaults
                          with all legal, equitable and
                          contractual rights remaining
                          unaltered, (ii) paid in full, in
                          Cash, plus any interest required
                          to be paid pursuant to section
                          506(b) of the Bankruptcy Code, on
                          the Effective Date, or (iii)
                          fully and completely satisfied by
                          delivery or retention of the
                          collateral securing the Other
                          Secured Claim and payment of any
                          interest required to be paid
                          pursuant to section 506(b) of the
                          Bankruptcy Code.

   3    DIP Financing     Unimpaired; paid in full, in Cash    $25.8mm         100%
        Claims            on the Effective Date.
</TABLE>

                                        6
<PAGE>
<TABLE>
<CAPTION>
        Type of Claim or                                      Estimated     Estimated
 Class  Equity Interest              Treatment               Claim Amount    Recovery
 -----  -----------------            ---------               ------------    --------
<S>     <C>              <C>                                 <C>             <C>
   4    Convenience       Impaired; distribution of 50% of    $245,000.00       50%
        Claims            Allowed Claim up to $1,000 on
                          the later of (i) the Effective
                          Date and (ii) 30 days after the
                          date on which such Claim becomes
                          an Allowed Claim.

   5    General Unsecured Impaired; distribution of Pro         $142mm          53% 3/
        Claims            Rata share of 5,000,000 shares
                          of New Common Stock in the
                          Reorganized Company on the
                          later of (i) the Effective Date
                          and (ii) 30 days after the date
                          on which such Claim becomes an
                          Allowed Claim.

   6    Equity Interests  Impaired; no distribution shall be     N/A          $ 0.00
                          made, and all existing Equity
                          Interests will be canceled.
</TABLE>

                                      III.

                             OVERVIEW OF CHAPTER 11

            Chapter 11 is the principal business reorganization chapter of the
Bankruptcy Code. Under chapter 11, a debtor is authorized to reorganize its
business for the benefit of itself, its creditors and equity interest holders.
In addition to permitting rehabilitation of a debtor, another goal of chapter 11
is to promote equality of treatment for similarly situated creditors and equity
interest holders with respect to the distribution of a debtor's assets.

            The commencement of a chapter 11 case creates an estate that is
comprised of all of the legal and equitable interests of the debtor as of the
filing date. The Bankruptcy Code provides that the debtor may continue to
operate its business and remain in possession of its property as a "debtor in
possession."

            The consummation of a plan of reorganization is the principal
objective of a chapter 11 reorganization case. A plan of reorganization sets
forth the means for satisfying claims against and interests in the debtor.
Confirmation of a plan of reorganization by the bankruptcy court makes the plan
binding upon a debtor, any

--------
3/    For an analysis of the estimated recovery, see Recovery Analysis attached
      as Exhibit G.

                                        7
<PAGE>

issuer of securities under the plan, any person acquiring property under the
plan and any creditor or equity interest holder of a debtor. Subject to certain
limited exceptions, the confirmation order discharges a debtor from any debt
that arose prior to the date of confirmation of the plan and substitutes
therefor the obligations specified under the confirmed plan.

            After a plan of reorganization has been filed, the holders of claims
against or interests in a debtor are generally permitted to vote to accept or
reject the plan. Before soliciting acceptances of the proposed plan, however,
section 1125 of the Bankruptcy Code requires a debtor to prepare a disclosure
statement containing adequate information of a kind, and in sufficient detail,
to enable a hypothetical reasonable investor to make an informed judgment about
the plan. The Debtor is submitting this Disclosure Statement to holders of
Claims against the Debtor to satisfy the requirements of section 1125 of the
Bankruptcy Code.

                                       IV.

                      DESCRIPTION OF THE DEBTOR'S BUSINESS

      A.    Overview

            Loehmann's is a leading national specialty retailer of well-known
designer and brand name women's fashion apparel, men's furnishings, accessories
and shoes offered at prices that are typically 30% to 60% those offered by
department stores. Loehmann's believes it is one of the largest national upscale
off-price specialty retailers in the industry. Loehmann's has a strong brand
name, loyal customer base and long-standing relationships with leading designers
and vendors of quality merchandise.

            Loehmann's currently operates 48 retail stores (4 of which will be
closed shortly) in major metropolitan markets located in 17 states, in various
regions of the country. Loehmann's also operates two distribution facilities --
one located at its headquarters in the Bronx, New York, and the other located in
Rutherford, New Jersey. Loehmann's is a Delaware corporation with no
subsidiaries.

      B.    History

            Frieda Loehmann founded the original Loehmann's business in 1921.
She acquired the overruns and samples from designers who supplied major
department stores and sold these goods at discount prices at her store in
Brooklyn, New York. With the success of the original Brooklyn store, her son
Charles began expanding the business, first in the northeastern United States
and then nationally. Loehmann's remained privately held until 1964. After 17
years as a public company, Loehmann's was acquired in 1981 by AEA Investors in a
leveraged buyout transaction. AEA then sold the company in 1983 to Associated
Dry Goods Corporation ("ADG"), owners of

                                        8
<PAGE>

the Lord & Taylor and other retail chains. Loehmann's ownership changed again in
October 1986 when the May Department Stores purchased ADG. On September 19, 1988
Loehmann's was acquired in a leveraged buyout transaction led by Sefinco Ltd.,
an affiliate of Entrecanales y Tavora, S.A., the Sprout Group, a venture capital
affiliate of Donaldson, Lufkin & Jenrette, Inc., Desai Capital Management, Inc.
and certain of its affiliates and members of senior management. On May 10, 1996,
Loehmann's issued and sold 3,572,000 shares of common stock in an initial public
offering (the "Initial Public Offering") and issued and sold $100 million
principal amount of the Senior Notes in a concurrent debt offering.

            Prior to consummation of the Initial Public Offering in May 1996,
Loehmann's Holdings, Inc. ("Holdings"), the former parent of Loehmann's, whose
only material assets consisted of all of the outstanding stock of Loehmann's and
an intercompany note with the company, was merged with and into a new
wholly-owned Delaware subsidiary formed for the purpose of reincorporating
Holdings from Maryland to Delaware. Subsequently, but prior to consummation of
the Initial Public Offering, the surviving corporation of such merger was merged
with and into Loehmann's with Loehmann's being the ultimate surviving
corporation.

      C.    Merchandising

            As an off-price retailer of upscale merchandise, Loehmann's is able
to offer merchandise comparable to that offered in better department stores at
significantly reduced prices. Loehmann's offers name-brand merchandise from
designers such as Anne Klein, Calvin Klein, Donna Karan and Ralph Lauren.
Loehmann's buys both in-season merchandise as available from vendors for
immediate distribution to its stores and end-of-season overruns that are then
held in the company's warehouse for distribution at the start of the next
years's season. Loehmann's' merchandising strategy is to maintain and develop
its unique position as an off-price retailer of better merchandise.

            Loehmann's purchases its inventory from over 400 suppliers, which in
many cases include separate divisions of a single manufacturer or designer.
These suppliers include a substantial majority of the designer and name brand
apparel manufacturers in the United States. Some purchases are also made in the
European market, primarily Italy. Loehmann's does not have any long-term supply
contracts with its suppliers. Vendors who sell to Loehmann's generally do not
need to build into their price structure any anticipation of returns, markdown
allowances or advertising allowances, all of which are typical in the department
store industry.

            Over the past three years, Loehmann's has expanded its product
offerings to include men's furnishings, junior's apparel, accessories and
intimate apparel and gifts. Because of these additions, Loehmann's' sales mix
shifted from approximately 80% women's apparel in 1996 to approximately 65% in
1999.

                                        9
<PAGE>

            Loehmann's maintains its own central buying staff, comprised of 16
experienced off-price buyers, many of whom also have extensive experience with
traditional department stores. Historically, Loehmann's has had very low
turnover within its buying group, enabling the company to capitalize on an
experienced, respected group of buyers capable of enhancing its already strong
vendor relationships.

      D.    Pricing

            Loehmann's seeks to provide its customers with exceptional value by
offering its merchandise at prices that are typically 30% to 60% below prices
charged by department stores for the same items and that are comparable to or
lower than prices charged by other off-price retailers. Loehmann's' central
buying staff adheres to a disciplined approach to acquiring merchandise that
enables the company to consistently offer its merchandise at favorable prices.
Each item of merchandise offered by Loehmann's carries a price tag displaying
the company's price as well as the typical department store's initial price for
the same item.

            Loehmann's has historically used a cyclical permanent markdown
policy to reduce prices automatically as goods age. Over the past several years,
this policy was modified in response to a more promotional competitive
environment. As department stores increased their promotional pricing,
Loehmann's included promotional coupons in its customer mailings. These coupons
generally allow customers to receive a discount on any merchandise in the store.
The popularity of these coupons had resulted in an increase in point of sale
("POS") markdowns, which Loehmann's has partially offset by decreasing permanent
markdowns. As further discussed below in Section VI.B, "Offer Consistent Value"
herein, Loehmann's has returned to a cyclical permanent markdown policy.

      E.    Distribution

            Loehmann's operates two distribution facilities: a 126,000 square
foot centralized distribution center located at Loehmann's Bronx headquarters
and a 272,000 square foot facility in Rutherford, New Jersey. Loehmann's began
leasing the Rutherford facility in May 1999. That facility replaces a 150,000
square foot warehouse facility in Secaucus, New Jersey and a 32,000 square foot
satellite facility Loehmann's formerly maintained in the Bronx.

      F.    Store Operations

            Loehmann's' stores are organized into several geographic districts
each with a regional manager. Regional managers monitor the financial
performance of the stores in their respective geographic districts and
frequently visit stores to ensure adherence to Loehmann's' merchandising,
operations and personnel standards. The typical staff for a Loehmann's store
consists of a store manager, a number of

                                       10
<PAGE>

associate and department managers, sales specialists and additional full and
part-time hourly associates depending upon the store's needs.

            Senior management meets with the regional managers on a periodic
basis to maintain a clear line of communication. In addition, mystery shoppers
shop the stores to help ensure that sales associates are friendly, helpful and
maintain all of the company's merchandising, customer service and loss
prevention standards. New store management personnel currently complete a
training program at a designated training store before assuming management
responsibility. Sales specialists receive product and customer service training
at the store level.

      G.    Store Layout

            Loehmann's' store format and merchandise presentation are designed
to project the image of deep discount and exceptional value, as well as to
emphasize Loehmann's' niche as the off-price equivalent of an upscale specialty
store. Loehmann's' stores are divided into two shopping areas: a large, open
selling area with wall-to-wall merchandise and a smaller, separate, and more
intimate area called The Back Room. All stores are low maintenance, simple and
functional facilities designed to maximize selling space and contain overhead
costs. Store layouts are flexible in that product groupings can be easily moved
or expanded. All stores have two or more communal fitting rooms. However, in
response to customer preferences, private fitting rooms have been added in most
stores. Because Loehmann's is committed to maintaining virtually all of its
in-store inventory on the selling floor, its stores do not require significant
space devoted to inventory storage.

            Loehmann's presents moderate and better sportswear, dresses and
suits, as well as all outerwear, men's, accessories, intimate apparel and shoes
on the main selling floor. Designer and bridge and import merchandise, including
evening dresses and suits, are displayed in The Back Room. The Back Room
provides a key point of differentiation to the consumer, as it projects the
image of designer goods sold in a no-frills environment and, therefore, at
exceptional values. Although Loehmann's estimates that The Back Room generally
accounts for only approximately 10% to 15% of a typical store's selling space,
The Back Room has historically generated approximately one-third of the
company's apparel revenues.

      H.    Marketing and Advertising

            Over the years, Loehmann's has principally relied on word-of-mouth
advertising. In the last three fiscal years, Loehmann's has significantly
increased its advertising expenditures, predominantly for direct mail and, to a
lesser extent, for newspaper advertising. A significant portion of Loehmann's'
advertising efforts involve direct mail announcements to members of The Insider
Club, a free member ship program. Members receive notification of special events
throughout the year and a 15% discount on their birthdays. The list of members
now includes approximately one million active customers (those who have shopped
at Loehmann's within the past

                                       11
<PAGE>

12 months). Loehmann's has developed a database of customer information from
Insider Club members. This database allows Loehmann's to track purchase activity
of current customers. These customers accounted for approximately 75% of total
company sales in fiscal 1998.

            During the fourth quarter of fiscal 1998, the company intensified
its marketing programs with the objective of increasing its customer base. The
focus of the marketing program was primarily: (1) reactivating existing
customers whose shopping frequency has decreased; (2) prospecting for new
customers, particularly in new and expansion store markets; and (3) nurturing
customer loyalty among existing Loehmann's frequent shoppers.

      I.    Store Locations

            Since its initial public offering in 1996, Loehmann's had opened 17
new stores. Consistent with the its move towards a model store format of
approximately 25,000 square feet, Loehmann's also closed ten of its older,
smaller stores during the first quarter of fiscal 1998. In July 1999, with
approval of the Court, Loehmann's closed fourteen of its underperforming stores
bringing its total store population to 55. As a last step to shedding unwanted
stores, Loehmann's closed an additional seven stores in April, 2000, and has
received Court approval to conduct going out of business sales at four
additional stores, which will close after such sales are completed, see Section
VII.F, "Store Closings."

            Loehmann's' 44 remaining stores are concentrated in three major
markets: New York/Mid-Atlantic, South Florida and Southern California.
Loehmann's also continues to operate in certain other markets throughout the
country which have proven to have demand for the Loehmann's product. Focusing on
these three major and selected ancillary markets allows less diffusion of the
company's marketing dollars, and makes major media advertising campaigns more
economically feasible. The following chart illustrates the relative strength of
Loehmann's' sales in various regions of the country:

                                            % of 1998
Region             Number of Stores      Comparable Sales
---------------  --------------------  --------------------
Tri-State                 13                   37.9%
Mid-Atlantic              4                     9.2%
South Florida             4                     8.6%
California                12                   28.9%
Other                     11                   15.4%
                 --------------------  --------------------
Total                     44                  100.0%
                 --------------------  --------------------

                                       12
<PAGE>

            Loehmann's' business plan envisions gradually opening several new
stores each year beginning in 2001. Each of the new stores will be located in
existing core markets.

      J.    Competition

            The off-price fashion apparel business is highly competitive.
Loehmann's competes primarily with finer department stores by offering a wide
selection of comparable quality merchandise at significantly lower prices. Many
department stores have increased their promotional efforts, although such
promotions are typically focused on moderate merchandise. Should finer
department stores continue to price more aggressively, Loehmann's' margins may
be adversely affected. Most of the department stores and some of the off-price
and discount retailers with which Loehmann's competes have access to
substantially greater financial and marketing resources than those available to
Loehmann's.

            Loehmann's also faces competition from factory outlet malls and a
variety of off-price and discount retailers, some of which are relatively new
companies, but many of which are established retail chains or divisions thereof.
Such competitors include Filene's Basement, Marshall's, Saks Off 5th, Syms,
Burlington Coat Factory and T.J. Maxx.

      K.    Employees

            As of February 15, 2000, Loehmann's had 2,185 employees, of whom
1,629 were store sales and clerical employees, 158 performed store managerial
functions, and 398 were corporate and warehouse personnel. Except for managerial
employees, professional support staff and Loehmann's' buyers, all employees are
paid on an hourly basis. None of Loehmann's' employees are represented by a
labor union. Loehmann's believes that its employee relations are good.

      L.    Trademark and Service Mark

            Loehmann's name is registered as a trademark and a service mark with
the United States Patent and Trademark Office. Loehmann's believes its trademark
and service mark have received broad recognition and their continued existence
is important to its business.

      M.    Properties

            Loehmann's follows the general industry practice of leasing all of
its stores. Loehmann's also does not own any of its manufacturing facilities.
Loehmann's' stores range in size from 9,000 to 60,000 square feet and are held
under leases expiring from 2000 to 2021, excluding option periods. The leases
for the company's stores typically provide for a 15- to 20-year term with three
five-year renewals that are automatic unless Loehmann's elects to terminate the
lease. The

                                       13
<PAGE>

rental rate is a fixed amount rather than a contingent payment based on a
store's gross sales. The leases typically contain tax escalation clauses and
require Loehmann's to pay insurance, utilities, repair and maintenance expenses.
Increases in the fixed rent payable during the renewal terms are generally less
than 10% to 15% of the base rent (although this percentage may increase for new
stores). Loehmann's has generally been successful in renewing its store leases
as they expire.

            Loehmann's leases the land for its 153,000 square foot facility
located in the Bronx, New York, which serves as its corporate headquarters and
as the site of its central warehousing and distribution operations (the "Bronx
Facility"). This facility contains 27,000 square feet of office space and
126,000 square feet of warehouse space. The ground lease with respect to the
land on which the facility is situated provides for aggregate annual base rental
payments of $37,500. The lease expires in 2010, but is renewable at certain
increased rates until 2050. The Bronx Facility is subject to a mortgage with the
City of New York, see Section IV.O, "Industrial Development Bonds," which the
Company believes will be paid off by the Confirmation Hearing. Loehmann's' lease
for the Rutherford, New Jersey facility provides for annual rental payments of
$1,251,000.

      N.    The Prepetition Loan Documents

            Prior to the Petition Date, Loehmann's had entered into a Loan and
Security Agreement, dated May 12, 1998 (the "Prepetition Loan Agreement") with
Congress Financial Corporation ("Congress"), as lender, pursuant to which
Congress made available to Loehmann's a secured credit facility in an aggregate
amount not to exceed $60,000,000 consisting of (i) a revolving credit facility
in an aggregate amount not to exceed $50,000,000 and (ii) a letter of credit
facility in an aggregate amount not to exceed $10,000,000. Credit availability
under the Prepetition Loan Agreement was determined by reference to a specified
percentage of eligible inventory, less certain reserves, all as set forth in a
borrowing base certificate delivered by Loehmann's to Congress on a periodic
basis. The obligations under the Prepetition Loan Agreement were secured by
liens on and security interests in, among other things, Loehmann's' inventory,
accounts receivable, property and related assets, including its rights under the
lease of its Bronx store.

            As of the Petition Date, the Debtor was indebted to Congress under
the Prepetition Loan Agreement in the aggregate principal amount of
approximately $38 million, together with accrued, but unpaid, interest, fees and
expenses, including attorneys' fees. In addition, as of the Petition Date,
letters of credit having an aggregate face amount equal to approximately $9.5
million remained issued and outstanding under the Prepetition Loan Agreement.

            Pursuant to the terms of that certain Agreement between Loehmann's
and Fleet Bank, N.A. ("Fleet"), Fleet made a loan to Loehmann's in the amount of
$7,850,000. The term loan was supported by a letter of credit issued under the
Prepetition Loan Agreement. As a result of the chapter 11 filing, Fleet drew on
the

                                       14
<PAGE>

letter of credit issued by Congress to pay off the term loan, increasing the
balance owed by the Debtor to Congress by the same amount.

      O.    Industrial Development Bonds

            Prior to the Petition Date, Loehmann's had entered into a Loan
Agreement, dated as of January 15, 1980 (as amended, the "Loan Agreement"), with
the City of New York (the "City") under which the City loaned Loehmann's funds
(received by the City pursuant to an Urban Development Action Grant) evidenced
by certain promissory note in the principal amount of $1,500,000 (as amended and
restated, the "Note"). The Note was secured by a certain Mortgage, dated March
14, 1980, between the New York City Industrial Development Agency (the "Agency")
as mortgagor, and the City as mortgagee (as amended, the "Mortgage") on the
lease of the Bronx Facility. The Company believes that the Note will be paid off
by the Confirmation Hearing.

            A second mortgage was placed on the Bronx Facility pursuant to an
Indenture of Mortgage and Trust, dated as of December 1, 1983 between the Agency
and IBJ Whitehall Bank & Trust Company, as trustee, securing the Agency's
$2,250,000 Industrial Development Revenue and Refunding Bonds (the "Bonds"), for
which Loehmann's is the obligor. As part of its debtor-in-possession financing,
and in particular, the term loan contemplated thereunder, on or about September
14, 1999 the Bonds were redeemed by Loehmann's. The redemption permitted
Loehmann's to borrow against the value of the property.

            As of the Petition Date, the Debtor was indebted to the City in the
aggregate principal amount of $412,763 on account of the Note.

                                       V.

                       KEY EVENTS LEADING TO COMMENCEMENT
                             OF THE CHAPTER 11 CASE

      A.    Decrease in Overall Store Performance and Operating Results

            Two interrelated factors were the primary reasons Loehmann's found
it necessary to file its Chapter 11 Case: unfavorable operating results caused
by a divergence in the direction of external retail market trends and the
preferences of Loehmann's' customers and a highly-leveraged capital structure.

            1     Market Trends

            In recent years, Loehmann's' management had observed several
external trends in the women's apparel retail business: (i) a demand by
customers for

                                       15
<PAGE>

more casual apparel; (ii) bridge and designer departments being de-emphasized in
department stores; (iii) an increase in promotions by department stores; and
(iv) a broadening of product mix by off-price retailers. Loehmann's' initial
response to these trends was to try to attract younger customers seeking
casual/contemporary apparel and to expand merchandise categories. As a result of
such efforts, Loehmann's' casual/contemporary sales have increased 44% since
1996. New merchandise categories such as junior's apparel, men's furnishings and
gifts have been added to the product mix at Loehmann's' stores. Despite these
efforts, Loehmann's' sales did not respond favorably. For the nine months ended
October 31, 1998, same store sales declined 3.7% from the comparable period in
the preceding year. By April 1999, in particular the later part of the month,
Loehmann's' sales, gross margin and earnings before interest, taxes,
depreciation and amortization ("EBITDA") were significantly below its business
plan.

            2     Effects of High Leverage

            As described above in Section IV, "Description of Debtor's
Business," over the past several years Loehmann's opened a number of new stores
and invested significantly in its store base and distribution facilities. These
acquisitions and investments were financed in part through the issuance of
Senior Notes. As a result, as of the Petition Date, Loehmann's had approximately
$100.6 million in principal and interest in Senior Notes outstanding that would
require approximately $11.3 million of debt service for the fiscal year ending
January 29, 2000 ("Fiscal 1999"). Loehmann's' high degree of leverage and the
cash required to satisfy its debt service obligations, capital expenditure and
working capital needs meant that it could not effectively operate and service
its debt obligations if EBITDA, LIFO provision and unusual and extraordinary
items declined significantly over an extended period.

            Loehmann's experienced declines in revenues, EBITDA and operating
income during the fiscal year ended January 31, 1998 and incurred continued
declines during the first quarter of Fiscal 1999. Because of these adverse
developments and the substantial amount of indebtedness owed to financial
institutions and noteholders, there was a substantial risk that Loehmann's would
not be able to secure sufficient trade credit from its vendors and factors for
the second half of Fiscal 1999. Without such credit, Loehmann's would be unable
to obtain sufficient inventory to continue to meet the expectations of its
customers and to stock its stores at appropriate levels.

      B.    Discussions with Financial Advisors and Trade Creditors

            In response to its increasing liquidity concerns, Loehmann's'
management engaged The Blackstone Group L.P. ("Blackstone") to act as its
financial advisor to explore its strategic alternatives and to assist it in
negotiating a consensual restructuring. Loehmann's also sought assistance from
its factors and their agreement to continue extending the trade credit necessary
to keep the shelves of Loehmann's' stores stocked and in business.

                                       16
<PAGE>

      C.    Defaults under Indenture

            In order to preserve capital and maintain flexibility in light of
its difficulties in obtaining trade credit, Loehmann's decided not to make its
scheduled debt service payment on its Senior Notes due May 17, 1999. In light of
this nonpayment and its liquidity problems, Loehmann's determined that it was
necessary to file for chapter 11 protection on May 18, 1999.

                                       VI.

                     STEPS TAKEN TO STRENGTHEN THE DEBTOR'S
                      FINANCIAL PERFORMANCE AND OPERATIONS

            In response to external market trends, Loehmann's' management has
recently developed and begun to implement several strategic initiatives designed
to improve its sales and financial performance.

      A.    Re-Emphasize The Back Room

            The Back Room creates a key point of differentiation for Loehmann's
in the women's apparel market. The Back Room contains merchandise of higher
quality than that found on the selling floors of off-price retailers and outlet
stores. Off-price retailers carry very little, if any, bridge or designer
apparel. Similarly, very few outlet stores carry bridge and designer apparel and
those cannot match The Back Room's assortment. Finally, department stores cannot
come close to matching the prices of the bridge and designer apparel found in
The Back Room.

            During the fall of 1999, Loehmann's implemented a plan to increase
gradually Back Room apparel sales to nearly a third of total apparel sales,
consistent with historic levels, and to maintain such levels for the next five
years. Although this represents a significant increase relative to The Back Room
penetration in 1998 and 1999, the forecasts are consistent with historical Back
Room performance. Despite industry trends towards casualization, market research
shows that Loehmann's customers continue to have strong demand for bridge and
designer merchandise. Management believes that the de-emphasis of The Back Room
in recent years diluted a key point of differentiation from other apparel
discounters. Thus, by re- emphasizing The Back Room, Loehmann's can (a)
re-establish a unique market niche to attract new customers, and (b) regain the
loyalty of its existing Back Room customers, who represent Loehmann's' most
frequent and highest spending shoppers.

      B.    Offer Consistent Value

            In response to the aggressive promotional strategies of department
stores, in recent years Loehmann's became reliant on point-of-sale (POS)
markdowns and price promotions (e.g., coupons) as a means to drive customer
traffic. However,

                                       17
<PAGE>

Loehmann's derives its competitive advantage from its ability to consistently
offer merchandise at prices 30% to 60% below department store prices. Emphasis
on POS promotions undercuts the company's positioning as offering the best
everyday low prices.

            Management believes that Loehmann's can offer a more consistent and
distinguishable value proposition if merchandise is priced using permanent
markdowns as opposed to promotional events and POS markdowns. Loehmann's has
de-empha sized POS markdowns and takes permanent markdowns on a more regular
schedule and will continue to do so. In this way, customers can be assured that
Loehmann's offers the best value every day, not just during advertised
promotional events.

            Management also believes that it can make the transition to regular
permanent markdowns without sacrificing margins. As part of the transition, the
company had modified its promotional calendar to emphasize product-driven
events, and de-emphasize price promotions. Further, to the extent that coupons
continue to be used, they will be good for clearance merchandise only and not
regularly priced products.

      C.    Enhance Brand Image

            In conjunction with offering consistent value, Loehmann's seeks to
enhance its brand image. Enhancing brand image will serve to (a) strengthen the
loyalty of its existing core customers, and (b) attract a potentially large base
of new customers.

            Management believes that the most effective tool it has to build
brand image and customer loyalty is to provide outstanding merchandise offerings
that encourage "word-of-mouth" advertising by existing customers.

            In addition, Loehmann's plans to enhance its brand image through
strategic initiatives to develop a campaign to build and reinforce its brand
image; development of an Internet strategy which will enable customers to access
the Loehmann's website to obtain information regarding the arrival of new
merchandise in stores; and investment in its customer database system to enhance
the productivity of direct-mail marketing.

      D.    Re-Emphasize Core Assortment

            While Loehmann's has broadened its product mix over the past several
years in order to offer the customer more options, a re-emphasis of its core
assortment is underway. In particular, Loehmann's will focus on women's better-
to designer-price points in sportswear, dresses, coats, shoes and handbags. This
will ensure that customers will find a wider range of well-known designer
merchandise at Loehmann's than at other off-price retailers.

                                       18
<PAGE>

            In order to strengthen the product offering, Loehmann's will
aggressively pursue buying opportunities with existing vendors and will develop
new sources for designer and branded merchandise. In addition, Loehmann's will
focus on improving the in-store experience through improved merchandising. The
Back Room which features a wide selection of bridge and designer labels, will be
more prominently advertised and promoted. And although Loehmann's' emphasis will
be on its core assortment, the company will continue to pursue opportunities in
men's apparel and gifts.

      E.    Focus on Core Markets

            To optimize store performance, Loehmann's is focusing on the three
major markets (New York Metro/Mid-Atlantic, Florida and California).
Concentrating in these select markets will allow Loehmann's to benefit from its
existing brand image and core customer base in these areas, and to target its
advertising spending on enhancing awareness in these markets.

            To this end, during the Chapter 11 Case Loehmann's closed 21 non-
core stores and will be closing four additional stores at which going out of
business sales are currently being held. Loehmann's continues to operate some
profitable stores in non-core markets and the company plans to retain these
profitable locations. However, Loehmann's plans for all future growth to be
inside its three core markets.

      F.    Improve Customer Service

            Market research has confirmed that customers' number one issue with
respect to customer service is the time-consuming checkout process. Loehmann's
plans to install new registers in all of its stores over the course of the next
two years, which will significantly reduce check-out time.

                                      VII.

                               THE CHAPTER 11 CASE

      A.    Significant "First Day" Motions During the Chapter 11 Case

            On the Petition Date and during the first few weeks of the Chapter
11 Case, the Court entered several orders authorizing the Debtor to pay various
prepetition claims. These orders were designed to ease the strain on the
Debtor's relationships with customers and employees as a consequence of the
filings. The Court entered orders authorizing the Debtor to, among other things,
(i) pay prepetition compensation, benefits and employee reimbursement to
employees; (ii) honor certain prepetition obligations to customers, including
obligations relating to the Debtor's return and exchange policy, gift
certificates and coupon programs; (iii) grant administrative expense status to
the Debtor's obligations arising from the

                                       19
<PAGE>

postpetition delivery of goods and services based on prepetition orders and
authorizing the Debtor to pay such expenses in the ordinary course of business;
(iv) confirm administrative expense treatment for holders of valid reclamation
claims and prohibit third parties from interfering with the Debtor's delivery of
goods; and (v) pay certain prepetition customs and shipping charges and related
liens.

            In addition, the Debtor filed several motions seeking orders
authorizing the Debtor's retention of professionals. Specifically, the Debtor
filed motions to retain (i) Paul, Weiss, Rifkind, Wharton & Garrison and Young,
Conaway, Stargatt & Taylor, LLP as co-counsel, (ii) The Blackstone Group L.P.,
as financial advisor and (iii) certain ordinary course professionals. The Debtor
also filed motions seeking certain relief from administrative requirements of
the Bankruptcy Code.

      B.    DIP Credit Facility

            To provide the Debtor with the cash and liquidity necessary to
continue operations and to maintain normal vendor relations, on May 19, 1999
Loehmann's sought court approval of a $75 million debtor-in-possession credit
facility in the form of a Ratification and Amendment Agreement (the "DIP Credit
Facility"), dated as of May 19, 1999, with Congress. The DIP Credit Facility
consists of a revolving credit and letter of credit facility (the "Revolving
Credit Facility") and a term loan facility (the "Term Loan Facility"). The
Revolving Credit Facility is for an amount up to $75 million, less the then
outstanding amount of the Term Loan Facility and any Letter of Credit
accommodations. The Term Loan Facility (x) is in a maximum amount equal to the
lesser of $3,500,000 and 50% of the fair market value of the real estate
comprising Loehmann's' Bronx Facility and (y) amortizes monthly on a 48- month
straight line basis with final payment due upon the earlier of the second
anniversary of the closing and the DIP Credit Facility termination date.

            On May 19, 1999, the Court approved interim financing arrangements
(the "Interim Financing Arrangements") with Congress. The Interim Financing
Arrangements provided for a credit line of $20 million in excess of the amount
of the outstanding indebtedness at the Petition Date, which was $47.9 million,
to cover the period through June 7, 1999. On June 7, 1999, the Bankruptcy Court
entered a final order (the "DIP Financing Order") approving the DIP Credit
Facility in full.

            The availability under the Revolving Credit Facility component of
the DIP Credit Facility is subject to certain inventory-related borrowing base
requirements. The indebtedness under the DIP Credit Facility bears interest, at
the Debtor's election (i) in the case of the Revolving Credit Facility, at
either the Eurodollar rate plus 225 basis points or the Prime Rate plus 50 basis
points and (ii) in the case of the Term Loan Facility, at either the Eurodollar
Rate plus 250 basis points or the Prime Rate plus 75 basis points, in each case
calculated on the basis of a 360 day year. The DIP Credit Facility contains
certain customary covenants (including limitations on indebtedness, liens and
restricted payments) but does not contain any financial covenants. As of March
18, 2000 the company had borrowing

                                       20
<PAGE>

of $14,302,768 and letters of credit of $1,308,030 outstanding under the DIP
Credit Facility, with $25,939,381 of availability for borrowings under the DIP
Credit Facility.

            Loehmann's' obligations to Congress under the DIP Credit Facility
(the "DIP Obligations") are secured by substantially all of Loehmann's' assets,
subject only to Permitted Liens (as defined in the DIP Credit Facility) and
Carve-Out Expenses (as defined below). In addition, pursuant to the DIP
Financing Order, the DIP Obligations have been accorded administrative expense
status with priority over all other administrative claims, other than certain
agreed-to administrative claims, including the fees and expenses of
professionals retained by the Debtor and any official committees appointed in
the Chapter 11 Case in the amount of $2 million (the "Carve-Out Expenses").

            The DIP Facility expires on the earliest of (a) the second
anniversary of the DIP Credit Facility, (b) the effective date of a plan of
reorganization for the company, or (c) acceleration following the occurrence of
an event of default.

            Loehmann's believes that cash generated from operations and funds
available under the DIP Credit Facility will be sufficient to satisfy its cash
requirements through the anticipated pendency of the Chapter 11 Case.

      C.    The Official Committee of Unsecured Creditors

            On September 8, 1999, the United States Trustee for the District of
Delaware appointed an Official Committee of Unsecured Creditors in the Chapter
11 Case. The Creditors Committee currently consists of United States Trust
Company of New York, as indenture trustee, C.I.T. Commercial Services, Inc., The
Ralph Lauren Womenswear Company, L.P., The Donna Karan Company, Republic
Business Credit Corporation, Jones Apparel Group, BNY Financial Corporation and
State Street Research and Management Company.

            The Creditors Committee has retained Kronish Lieb Weiner & Hellman,
LLP and Morris, Nichols, Arsht & Tunnell as co-counsel and Mahoney Cohen &
Company CPA, P.C. as its accountants.

      D.    Other Professionals Retained by Debtor

            In addition to those professionals retained pursuant to first day
motions, the Debtor subsequently sought and obtained approval for the retention
of three other professionals essential to its reorganization: (i)
PricewaterhouseCoopers, as the Debtor's strategic retail consultant; (ii) DJM
Asset Management, LLC, as the Debtor's real estate consultant; and (iii) Ernst &
Young LLP, as the Debtor's independent auditors and tax advisors. The Debtor
also obtained approval to use Logan & Company, Inc. as the Debtor's Claims,
Noticing, Voting and Tabulation Agent.

                                       21
<PAGE>

      E.    Management Retention and Severance Plan

            On July 9, 1999, the Debtor filed a motion seeking Court authority
to implement a Management Retention and Severance Plan (the "Retention Plan").
The Retention Plan provides for a (i) bonus for key management and other key
personnel payable on the Debtor's emergence from chapter 11 and (ii) a severance
program. Through the Retention Plan, the Debtor has sought to minimize
management and other key personnel turnover by providing incentives for
employees, including senior management, to remain in the Debtor's employ and to
work towards a successful reorganization of the Debtor's business. The Court
approved the Retention Plan on July 21, 1999.

      F.    Store Closings

            In July 1999, in an effort to streamline its operations and
rationalize its merchandising and marketing programs, the Debtor sought and
obtained an order from the Court authorizing it through its liquidating agent,
Hilco/Great American Group, to conduct certain store closing sales at 13 of its
underperforming stores (the "GOB Stores"). Next, the Debtor sought court
authority to dispose of the leases in respect of the GOB Stores (the "GOB
Leases"). On September 29, 1999 the Debtor obtained an order, among other
things, (i) approving bidding procedures for the sale of the GOB Leases, (ii)
setting an auction date for the sale of such leases, and (iii) scheduling a
hearing date to approve the sale and assignment of the GOB Leases to the
successful bidders at the auction. On October 18, 1999 an auction was held, and
eight of the GOB Leases were bid upon. The Court subsequently approved the sale
of the Debtor's interests in those eight GOB Leases free and clear of liens,
claims, encumbrances and interests. The Debtor realized $2.4 million on the
disposition of those GOB Leases. By Court order dated October 27, 1999, those
GOB Leases for which there were no bids were deemed rejected by the Debtor.

            On April 10, 2000, the Court authorized the Debtor to conduct going
out of business sales at four additional stores and to retain Hilco/Great
American Group as a consultant in respect of such sales. Contemporaneously, the
Debtor closed an additional seven of its underperforming stores. The Debtor will
soon be seeking Court authority to conduct an auction for the sale of the
additional eleven store leases.

      G.    Last Date to File Proofs of Claim

            On September 16, 1999, the Court entered an order (the "Bar Date
Order") requiring any person or entity holding or asserting a Claim against the
Debtor to file a written proof of claim with Loehmann's, Inc., Claims Processing
Department, c/o Logan & Company, Inc., 546 Valley Road, Upper Montclair, New
Jersey 07043, on or before 5:00 p.m. (EST) on November 8, 1999 (the "Bar Date").
The Bar Date Order provided that any person or entity (other than, among others,
employees and individual holders of Senior Notes and Common Stock) which fails
to

                                       22
<PAGE>

timely file a proof of claim will be forever barred, estopped and enjoined from
voting on, or receiving a distribution under, the Plan and will be forever
barred, estopped and enjoined from asserting a Claim against the Debtor, its
estate, the Reorganized Debtor, and any of its successors or assigns.

      H.    Assumption/Rejection of Leases and Executory Contracts

            Pursuant to the Bankruptcy Code, the Debtor has 60 days after the
entry of the order for relief (which is the Petition Date) to assume or reject
executory contracts or unexpired leases unless such time period is extended by
the Bankruptcy Court for cause. By Court order the deadline has been extended to
June 12, 2000. The Debtor has already obtained Court approval to reject eight
leases. The Debtor is reviewing its remaining leases and will decide shortly
whether to reject any other leases. The Debtor, in conjunction with its
attorneys, financial advisors and accountants will also review the Debtor's
executory contracts to determine which, if any, of such contracts should be
assumed or rejected. The Debtor will make any appropriate motions with respect
to assumed or rejected leases and existing contracts within the time period
established by the Bankruptcy Code or such other time as set by the Court.

      I.    Disclosure Statement/Plan Confirmation Hearings

            Simultaneously with the filing of its Plan, the Debtor filed a
motion to consider the adequacy of this Disclosure Statement. On April 24, 2000,
the Court entered the Disclosure Statement Order. As provided by the Disclosure
Statement Order, the hearing on confirmation of the Plan is scheduled for June
27, 2000.

                                      VIII.

                      SUMMARY OF THE PLAN OF REORGANIZATION

      A.    Introduction

            The Debtor believes that confirmation of the Plan is critical to its
continued survival and that the Plan provides the best opportunity for maximum
recoveries for its creditors. The Debtor believes, and will demonstrate to the
Court, that its creditors will receive at least as much, if not more, in value
under the Plan than they would receive in a liquidation under chapter 7 of the
Bankruptcy Code.

            The following is a summary of the Plan, in pertinent part. The Plan
is attached as Exhibit A to this Disclosure Statement. The terms of the Plan
govern in the event of any discrepancies with the following discussion.

                                       23
<PAGE>

      B.    Classification and Treatment of Administrative Claims,
            Claims and Equity Interests Under the Plan

            Only administrative expenses, claims and equity interests that are
"allowed" may receive distributions under a chapter 11 plan. An "allowed"
administrative expense, claim or equity interest simply means that the debtor
agrees, or in the event of a dispute, that the court determines, that the
administrative expense, claim or equity interest, including the amount, is in
fact a valid obligation of the debtor. Section 502(a) of the Bankruptcy Code
provides that a timely filed administrative expense, claim or equity interest is
automatically "allowed" unless the debtor or another party in interests objects.
However, section 502(b) of the Bankruptcy Code specifies certain claims that may
not be "allowed" in a bankruptcy case even if a proof of claim is filed. These
include, without limitation, claims that are unenforceable under the governing
agreement or applicable non-bankruptcy law, claims for unmatured interest,
property tax claims in excess of the debtor's equity in the property, claims for
certain services that exceed their reasonable value, lease and employment
contract rejection damage claims in excess of specified amounts, and late-filed
claims. In addition, Bankruptcy Rule 3003(c)(2) prohibits the allowance of any
claim or equity interest that either is not listed on the debtor's schedules or
is listed as disputed, contingent, or unliquidated if the holder has not filed a
proof of claim or equity interest before the deadline to file proofs of claim
and equity interests.

            The Bankruptcy Code also requires that, for purposes of treatment
and voting, a chapter 11 plan divide the different claims against, and equity
interests in, the debtor into separate classes based upon their legal nature.
Claims of a substantially similar legal nature are usually classified together,
as are equity interests of a substantially similar legal nature. Because an
entity may hold multiple claims and/or equity interests which give rise to
different legal rights, the holders of such claims and/or equity interests may
find themselves members of multiple classes of claims and/or equity interests.
As a result, under the Plan, for example, a creditor that holds both a Claim
based on a Senior Note and Old Common Stock would have its Claim classified in
Class 5 and its Equity Interest classified in Class 6. To the extent of this
holder's Claim, the holder would be entitled to the voting and treatment rights
that the Plan provides with respect to Class 5, and, to the extent of the
holder's Equity Interest, the voting and treatment rights that the Plan provides
with respect to Class 6.

            Under a chapter 11 plan, the separate classes of claims and equity
interests must be designated either as "impaired" (altered by the plan in any
way) or "unimpaired" (unaltered by the plan). If a class of claims is
"impaired," the Bankruptcy Code affords certain rights to the holders of such
claims, such as the right to vote on the plan (unless the plan provides for no
distribution to the holder, in which case, the holder is deemed to reject the
plan), and the right to receive an amount under the chapter 11 plan that is not
less than the value that the holder would receive if the debtor were liquidated
under chapter 7. Under section 1124 of the Bankruptcy Code, a class of claims or
interests is "impaired" unless, with respect to

                                       24
<PAGE>

each claim or interest of such class, the plan (i) does not alter the legal,
equitable, and contractual rights of the holders of such claims or interests or
(ii) irrespective of the holder's right to receive accelerated payment of such
claims or interests after the occurrence of a default, cures all defaults (other
than those arising from, among other things, the debtor's insolvency or the
commencement of a bankruptcy case), reinstates the maturity of the claims or
interests in the class, compensates the holders of such claims or interests for
any damages incurred as a result of their reasonable reliance upon any
acceleration rights and does not otherwise alter their legal, equitable or
contractual rights. Typically, this means that the holder of an unimpaired claim
will receive on the later of the effective date of the plan of reorganization or
the date on which amounts owing are due and payable, payment in full, in cash,
with postpetition interest to the extent permitted and provided under the
governing agreement between the parties (or if there is no agreement, under
applicable non-bankruptcy law), and the remainder of the debtor's obligations,
if any, will be performed as they come due in accordance with their terms. Thus,
other than its right to accelerate the debtor's obli gations, the holder of an
unimpaired claim will be placed in the position it would have been in had the
debtor's case not been commenced.

            Consistent with these requirements, the Plan divides the Claims
against, and Equity Interests in, the Debtor into the following Classes:

         Unclassified    Administrative Claims                Paid in full
         Unclassified    Priority Tax Claims                  Paid in full
         Class 1         Other Priority Claims                Unimpaired
         Class 2         Other Secured Claims                 Unimpaired
         Class 3         DIP Financing Claims                 Unimpaired
         Class 4         Convenience Claims                   Impaired
         Class 5         General Unsecured Claims             Impaired
         Class 6         Equity Interests                     Impaired

            For purposes of computing distributions under the Plan, Allowed
Claims do not include postpetition interest unless otherwise specified in the
Plan.

            1     Unclassified -- Administrative Claims

            Administrative Claims are Claims constituting a cost or expense of
administration of the Chapter 11 Case allowed under sections 503(b) and
507(a)(1) of the Bankruptcy Code. Such Claims include any actual and necessary
costs and expenses of preserving the Debtor's estate, any actual and necessary
costs and expenses of operating the Debtor in Possession's business, any
indebtedness or obligations incurred or assumed by the Debtor in Possession in
connection with the

                                       25
<PAGE>

conduct of its business including, without limitation, for the acquisition or
lease of property or an interest in property or the rendition of services, all
compensation and reimbursement of expenses to the extent Allowed by the Court
under section 330, 331 or 503 of the Bankruptcy Code and any fees or charges
assessed against the Debtor's estate under section 1930 of chapter 123 of title
28 of the United States Code. In addition, pursuant to court order all valid
reclamation claims will be treated as Administrative Claims.

            Except as provided for below with respect to Professional
Compensation and Reimbursement Claims (as defined below), pursuant to the Plan
or to the extent that any entity entitled to payment of any Allowed
Administrative Claim agrees with the Debtor in writing to different treatment
(subject to the consent of the Creditors Committee), each holder of an Allowed
Administrative Claim (a) will be paid in full, in Cash, on the later of the
Effective Date and the date such Administrative Claim becomes an Allowed
Administrative Claim, or as soon thereafter as is practicable or (b) receive
such other treatment as the Debtor and such holder shall have agreed upon in
writing, subject to the consent of the Creditors Committee; provided, however,
that Allowed Administrative Claims representing liabilities incurred in the
ordinary course of business by the Debtor in Possession or liabilities arising
under loans or advances to or other obligations incurred by the Debtor in
Possession (to the extent authorized and approved by the Court if such
authorization and approval was required under the Bankruptcy Code, including
amounts owed to vendors and suppliers that have sold goods or furnished services
to the Debtor in Possession since the Petition Date) shall be paid in full and
performed by the Reorganized Debtor in the ordinary course of business in
accordance with the terms and subject to the conditions of any agreements that
govern instruments evidencing, or other documents relating to such transaction.

            The Debtor estimates that allowed Administrative Claims should not
exceed $4.8 million in the aggregate.

            2     Unclassified -- Professional Compensation and
                  Reimbursement Claims

            Professional Compensation and reimbursement claims are
Administrative Claims for the compensation of professionals and reimbursement of
expenses incurred by such professionals pursuant to sections 503(b)(2),
503(b)(3), 503(b)(4) and 503(b)(5) of the Bankruptcy Code (the "Compensation and
Reimbursement Claims"). All payments to professionals for Compensation and
Reimbursement Claims will be made in accordance with the procedures established
by the Bankruptcy Code, the Bankruptcy Rules and the Court relating to the
payment of interim and final compensation for services rendered and
reimbursement of expenses. The Court will review and determine all applications
for compensation for services rendered and reimbursement of expenses.

                                       26
<PAGE>

            Section 503(b) of the Bankruptcy Code provides for payment of
compensation to creditors, indenture trustees and other entities making a
"substantial contribution" to a reorganization case, and to attorneys for and
other professional advisors to such entities. The amounts, if any, which may be
sought by entities for such compensation are not known by the Debtor at this
time. Requests for compensation must be approved by the Court after a hearing on
notice at which the Debtor and other parties in interest may participate and, if
appropriate, object to the allowance of any compensation and reimbursement of
expenses.

            Pursuant to the Plan, holders of Compensation and Reimbursement
Claims (i) shall file their respective final applications for allowance of
compensation for services rendered and reimbursement of expenses incurred
through the Effective Date by the date that is 30 days after the Effective Date
or such other date as may be fixed by the Court, and (ii) if granted, such an
award by the Court shall be paid in full in such amounts as are Allowed (a) on
the date such Compensation and Reimbursement Claim becomes an Allowed
Administrative Claim or as soon thereafter as is practicable, or (b) upon such
other terms as may be mutually agreed upon between such holder of an Allowed
Administrative Claim and the Debtor in Possession or, on and after the Effective
Date, the Reorganized Debtor. The Debtor estimates that Allowed Compensation and
Reimbursement Claims should not exceed $500,000 in the aggregate.

            3     Unclassified -- Priority Tax Claims

            A Priority Tax Claim consists of any Claim of a governmental unit of
the kind specified in sections 502(i) and 507(a)(8) of the Bankruptcy Code.
These unsecured Claims are given a statutory priority in right of payment.
Except to the extent that a holder of an Allowed Priority Tax Claim agrees to a
different treatment, each holder of an Allowed Priority Tax Claim will receive,
at the sole option of the Reorganized Debtor, (a) Cash in an amount equal to
such Allowed Priority Tax Claim on the later of the Effective Date and the date
such Priority Tax Claim becomes an Allowed Priority Tax Claim, or as soon
thereafter as is practicable, or (b) equal annual Cash payments in an aggregate
amount equal to such Allowed Priority Tax Claim, together with interest (i) with
respect to federal taxes, at a fixed annual rate equal to the federal statutory
rate as provided in 26 U.S.C. ss. 6621 over a period through the sixth
anniversary of the date of assessment of such Allowed Priority Tax Claim; and
(ii) with respect to state and city taxes, at the rate applicable under state or
local law. The Debtor estimates that Allowed Priority Tax Claims should not
exceed approximately $1.2 million in the aggregate.

            4     Class 1 -- Other Priority Claims
                  (Unimpaired; therefore, deemed to have
                  accepted the Plan and not entitled to
                  vote.)

                                       27
<PAGE>

            Other Priority Claims are Claims which are entitled to priority in
accordance with section 507(a) of the Bankruptcy Code (other than Administrative
Claims and Priority Tax Claims). Such Claims include (i) General Unsecured
Claims for accrued employee compensation earned within 90 days prior to the
commencement of the Chapter 11 Case to the extent of $4,300 per employee and
(ii) contributions to employee benefit plans arising from services rendered
within 180 days prior to the commencement of the Chapter 11 Case, but only for
each such plan to the extent of (a) the number of employees covered by such plan
multiplied by $4,300, less (b) the aggregate amount paid to such employees from
the estate for priority wages, salaries or commissions. Pursuant to the Plan,
except to the extent that a holder of an Allowed Other Priority Claim shall have
agreed in writing to a different treatment, subject to the consent of the
Creditors Committee, holders of Allowed Other Priority Claims, if any exist,
will be paid in full in Cash on the later of the Effective Date and the date
such Other Priority Claim becomes an Allowed Claim, or as soon thereafter as is
practicable. The legal, equitable and contractual rights of the holders of Other
Priority Claims, if any exist, are not altered by the Plan. Because the Court
entered an order authorizing the Debtor to pay, among other things, unpaid
priority prepetition compensation and benefits, the Debtor estimates that the
Allowed Claims in Class 1 that are due and payable pursuant to the Plan on or
before the Effective Date will be de minimis, if any.

            5     Class 2 -- Other Secured Claims
                  (Unimpaired; therefore, deemed to have
                  accepted the Plan and not entitled to
                  vote.)

            Other Secured Claims include Claims (other than the DIP Financing
Claims), to the extent reflected in the Schedules or a proof of claim filed as a
Secured Claim which is secured by a Lien on Collateral to the extent of the
value of such Collateral, as determined in accordance with section 506(a) of the
Bankruptcy Code, or, in the event that such Claim is subject to setoff under
section 553 of the Bankruptcy Code, to the extent of such setoff.

            Except to the extent that a holder of an Allowed Other Secured Claim
shall have agreed in writing to a different treatment, subject to the consent of
the Creditors Committee, at the sole option of the Debtor, in full and complete
satisfaction of such Allowed Other Secured Claim, (i) each Allowed Other Secured
Claim shall be reinstated and rendered unimpaired in accordance with section
1124(2) of the Bankruptcy Code, notwithstanding any contractual provision or
applicable nonbankruptcy law that entitles the holder of an Allowed Other
Secured Claim to demand or receive payment of such Allowed Other Secured Claim
prior to the stated maturity of such Allowed Other Secured Claim from and after
the occurrence of a default, (ii) each holder of an Allowed Other Secured Claim
shall receive Cash in an amount equal to such Allowed Other Secured Claim,
including any interest on such Allowed Other Secured Claim required to be paid
pursuant to section 506(b) of the Bankruptcy Code, on the later of the Effective
Date and the date such Allowed Other

                                       28
<PAGE>

Secured Claim becomes an Allowed Other Secured Claim, or as soon thereafter as
is practicable, or (iii) each holder of an Allowed Other Secured Claim shall
receive the Collateral securing its Allowed Other Secured Claim and any interest
on such Allowed Secured Claim required to be paid pursuant to section 506(b) of
the Bankruptcy Code, on the later of the Effective Date and the date such
Allowed Other Secured Claim becomes an Allowed Other Secured Claim, or as soon
thereafter as is practicable.

            The Debtor estimates that Allowed Other Secured Claims in Class 2
will be de minimis, if any.

            6     Class 3 -- DIP Financing Claims
                  (Unimpaired; therefore, deemed to have
                  accepted the Plan and not entitled to
                  vote.)

            DIP Financing Claims consist of the Claims of Congress arising under
the DIP Credit Facility and all agreements and instruments relating thereto,
which claims are secured by a first priority security interest in certain of the
Debtor's real and personal property, including inventory, accounts receivable,
equipment, certain real property interests and amounts held in certain deposit
accounts, subject only to Permitted Liens (as defined in the DIP Credit
Facility).

            Each holder of a DIP Financing Claim (which shall be deemed Allowed)
shall receive Cash in an amount equal to its Allowed DIP Financing Claim on the
Effective Date.

            7     Class 4 -- Convenience Claims
                  (Impaired; therefore, entitled to vote to accept or reject the
                  Plan.)

            A Class 4 Convenience Claim includes any General Unsecured Claim
that is Allowed in the amount of $2,000 or less, or is Allowed in an amount
greater than $2,000, but which Claim is reduced to $2,000 by the election of the
holder thereof on such holder's Ballot. Each holder of an Allowed Convenience
Claim shall receive Cash in an amount equal to 50% of such Allowed Convenience
Claim on the later of (i) the Effective Date, and (ii) 30 days after the date
such Convenience Claim becomes an Allowed Convenience Claim, or as soon
thereafter as is practicable. Any holder of a Claim which would otherwise be an
Allowed Convenience Claim may elect on such holder's Ballot to have such Allowed
Claim treated as an Allowed General Unsecured Claim under Class 5, in which
event the holder of such Allowed Claim shall receive distributions under Class 5
on account of such Allowed Claim and shall forfeit its right to distributions
under Class 4 on account of such Allowed Claim.

            By checking the appropriate box on a timely cast Ballot, the holder
of an Allowed General Unsecured Claim in an amount greater than $2,000 may elect
to

                                       29
<PAGE>

reduce the amount of such holder's Allowed General Unsecured Claim to $2,000 and
to receive a distribution upon such Allowed Class 4 Convenience Claim in the
amount of $2,000 as described above. Such an election shall constitute a waiver
of the right to collect, and a release of, the amount of the Allowed General
Unsecured Claim in excess of $2,000, and the holder of such Allowed Class 4
Convenience Claim shall be deemed to have released the Debtor and its estate,
and its property from any and all liability for such excess amount. The holder
of an Allowed General Unsecured Claim which timely elects to reduce the amount
of its Allowed Claim shall be deemed to be the holder of an Allowed Class 4
Convenience Claim for classification, voting, and all other purposes under the
Plan. The Debtor estimates that the Allowed Claims in Class 4 will be
approximately $245,000.

            8     Class 5 -- General Unsecured Claims
                  (Impaired; therefore, entitled to vote to accept or
                  reject the Plan.)

            Class 5 includes all General Unsecured Claims against the Debtor
other than Administrative Claims, including, without limitation (a) Claims of
trade creditors of Loehmann's, (b) Claims of customers of Loehmann's that are
not Priority Claims, (c) Claims of employees of Loehmann's that are not Priority
Claims, (d) Claims arising as a result of the rejection by Loehmann's of
executory contracts or unexpired leases pursuant to section 365 of the
Bankruptcy Code, (e) Claims arising as a result of pre-Petition Date litigation
against Loehmann's that are not subordinated under section 510(b) of the
Bankruptcy Code and (f) Senior Note Claims. Pursuant to the Plan, Senior Note
Claims will be allowed in the aggregate amount of $100,740,217.29. The Debtor
estimates that the Allowed Claims in Class 5 will be approximately $142 million.

            Pursuant to the Plan, each holder of an Allowed General Unsecured
Claim in Class 5 will receive its Pro Rata Share of Available Shares on the
later of (i) the Effective Date, or (ii) 30 days after the date on which such
Claim becomes an Allowed General Unsecured Claim, or as soon thereafter as is
practicable. If, after the Effective Date, any further Available Shares are
available from the release of shares of New Common Stock from the Disputed
Claims Reserve, then pursuant to the Plan each holder of an Allowed General
Unsecured Claim will receive on a Subsequent Distribution Date, if any, and the
Final Distribution Date, its Pro Rata Share of Available Shares on account of
its Allowed General Unsecured Claim in accordance with Sections VI.B.1(d) and
(e) of the Plan.

            9     Class 6 -- Equity Interests (Impaired; no distributions shall
                  be made, therefore, deemed to have rejected the Plan and not
                  entitled to vote.)

            Class 6 includes the outstanding common and preferred stock of
Loehmann's and any option, warrant or right, contractual or otherwise, to
acquire any such interest.

                                       30
<PAGE>

            The Plan provides that holders of Class 6 Equity Interests shall
receive no distributions on account of such Equity Interests and are
conclusively presumed to have rejected the Plan. All Equity Interests shall be
canceled on the Effective Date.

      C.    Provisions Regarding Corporate Governance and
            Management of the Reorganized Debtor

            1     Directors and Officers of Reorganized Loehmann's

                  (a) Board of Directors. As of the Effective Date, the Board of
Directors of Reorganized Loehmann's will initially consist of seven (7) members,
five (5) of whom shall be designated by the Creditors Committee whose names
shall be disclosed on or before the date of the Confirmation Hearing; and two
(2) of whom shall be Robert Friedman and Robert Glass, who currently serve as
Loehmann's' Chairman and Chief Executive Officer, and President and Chief
Operating Officer, respectively. The Board of Directors of Reorganized
Loehmann's will select a Chairman of the Board of Directors of Reorganized
Loehmann's at their initial meeting.

                  (b) Officers of Reorganized Loehmann's. The officers of
Loehmann's immediately prior to the Effective Date shall serve as the initial
officers of Reorganized Loehmann's on or after the Effective Date. Such officers
shall serve in accordance with employment agreements to be negotiated with
Reorganized Loehmann's and applicable nonbankruptcy law. Key officers of
Loehmann's who shall serve in the same position for the Reorganized Debtor,
include, among others, the following:

         Name               Age                   Title
-----------------------     ---   -----------------------------------------
Robert N. Friedman          58    Chairman, Chief Executive Officer and
                                  Director

Robert Glass                53    President, Chief Operating Officer, Chief
                                  Financial Officer and Director

Anthony D'Annibale          38    Senior Vice President, Merchandising

John Mains                  44    Senior Vice President, Merchandising

Richard Morretta            46    Vice President and Controller

            2     Amended Certificate of Incorporation and Amended
                  Loehmann's By-Laws

            The adoption of the Amended Certificate of Incorporation and Amended
By-Laws will be deemed to have occurred and be effective as of the

                                       31
<PAGE>

Effective Date without any further action by the directors or stockholders of
the Debtor or the Reorganized Debtor. The Amended Certificate of Incorporation
will, among other things, contain appropriate provisions consistent with the
Plan (i) governing the authorization of up to 5 million shares of New Common
Stock (up to 5 million will be issued on the Effective Date); and (ii)
prohibiting the issuance of nonvoting equity securities as required by section
1123(a)(6) of the Bankruptcy Code.

            On or prior to the Effective Date, Loehmann's will file with the
Secretary of State of the State of Delaware, in accordance with sections 103 and
303 of the Delaware General Corporation Law, the Amended Certificate of
Incorporation and such certificate shall be the certificate of incorporation for
Reorganized Loehmann's. The Amended Certificate of Incorporation and Amended
By-Laws shall be substantially in the forms contained in the Plan Supplement.

            3     Securities to be Issued Pursuant to the Plan; New
                  Common Stock

            On the Effective Date, pursuant to the Plan, issuance by Reorganized
Loehmann's of 5 million shares of New Common Stock is authorized without further
act or action under applicable law, regulation, rule or order. Each share of New
Common Stock will entitle its holder to one vote with no cumulative voting
rights. Holders of New Common Stock will have the right to participate
proportionately in any dividends distributed by Reorganized Loehmann's.
Reorganized Loehmann's will use its best efforts to have the New Common Stock
listed on a nationally recognized market or exchange.

      D.    Equity Incentive Plan

            1     Reorganized Loehmann's Equity
                  Incentive Plan

            Pursuant to the Plan, on the Effective Date, Reorganized Loehmann's
will adopt a stock option plan (the "Equity Incentive Plan") which permits
Reorganized Loehmann's to grant to its directors and certain key senior
management executives of the Company options to acquire shares of New Common
Stock. Such stock option plan shall be on the terms in substantially the form
contained in the Plan Supplement. Options granted under the stock option plan
are generally intended to qualify as "incentive stock options" described in the
Internal Revenue Code.

            2     Description of Reorganized Loehmann's Equity
                  Incentive Plan

            The purposes of the Loehmann's Equity Incentive Plan are to promote
the interests of Reorganized Loehmann's and its shareholders by (i) attracting
and retaining exceptional officers, directors and key employees of Reorganized
Loehmann's and (ii) enabling such individuals to participate in the long-term
growth

                                       32
<PAGE>

and financial success of Reorganized Loehmann's. In connection with and pursuant
to the Plan, the Equity Incentive Plan will be adopted and certain of the
options will be granted to certain persons under the Equity Incentive Plan,
effective as of the Effective Date. The Equity Incentive Plan makes available
the grant of options to acquire an aggregate of 425,000 shares of New Common
Stock and an aggregate of 262,500 will be issued as of the Effective Date. The
remaining options to acquire 162,500 shares of New Common Stock will be issued
by a compensation committee of Reorganized Loehmann's' Board of Directors. All
of Loehmann's' directors, officers and employees are eligible to receive options
under the Equity Incentive Plan.

The following are further terms respecting the Equity Incentive Plan:

Shares Available:         The number of options that will be available for grant
                          pursuant to the Equity Incentive Plan will be equal to
                          425,000 shares of New Common Stock.

Eligible Participants:    All members of the Board of Directors
                          and certain key senior management executives of
                          Reorganized Loehmann's will be eligible to participate
                          in the Equity Incentive Plan.

Effective Date Grants:    On the Effective Date, Robert Friedman
                          and Robert Glass will each receive options to acquire
                          131,250 shares of New Common Stock for a total of
                          262,500 shares.

Strike Price:             The strike price shall equal (i) $75,000,000,
                          divided by (ii) the number of shares of New Common
                          Stock issued on the Effective Date pursuant to the
                          Plan (5,000,000).

Vesting:                  Options granted under the Equity Incentive Plan will
                          vest in four (4) equal tranches on each of the
                          Effective Date and the first three (3) anniversaries
                          thereafter.

Duration of Options:      Options must be exercised on or before the fifth (5th)
                          anniversary of the grant date.

Change of Control:        In the event a sale of Reorganized
                          Loehmann's (whether stock or substantially all of the
                          assets) occurs, all options that have not vested as of
                          such date shall automatically vest in full.

                                       33
<PAGE>

Termination of Option     If an option holder is terminated from employment by
Holder                    Reorganized Loehmann's or removed as a director of
                          Reorganized Loehmann's (in each case other than for
                          "cause"), such option holder's options that are vested
                          as of such date shall be exercisable for a period of
                          60 days following such date of termination or removal
                          and all unvested options will on such date be
                          forfeited.

      E.    Distributions Under the Plan

            1     Method of Distributions under the Plan

                  (a) Date and Delivery of Distributions. Distributions under
the Plan shall be made by the Reorganized Debtor or its designee to the holders
of Allowed Administrative Claims, Allowed Priority Tax Claims, Allowed Other
Priority Claims, Allowed DIP Financing Claims, Allowed Other Secured Claims,
Allowed Convenience Claims and Allowed General Unsecured Claims at the addresses
set forth on the Schedules, unless such addresses are superseded by proofs of
claim or transfers of claim filed pursuant to Bankruptcy Rule 3001 (or at the
last known addresses of such holders if the Debtor or the Reorganized Debtor has
been notified in writing of a change of address), except that all distributions
to the holders of Allowed Senior Note Claims shall be made in accordance with
the Senior Note Indenture. Distributions of New Common Stock shall be made
initially to the Transfer Agent who shall make distributions to the holders of
Allowed General Unsecured Claims or, in the case of holders of Allowed Senior
Note Claims to the Senior Note Indenture Trustee for further distribution to
individual holders of Senior Note Claims. Notwithstanding any provision in the
Plan to the contrary, the Senior Note Indenture will continue in effect to the
extent necessary to allow the Senior Note Indenture Trustee to receive and make
distributions pursuant to the Plan on account of the Senior Note Claims. New
Common Stock (including dividends paid on account thereof) held by the
disbursing agent or the Reorganized Debtor, as applicable, for the benefit of
the potential claimants of such securities shall be held in trust for such
claimants and shall be treated as treasury stock for voting purposes until such
time as such shares are distributed to the holders of Allowed Claims.

                  (b) Distribution of Cash. Any payment of Cash by the
Reorganized Debtor pursuant to the Plan shall be made at the option and in the
sole discretion of the Reorganized Debtor, by (i) a check drawn on, or (ii) wire
transfer from, a domestic bank selected by the Reorganized Debtor.

                                       34
<PAGE>

                  (c) Effective Date Distributions. On the Effective Date, or as
soon thereafter as practicable, the Reorganized Debtor shall distribute all
Available Shares to the holders of Allowed General Unsecured Claims.

                  (d) Distributions on Subsequent Distribution Dates. Unless
otherwise provided in the Plan, to the extent there are Available Shares
subsequent to the Effective Date as a result of the release of shares of New
Common Stock from the Disputed Claims Reserve in accordance with Section VI.B.5.
of the Plan or the return of unclaimed, undeliverable or time-barred
distributions to holders of Allowed General Unsecured Claims pursuant to Section
VI.B.1.(g) of the Plan, the Reorganized Debtor shall, on a Subsequent
Distribution Date, distribute (with the written consent of the Creditors
Committee or Court order on notice to the Creditors Committee) such Available
Shares to the holders of General Unsecured Claims entitled thereto that were
Allowed on the Effective Date or subsequently have become Allowed on or before
the Subsequent Distribution Date in amounts necessary to cause such holders to
have received aggregate distributions of shares of New Common Stock in respect
of such Allowed General Unsecured Claims equal to the distributions that such
holders would have received in respect of such Allowed General Unsecured Claims
on the Effective Date if (x) such Available Shares had been available for
distribution on the Effective Date, (y) such Allowed General Unsecured Claims
had been Allowed on the Effective Date in the amounts in which they are Allowed
on the Subsequent Distribution Date, and (z) Claims or portions thereof that
have become disallowed subsequent to the Effective Date and on or before the
Subsequent Distribution Date had been disallowed on the Effective Date.

                  (e) Distributions on the Final Distribution Date. Unless
otherwise provided in this Plan, to the extent there are Available Shares
subsequent to the Effective Date from the release of shares of New Common Stock
from the Disputed Claims Reserve in accordance with Section VI.B.5. of the Plan,
or the return of unclaimed, undeliverable or time-barred distributions to
holders of Allowed General Unsecured Claims pursuant to Section VI.B.1.(g) of
the Plan, the Reorganized Debtor shall, on the Final Distribution Date,
distribute all such Available Shares to the holders of General Unsecured Claims
entitled thereto that were Allowed on the Effective Date, or subsequently have
become Allowed on or before the Final Distribution Date in amounts necessary to
cause such holders to have received aggregate distributions of shares of New
Common Stock in respect of such Allowed Claims equal to the distributions that
such holders would have received in respect of such Allowed General Unsecured
Claims on the Effective Date if (x) such Available Shares had been available for
distribution on the Effective Date, (y) such Allowed General Unsecured Claims
had been Allowed on the Effective Date in the amounts in which they are Allowed
on the Final Distribution Date, and (z) Claims or portions thereof that have
become disallowed subsequent to the Effective Date and on or

                                       35
<PAGE>

before the Final Distribution Date had been disallowed on the Effective Date;
provided, however, that in no event shall the Reorganized Debtor be obligated to
make such a distribution if, in the discretion of the Reorganized Debtor and the
Creditors Committee, there are insufficient Available Shares to make a
cost-efficient distribution, taking into account the size of the distribution to
be made and the number of recipients of such distribution, in which event such
shares of New Common Stock shall become the property of the Reorganized Debtor.

                  (f) Reserve Shares for Disputed Claims. On the date on which
the Reorganized Debtor makes its initial distribution to holders of Allowed
General Unsecured Claims pursuant to Section VI.B.1 of the Plan, the Reorganized
Debtor shall deposit with the Transfer Agent an aggregate number of shares of
New Common Stock sufficient to distribute to each holder of a Disputed Claim (i)
the number of shares of New Common Stock that such holder would have been
entitled to receive under the Plan if such Claim had been an Allowed General
Unsecured Claim on the date of such initial distribution, or (ii) such lesser
amount as the Court may estimate pursuant to Section VI.C. of the Plan or may
otherwise order. Shares of New Common Stock withheld and reserved for
distribution to holders of Disputed Claims shall be held by the Transfer Agent
and treated as treasury stock for voting purposes until such time as such shares
are distributed to holders of Allowed Claims.

                  (g) Unclaimed Distributions. Any distribution of Cash under
the Plan which is unclaimed after the later to occur of (a) two years after
distribution and (b) six months after the date on which such claimant's Claim is
Allowed shall be transferred to the Reorganized Debtor notwithstanding state or
other escheat or similar laws to the contrary. Distributions under the Plan
consisting of New Common Stock that are unclaimed for a period of two years
after distribution shall be canceled and any dividends or interest which has
been paid with respect to such securities shall be transferred to the
Reorganized Debtor and entitlement by the holder of a Claim to such distribution
shall be extinguished and forever barred.

                  (h) Saturdays, Sundays, or Legal Holidays. If any payment or
act under the Plan is required to be made or performed on a date that is not a
Business Day, then the making of such payment or the performance of such act may
be completed on the next succeeding Business Day, and shall be deemed to have
been completed as of the required date.

                  (i) Fractional Shares. Notwithstanding any other provision in
the Plan to the contrary, no fractional shares of New Common Stock shall be
issued pursuant to the Plan. Whenever any payment of a fraction of a share of
New Common Stock would otherwise be required under the Plan, the actual
distribution made shall reflect a rounding of such fraction to the nearest whole
share (up or

                                       36
<PAGE>

down), with half shares or less being rounded down and fractions in excess of
half of a share being rounded up. If two or more holders are entitled to equal
fractional entitlements and the number of holders so entitled exceeds the number
of whole shares, which remain to be allocated, the Transfer Agent shall allocate
the remaining whole shares to such holders by random lot or such other impartial
method as the Transfer Agent deems fair, in the Transfer Agent's sole
discretion. Upon the allocation of all of the whole shares authorized under the
Plan, all remaining fractional portions of the entitlements shall be canceled
and shall be of no further force and effect.

                  (j) Distributions to Holders as of the Record Date. As at the
close of business on the Record Date, the claims register shall be closed, and
there shall be no further changes in the record holders of any Claims. Further,
at the close of business on the Record Date, the Senior Note Indenture Trustee
shall close the register for the Senior Notes. The Debtor, the Reorganized
Debtor and the Senior Note Indenture Trustee shall have no obligation to
recognize any transfer of any Claims (including Senior Note Claims) occurring
after the Record Date. The Debtor, the Reorganized Debtor and the Senior Note
Indenture Trustee shall instead be entitled to recognize and deal for purposes
under the Plan (except as to voting to accept or reject the Plan) with only
those record holders stated on the claims register and the register for Senior
Note as of the close of business on the Record Date.

                  (k) Senior Note Indenture Trustee's Fees and Expenses. The
Senior Note Indenture Trustee shall be entitled to payment from Reorganized
Loehmann's of Indenture Trustee Expenses incurred in connection with such
Trustee's making distributions under the Plan without further Bankruptcy Court
approval. These payments will be made on terms agreed to with Reorganized
Loehmann's and will not be deducted from distributions to be made pursuant to
the Plan to holders of Allowed Senior Note Claims.

            2     Disputed General Unsecured Claims

                  The holder of a Disputed General Unsecured Claim that becomes
an Allowed Claim subsequent to the Initial Distribution Date shall receive a
distribution of New Common Stock as soon thereafter as is practicable. Such
distribution shall be made in accordance with the Plan based on the
distributions that would have been made to such holder under the Plan if the
Disputed General Unsecured Claim had been an Allowed Claim on or prior to the
Effective Date.

      F.    Objections to and Resolution of Administrative Claims and
            Claims; Administrative and Priority Claims Reserve

                                       37
<PAGE>

            1     Objections to and Resolution of Administrative Claims
                  and Claims

                  The Debtor, the Reorganized Debtor and the Creditors Committee
shall have the exclusive right to make and file objections to Administrative
Claims and Claims subsequent to the Confirmation Date. All objections shall be
litigated to a Final Order. Unless otherwise ordered by the Court, the Debtor,
the Reorganized Debtor and the Creditors Committee shall file all objections to
Administrative Claims and Claims that are the subject of proofs of claim or
requests for payment filed with the Court (other than applications for allowance
of compensation and reimbursement of expenses) and serve such objections upon
the holders of the Administrative Claims and Claims as to which the objection is
made as soon as is practicable, but in no event later than 60 days after the
Effective Date or such later date as may be approved by the Court.

            2     Administrative, Priority and Convenience Claims Reserve

                  (a) Establishment of Administrative, Priority and Convenience
Claims Reserve. Pursuant to the Plan, on the Effective Date, the Reorganized
Debtor shall place into reserve an amount of Cash equal to (i) the sum of the
aggregate amount of all Disputed Administrative Claims, Disputed Priority Tax
Claims, Disputed Other Priority Claims and Disputed Convenience Claims, plus
(ii) an amount to be determined by the Court to be reserved for any Disputed
Administrative Claims, Disputed Priority Tax Claims and Disputed Other Priority
Claims that are unliquidated (the "Administrative, Priority and Convenience
Claims Reserve").

                  (b) Cash Held in Administrative, Priority and Convenience
Priority Claims Reserve. Cash held in the Administrative, Priority and
Convenience Claims Reserve shall be deposited in a segregated bank account or
accounts in the name of the Reorganized Debtor and designated as held in trust
for the benefit of holders of Allowed Administrative Claims, Allowed Priority
Tax Claims, Allowed Other Priority Claims and Allowed Convenience Claims. Cash
held in the Administrative, Priority and Convenience Claims Reserve shall not
constitute property of the Reorganized Debtor. The Reorganized Debtor shall
invest the Cash held in the Administrative, Priority and Convenience Claims
Reserve in a manner consistent with investment guidelines to be included in the
Plan Supplement. The Reorganized Debtor shall pay, or cause to be paid, out of
the funds held in the Administrative, Priority and Convenience Claims Reserve,
any tax imposed on the Administrative, Priority and Convenience Claims Reserve
by any governmental unit with respect to income generated by Cash held in the
Administrative, Priority and

                                       38
<PAGE>

Convenience Claims Reserve. Any Cash held in the Administrative, Priority and
Convenience Claims Reserve after all Administrative, Priority and Convenience
Claims have been Allowed or disallowed shall be transferred to and become the
property of the Reorganized Debtor.

            3     Allowance of Disputed Administrative, Priority and
                  Convenience Claims.

            Pursuant to the Plan, if, on or after the Effective Date, any
Disputed Administrative, Priority or Convenience Claim becomes an Allowed Claim,
the Reorganized Debtor shall, 30 days after the date on which such Claim becomes
an Allowed Claim, or as soon thereafter as is practicable, distribute from the
Administrative, Priority and Convenience Claims Reserve to the holder of such
Allowed Administrative, Priority or Convenience Claim Cash equal to the amount
that such holder would have been entitled to had such Claim been Allowed on the
Effective Date.

            4     Release of Shares from Disputed Claims Reserve.

                  If at any time or from time to time after the Effective Date,
there shall be shares of New Common Stock in the Disputed Claims Reserve in an
amount in excess of the amount which the Reorganized Debtor is required at such
time to reserve on account of Disputed Claims under the Plan or pursuant to any
Order of the Court, such excess shares of New Common Stock shall become
available for distribution in accordance with the Plan.

      G.    Allocation of Consideration

            The aggregate consideration to be distributed to the holders of
Allowed Claims in each Class under the Plan (other than the Claims, if any, of
the Internal Revenue Service) shall be treated as first satisfying an amount
equal to the stated principal amount of the Allowed Claim for such holders and
any remaining consideration as satisfying accrued, but unpaid, interest and
costs, if any, and attorneys' fees where applicable.

      H.    Cancellation and Surrender of Existing Securities and
            Agreements

            On the Effective Date, the Senior Notes and Equity Interests shall
be deemed canceled and the underlying agreements and securities, including the
Senior Note Indenture (except as provided in Section VI.B.1.(a) of the Plan),
together with all instruments issued pursuant thereto, shall have no further
legal effect other than as evidence of any right to receive distributions, fees
and expenses under the Plan. In

                                       39
<PAGE>

addition, the Indenture Trustee's obligations shall be discharged, except as
contemplated under Section VI.B. of the Plan.

            Notwithstanding any other provision of the Plan, as a condition
precedent to receiving any distribution under the Plan, each holder of a
promissory note, share certificate, or other instrument or security evidencing a
Claim must tender such promissory note or other instrument or security to the
Reorganized Debtor or its designee or must execute and deliver an affidavit of
loss and furnish an indemnity or bond in substance and amount reasonably
satisfactory to the Reorganized Debtor and the Indenture Trustee.

            Any holder of a Claim that fails to surrender such instrument or to
provide the affidavit and indemnity or bond, before the later to occur of (i)
the second anniversary of the Effective Date and (ii) six months following the
date such holder's Claim becomes an Allowed Claim shall be deemed to have
forfeited all rights and/or Claims and may not receive or participate in any
distribution under the Plan.

            Pursuant to the Plan, the Debtor, the Reorganized Debtor or the
Creditors Committee may, at any time, request that the Court estimate any
Disputed Claim pursuant to section 502(c) of the Bankruptcy Code regardless of
whether the Debtor, the Reorganized Debtor or the Creditors Committee have
previously objected to such Claim. The Court will retain jurisdiction to
estimate any Claim at any time, including during litigation concerning any
objection to such Claim. In the event that the Court estimates any Disputed
Claim, that estimated amount may constitute either the Allowed amount of such
Claim, the amount on which a reserve is to be calculated for purposes of the
Disputed Claims Reserve, or a maximum limitation on such Claim, as determined by
the Court. If the estimated amount constitutes a maximum limitation on such
Claim, the Debtor, the Reorganized Debtor or the Creditors Committee may elect
to pursue any supplemental proceedings to object to any ultimate payment of such
Claim. All of the aforementioned Claims objection, estimation and resolution
procedures are cumulative and not necessarily exclusive of one another.

      I.    Administrative Claims of Indenture Trustee.

            In addition to any other Administrative Claim that may be filed by
the Indenture Trustee, the Indenture Trustee shall have an Allowed
Administrative Claim in an amount equal to the reasonable and necessary fees and
expenses incurred by the Indenture Trustee and its legal counsel in accordance
with and to the extent provided for in the Senior Note Indenture for the period
covering the Petition Date through and including the Effective Date.

                                       40
<PAGE>

      J.    Nonconsensual Confirmation.

            As the holders of Equity Interests in Class 6 are deemed to reject
the Plan, the Debtor will seek to have the Court confirm the Plan under section
1129(b) of the Bankruptcy Code.

      K.    Implementation of the Plan; the Amended Certificate of
            Incorporation, the Amended By-Laws and Other
            Implementation Documents

            On or before the Effective Date, pursuant to the Plan, the
Reorganized Debtor will execute the Amended Certificate of Incorporation, the
Amended By-Laws and Other Implementation Documents, and all other documents
required and necessary to implement the Plan, without the requirement of any
further corporate action.

      L.    Effect of Confirmation of the Plan

            1     Continued Corporate Existence

            The Debtor, as Reorganized Debtor, shall continue to exist after the
Effective Date with all powers of a corporation under the laws of its state of
incorporation and without prejudice to any right to alter or terminate such
existence (whether by merger or otherwise) under such applicable state law; and
the Reorganized Debtor may operate its business free of any restrictions imposed
by the Bankruptcy Code, the Bankruptcy Rules or by the Court, subject only to
the terms and conditions of the Plan

            2     Vesting of Assets

            To take advantage of certain state tax efficiencies, except as
otherwise expressly provided in the Plan, on the Effective Date, or as soon as
practicable thereafter, the Reorganized Debtor shall form two (2) subsidiaries.
Such subsidiaries shall be vested with all of the property of the Debtor's
estate free and clear of all Claims, Liens, encumbrances, charges and other
interests of creditors and equity security holders. Tangible assets shall be
transferred to one subsidiary and intangible assets shall be transferred to the
other. As a result of the transfer of assets into two newly formed subsidiaries,
Reorganized Loehmann's will become a holding company.

                                       41
<PAGE>

            3     Discharge of the Debtor

            The rights afforded in the Plan and the treatment of all Claims and
Equity Interests in the Plan shall be in exchange for and in complete
satisfaction, discharge, and release of all Claims and Equity Interests of any
nature whatsoever, including any interest accrued on such Claims from and after
the Petition Date, against the Debtor, the Debtor in Possession, the Reorganized
Debtor or any of its assets or properties, arising prior to the Effective Date.
Except as otherwise expressly specified in the Plan, the Confirmation Order
shall act as of the Effective Date as a discharge of all debts of, Claims
against, Liens on, and Equity Interests in the Debtor, its assets and
properties, arising at any time before the entry of the Confirmation Order,
regardless of whether a proof of Claim or Equity Interest with respect thereto
was filed, whether the Claim or Equity Interest is Allowed or whether the holder
thereof votes to accept the Plan or is entitled to receive a distribution
thereunder. Except as otherwise expressly specified in the Plan, after the
Effective Date, any holder of such discharged Claim or Equity Interest shall be
precluded from asserting against the Debtor, the Reorganized Debtor or any of
its assets or properties, any other or further Claim or Equity Interest based on
any document, instrument, act, omission, transaction or other activity of any
kind or nature that occurred before the entry of the Confirmation Order.

            4     Injunction

            Except as otherwise expressly provided in the Plan, the Confirmation
Order, or any other order of the Court, all entities who have held, hold or may
hold Claims against or Equity Interests in the Debtor which arose before or were
held as of the Effective Date, are permanently enjoined, on and after the
Effective Date, from (a) commencing or continuing in any manner any action or
other proceeding of any kind against the Debtor with respect to any such Claim
or Equity Interest, (b) the enforcement, attachment, collection or recovery by
any manner or means of any judgment, award, decree or order against the Debtor
on account of any such Claim or Equity Interest, (c) creating, perfecting or
enforcing any encumbrance of any kind against the Debtor or against the property
or interests in property of the Debtor on account of any such Claim or Equity
Interest and (d) asserting any right of setoff, subrogation or recoupment of any
kind against any obligation due from the Debtor or against the property or
interests in property of the Debtor on account of any such Claim or Equity
Interest. Such injunction shall extend to successors of the Debtor (including,
without limitation, the Reorganized Debtor) and its respective properties and
interests in property.

                                       42
<PAGE>

            5     Extinguishment of Causes of Action Under the
                  Avoiding Power Provisions

            On the Effective Date, all rights, claims, causes of action,
avoiding powers, suits and proceedings arising under sections 544, 545, 547,
548, 549 and 553 of the Bankruptcy Code shall be extinguished whether or not
then pending. While the Debtor has not conducted an exhaustive investigation,
the Debtor does not believe that the pursuit of such claims is warranted. The
Reorganized Debtor shall have, retain, reserve and be entitled to assert all
other Claims, Causes of Action, rights of setoff and other legal or equitable
defenses which the Debtor had immediately prior to the Petition Date as fully as
if the Chapter 11 Case had not been commenced; and all of the Reorganized
Debtor's legal and equitable rights respecting any such Claim which is not
specifically waived, extinguished or relinquished by the Plan may be asserted
after the Effective Date to the same extent as if the Chapter 11 Case had not
been commenced.

            6     Votes Solicited in Good Faith

            The Plan provides that pursuant to section 1125(e) of the Bankruptcy
Code, the Debtor and the Creditors Committee have, and upon confirmation of the
Plan shall be deemed to have, solicited acceptances of the Plan in good faith
and in compliance with the applicable provisions of the Bankruptcy Code. The
Plan further provides that pursuant to section 1125(e) of the Bankruptcy Code,
the Debtor and the Creditors Committee (and their respective affiliates, agents,
directors, officers, members, employees, advisors, and attorneys) have
participated in good faith and in compliance with the applicable provisions of
the Bankruptcy Code in the offer, issuance, sale and purchase of the securities
offered and sold under the Plan and therefore have not, and on account of such
offer, issuance, sale, solicitation and/or purchase will not be, liable at any
time for the violation of any applicable law, rule or regulation governing the
solicitation of acceptances or rejections of the Plan or the offer, issuance,
sale or purchase of the securities offered and sold under the Plan.

            7     Administrative Claims Incurred after the
                  Confirmation Date

            Administrative Claims incurred by the Reorganized Debtor after the
date and time of the entry of the Confirmation Order, including (without
limitation) Claims for professionals' fees and expenses incurred after such
date, including, without limitation, fees and expenses by the Reorganized
Debtor, the Creditors Committee and the Senior Note Indenture Trustee, shall not
be subject to application and may be paid by the Reorganized Debtor in the
ordinary course of business and without application for or Court approval.

                                       43
<PAGE>

            8     The Debtor's Release

            On the Effective Date, pursuant to the Plan, the Debtor and the
Reorganized Debtor on behalf of themselves, and their estates, shall be deemed
to release unconditionally all of their respective officers, directors,
employees, advisors, attorneys, financial advisors, accountants and other
professionals, the Creditors Committee members, counsel to the Creditors
Committee, accountants to the Creditors Committee, the Senior Note Indenture
Trustee and each of their representatives and agents (including any
professionals retained by such persons or entities) (the "Released Parties")
from any and all claims, obligations, suits, judgments, damages, rights, Causes
of Action and liabilities whatsoever, whether known or unknown, foreseen or
unforeseen, existing or thereafter arising, in law, equity or otherwise, based
in whole or in part upon actions taken in their respective capacities described
above or any omission, transaction, event or other occurrence taking place on or
prior to the Effective Date in any way relating to the Debtor, the Chapter 11
Case or the Plan, except that (i) no individual shall be released from any act
or omission that constitutes gross negligence or willful misconduct, and (ii)
the Reorganized Debtor shall not relinquish or waive the right to assert any of
the foregoing as a legal or equitable defense or right of set-off or recoupment
against any Claims of any such persons asserted against the Debtor. While the
Debtor has not conducted an exhaustive investigation with respect to any of the
claims that may be released under the Plan, the Debtor is not aware of any such
claims.

            9     Exculpation and Release and Injunction of Released
                  Parties

                  (a) Exculpation. The Plan provides that the Debtor, the
Reorganized Debtor, members of the Creditors Committee, the Senior Note
Indenture Trustee and the other Released Parties (i) shall have no liability
whatsoever to any holder or purported holder of an Administrative Claim, Claim
or Equity Interest for any act or omission in connection with, or arising out
of, the negotiation of the Plan, the negotiation of the other documents included
in the Plan Supplement, the pursuit of approval of the Disclosure Statement or
the solicitation of votes for the Plan, the Chapter 11 Case, the consummation of
the Plan, the administration of the Plan or the property to be distributed under
the Plan or any transaction contemplated by the Plan or Disclosure Statement or
in furtherance thereof (including, without limitation, the Equity Incentive
Plan, employment contracts, programs and arrangements adopted in connection with
the Plan or the Chapter 11 Case), except for willful misconduct or gross
negligence as determined by a Final Order, and (ii) in all respects, shall be
entitled to rely upon the advice of counsel with respect to their duties and
responsibilities under the Plan. This exculpation shall be in addition to, and
not in

                                       44
<PAGE>

limitation of, all other releases, indemnities, exculpations and any other
applicable law or rules protecting such Released Parties from liability.

                  (b) Injunction. The Plan provides that pursuant to section 105
of the Bankruptcy Code, no holder or purported holder of an Administrative
Claim, Claim or Equity Interest shall be permitted to commence or continue any
action, employment of process, or any act to collect, offset or recover any
claim against a Released Party that accrued on or prior to the Effective Date
and has been released or waived pursuant to the Plan.

            10    Limitation of Governmental Releases

            The Plan provides that, notwithstanding Sections VII.I.1 and 2
thereof, it does not release, discharge or exculpate any non-debtor party from
any debt owed to the United States Government, and/or its agencies, including
the Pension Benefit Guaranty Corporation (the "Government"), or from any
liability arising under the Internal Revenue Code, the Employee Retirement
Income Security Act of 1974, as amended, or environmental laws, securities laws
or criminal laws of the United States. In addition, notwithstanding Sections
VII.I.1 and 2 of the Plan, the Plan does not enjoin or prevent the Government
from collecting any such liability from any such non-debtor party.

            11    Term of Bankruptcy Injunction or Stays

            The Plan provides that all injunctions or stays provided for in the
Chapter 11 Case under sections 105 or 362 of the Bankruptcy Code, or otherwise,
and in existence on the Confirmation Date, shall remain in full force and effect
until the Effective Date.

            12    Preservation of Insurance

            The Plan provides that the Debtor's discharge and release from all
Claims as provided in the Plan, does not diminish or impair the enforceability
of any insurance policy that may cover Claims against the Debtor, the
Reorganized Debtor (including, without limitation, its officers and directors)
or any other person or entity.

            13    Officers' and Directors' Indemnification Rights and
                  Insurance

            The Plan provides that notwithstanding any other provision of the
Plan, the obligations of the Debtor to indemnify its present directors, officers
and employees against any obligations, liabilities, costs or expenses pursuant
to the

                                       45
<PAGE>

articles of incorporation or by-laws of the Debtor, applicable state law,
specific agreement or any combination of the foregoing, shall survive the
Effective Date.

      M.    Retention of Jurisdiction

            The Plan provides that the Court shall have exclusive jurisdiction
of all matters arising out of, and related to, the Chapter 11 Case and the Plan
pursuant to, and for the purposes of, section 105(a) and section 1142 of the
Bankruptcy Code and for, among other things, the following purposes: (1) to hear
and determine applications for the assumption or rejection of executory
contracts or unexpired leases pending on the Confirmation Date, and the
allowance of Claims resulting therefrom; (2) to determine any other
applications, adversary proceedings and contested matters pending on the
Effective Date; (3) to ensure that distributions to holders of Allowed Claims
are accomplished as provided by the Plan; (4) to resolve disputes as to the
ownership of any Claim or Equity Interest; (5) to hear and determine timely
objections to Administrative Claims and Claims; (6) to enter and implement such
orders as may be appropriate in the event the Confirmation Order is for any
reason stayed, revoked, modified or vacated; (7) to issue such orders in aid of
execution of the Plan, to the extent authorized by section 1142 of the
Bankruptcy Code; (8) to consider any modifications of the Plan, to cure any
defect or omission, or to reconcile any inconsistency in any order of the Court,
including, without limitation, the Confirmation Order; (9) to hear and determine
all applications for compensation and reimbursement of expenses of professionals
under sections 330, 331, and 503(b) of the Bankruptcy Code; (10) to hear and
determine disputes arising in connection with the interpretation, implementation
or enforcement of the Plan; (11) to hear and determine any issue for which the
Plan requires a Final Order of the Court; (12) to hear and determine matters
concerning state, local, and federal taxes in accordance with sections 346, 505
and 1146 of the Bankruptcy Code; (13) to hear any other matter not inconsistent
with the Bankruptcy Code; (14) to hear and determine disputes arising in
connection with compensation and reimbursement of expenses of professionals for
services rendered during the period commencing on the Confirmation Date through
and including the Effective Date; and (15) to enter a final decree closing the
Chapter 11 Case.

                                       46
<PAGE>

      N.    Miscellaneous Provisions

            1     Payment of Statutory Fees

            The Plan provides that all fees payable on or before the Effective
Date (i) pursuant to section 1930 of title 28 of the United States Code, as
determined by the Court at the Confirmation Hearing, and (ii) to the United
States Trustee, shall be paid by the Debtor on or before the Effective Date and
all such fees payable after the Effective Date shall be paid by the Reorganized
Debtor.

            2     Dissolution of Creditors Committee

            The Plan provides that the appointment of the Creditors Committee
shall terminate on the Final Distribution Date.

            3     Modification of the Plan

            The Plan provides that the Debtor reserves the right, in accordance
with the Bankruptcy Code, to amend or to modify the Plan prior to the entry of
the Confirmation Order with the prior consent of the Creditors Committee. The
Plan also provides that after entry of the Confirmation Order, the Reorganized
Debtor or the Debtor may amend or modify the Plan, or remedy any defect or
omission or reconcile any inconsistency in the Plan in such a manner as may be
necessary to carry out the purpose and intent of the Plan.

            4     Governing Law

            The Plan provides that unless a rule of law or procedure is supplied
by Federal law (including the Bankruptcy Code or Bankruptcy Rules) or the
Delaware General Corporation Law, the laws of the State of Delaware (without
reference to the conflicts of laws provisions thereof) will govern the
construction and implementation of the Plan and any agreements, documents and
instruments executed in connection with the Plan.

            5     Filing or Execution of Additional Documents

            The Plan provides that on or before the Effective Date, the Debtor
or the Reorganized Debtor, will file with the Court or execute, as appropriate,
such agreements and other documents as may be necessary or appropriate to
effectuate and further evidence the terms and conditions of the Plan.

                                       47
<PAGE>

            6     Withholding and Reporting Requirements

            The Plan provides that in connection therewith and all instruments
issued in connection therewith and distributions thereon, the Reorganized Debtor
shall comply with all withholding and reporting requirements imposed by any
federal, state, local or foreign taxing authority and all distributions
thereunder will be subject to any such withholding and reporting requirements.

            7     Exemption from Transfer Taxes

            The Plan provides that pursuant to section 1146(c) of the Bankruptcy
Code, the issuance, transfer or exchange of New Common Stock under the Plan, the
making or assignment of any lease or sublease or the making or delivery of any
other instrument whatsoever, in furtherance of or in connection with the Plan
will not be subject to any stamp, real estate transfer, recording or other
similar tax.

            8     Section 1145 Exemption

            Pursuant to, in accordance with, and solely to the extent provided
under section 1145 of the Bankruptcy Code, the issuance of the New Common Stock
to the Debtor's creditors under the Plan is exempt from the registration
requirements of section 5 of the Securities Act, as amended, and any State or
local law requiring registration for offer or sale of a security or registration
or licensing of an issuer of, underwriter of, or broker or dealer in such New
Common Stock and is deemed to be a public offering of New Common Stock.

            9     Waiver of Federal Rule of Civil Procedure 62(a)

            The Debtor may request that the Confirmation Order include (a) a
finding that Fed. R. Civ. P. 62(a) shall not apply to the Confirmation Order and
(b) authorization for the Debtor to consummate the Plan immediately after entry
of the Confirmation Order.

            10    Plan Supplement

            Forms of the documents relating to the Amended Certificate of
Incorporation, the Amended By-laws, investment guidelines referred to in Section
IX.M of the Plan, and the Equity Incentive Plan will be contained in the Plan
Supplement which will be filed with the Clerk of the Court prior to the
Confirmation Hearing. The Plan Supplement may be inspected in the office of the
Clerk of the Court during normal court hours.

                                       48
<PAGE>

            11    Setoff by the United States

            Pursuant to the Plan, the valid setoff rights, if any, of the United
States of America will be unaffected by the Plan or confirmation thereof.

      O.    Executory Contracts and Unexpired Leases

            The Bankruptcy Code grants the Debtor the power, subject to the
approval of the Court, to assume or reject executory contracts and unexpired
leases. If an executory contract or unexpired lease is rejected, the other party
to the agreement may file a claim for damages, if any, incurred by reason of the
rejection. In the case of rejection of leases of real property and employment
agreements, such damage claims are subject to certain limitations imposed by the
Bankruptcy Code.

            Other than (i) executory contacts or unexpired leases which (x) are
the subject of a motion to reject pending on the Confirmation Date, (y) were
previously assumed or rejected by the Debtor, or (z) have expired or terminated
pursuant to their own terms during the pendency of the Chapter 11 Case, and (ii)
employment agreements, if any, terminated prior to or in connection with the
Plan, all of the executory contracts, unexpired leases and employment agreements
that exist between the Debtor and any person are specifically assumed as of the
Effective Date pursuant to the Plan. All Claims for damages arising from the
rejection of executory contracts or unexpired leases must be filed with the
Court in accordance with the terms of the order authorizing such rejection. Any
Claims not filed within such time will be forever barred from assertion against
the Debtor, its estate and the Reorganized Debtor. All Allowed Claims arising
from the rejection of executory contracts or unexpired leases shall be treated
as Class 5 General Unsecured Claims (subject to the claimant's option to have
the claim treated as a Class 4 Convenience Claim; see Section VIII.B.7, "Class 4
-- Convenience Claims," above). The Reorganized Debtor, except as otherwise
agreed by the parties, will cure any and all undisputed defaults within 60 days
of the Effective Date under any executory contract, unexpired lease or
employment agreement assumed pursuant to the Plan in accordance with section 365
of the Bankruptcy Code. All disputed defaults that are required to be cured
shall be cured either within 30 days of the entry of a Final Order determining
the amount, if any, of the liability of the Debtor or the Reorganized Debtor
with respect thereto, or as may otherwise be agreed to by the parties.

      P.    Benefit Plans

            The Plan provides that all employment and severance agreements and
policies, and all employee compensation and benefit plans, policies and programs
of the Debtor applicable generally to its employees, including agreements and
programs

                                       49
<PAGE>

subject to section 1114 of the Bankruptcy Code, as in effect on the Effective
Date, including, without limitation, all savings plans, retirement plans, health
care plans, disability plans, severance benefit plans, incentive plans, and life
accidental death and dismemberment insurance plans, shall be deemed to be, and
shall be treated as though they are, executory contracts that are assumed under
the Plan, and the Debtor's obligations under such agreements and programs shall
survive the Effective Date of the Plan, without prejudice to the Reorganized
Debtor's rights under applicable non- bankruptcy law to modify, amend, or
terminate the foregoing arrangements, except for (i) such executory contracts or
plans specifically rejected pursuant to the Plan (to the extent such rejection
does not violate section 1114 of the Bankruptcy Code) and (ii) such executory
contracts or plans as have previously been terminated, or rejected, pursuant to
a Final Order, or specifically waived by the beneficiaries of such plans,
contracts or programs.

                                       IX.

                       PROJECTIONS AND VALUATION ANALYSIS

            The Debtor and its advisors developed a set of financial projections
(summarized below and in Exhibit D) to assess the value of the Reorganized
Debtor generally, and specifically the value of the New Common Stock to be
distributed to Class 5 under the Plan. The projections and valuations set forth
below and in Exhibit D are based on a number of significant assumptions
including, among other things, the successful reorganization of the Debtor, an
assumed Effective Date of June 1, 2000 and no significant downturn in the
specific markets in which the Debtor operates.

            THE PROJECTIONS ARE BASED UPON A NUMBER OF SIGNIFICANT ASSUMPTIONS.
ACTUAL OPERATING RESULTS AND VALUES MAY VARY.

      A.    Projections

            As a condition to confirmation of a plan, the Bankruptcy Code
requires, among other things, that the Bankruptcy Court determine that
confirmation is not likely to be followed by the liquidation or the need for
further financial reorganization of the debtor. In connection with the
development of the Plan, and for purposes of determining whether the Plan
satisfies this feasibility standard, Loehmann's management has, through the
development of financial projections (the "Projections"), analyzed the ability
of Loehmann's to meet its obligations under the Plan to maintain sufficient
liquidity and capital resources to conduct its business. The

                                       50
<PAGE>

Projections were also prepared to assist each holder of a Claim in Classes 4 and
5 in determining whether to accept or reject the Plan.

            The Projections should be read in conjunction with the assumptions,
qualifications and footnotes to the tables containing the Projections set forth
herein and in Exhibit D, the historical consolidated financial information
(including the notes and schedules thereto) and the other information set forth
in Loehmann's Annual Report on Form 10-K for the fiscal year ended January 30,
1999 and Loehmann's Quarterly Report on Form 10-Q for the period ended October
30, 1999 annexed hereto as Exhibits C and F, respectively, the full texts of
which are incorporated herein by reference. The Projections were prepared in
good faith based upon assumptions believed to be reasonable. The Projections,
which were prepared in March 2000, were based, in part, on economic,
competitive, and general business conditions prevailing at the time. While as of
the date of this Disclosure Statement such conditions have not materially
changed, any future changes in these conditions may materially impact the
ability of Loehmann's to achieve the Projections.

            THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TOWARDS COMPLYING WITH
THE GUIDELINES FOR PROSPECTIVE FINANCIAL STATEMENTS PUBLISHED BY THE AMERICAN
INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS. LOEHMANN'S INDEPENDENT ACCOUNTANT,
ERNST & YOUNG, HAS NEITHER COMPILED NOR EXAMINED THE ACCOMPANYING PROSPECTIVE
FINANCIAL INFORMATION TO DETERMINE THE REASONABLENESS THEREOF AND, ACCORDINGLY,
HAS NOT EXPRESSED AN OPINION OR ANY OTHER FORM OF ASSURANCE WITH RESPECT
THERETO.

            LOEHMANN'S DOES NOT, AS A MATTER OF COURSE, PUBLISH PROJECTIONS OF
ITS ANTICIPATED FINANCIAL POSITION, RESULTS OF OPERATIONS OR CASH FLOWS.
ACCORDINGLY, LOEHMANN'S DOES NOT INTEND TO, AND DISCLAIMS ANY OBLIGATION TO (A)
FURNISH UPDATED PROJECTIONS TO HOLDERS OF CLAIMS OR EQUITY INTERESTS PRIOR TO
THE EFFECTIVE DATE OR TO HOLDERS OF NEW COMMON STOCK OR ANY OTHER PARTY AFTER
THE EFFECTIVE DATE, (B) INCLUDE SUCH UPDATED INFORMATION IN ANY DOCUMENTS THAT
MAY BE REQUIRED TO BE FILED WITH THE SEC, OR (C) OTHERWISE MAKE SUCH UPDATED
INFORMATION PUBLICLY AVAILABLE.

            THE PROJECTIONS PROVIDED IN THE DISCLOSURE STATEMENT HAVE BEEN
PREPARED EXCLUSIVELY BY LOEHMANN'S MANAGEMENT. THESE PROJECTIONS, WHILE
PRESENTED WITH NUMERICAL SPECIFICITY, ARE NECESSARILY BASED ON A VARIETY OF
ESTIMATES AND

                                       51
<PAGE>

ASSUMPTIONS WHICH, THOUGH CONSIDERED REASONABLE BY MANAGEMENT, MAY NOT BE
REALIZED, AND ARE INHERENTLY SUBJECT TO SIGNIFICANT BUSINESS, ECONOMIC AND
COMPETITIVE UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND
LOEHMANN'S' CONTROL. LOEHMANN'S CAUTIONS THAT NO REPRESENTATIONS CAN BE MADE AS
TO THE ACCURACY OF THESE FINANCIAL PROJECTIONS OR TO REORGANIZED LOEHMANN'S'
ABILITY TO ACHIEVE THE PROJECTED RESULTS. SOME ASSUMPTIONS INEVITABLY WILL NOT
MATERIALIZE. FURTHER, EVENTS AND CIRCUMSTANCES OCCURRING SUBSEQUENT TO THE DATE
ON WHICH THESE PROJECTIONS WERE PREPARED MAY BE DIFFERENT FROM ASSUMED OR,
ALTERNATIVELY, MAY HAVE BEEN UNANTICIPATED AND THUS THE OCCURRENCE OF THESE
EVENTS MAY AFFECT FINANCIAL RESULTS IN A MATERIAL AND POSSIBLY ADVERSE MANNER.
THE PROJECTIONS, THEREFORE, MAY NOT BE RELIED UPON AS A GUARANTY OR OTHER
ASSURANCE OF THE ACTUAL RESULTS THAT WILL OCCUR.

            FINALLY, THE PROJECTIONS INCLUDE ASSUMPTIONS AS TO THE ENTERPRISE
VALUE OF REORGANIZED LOEHMANN'S, THE FAIR VALUE OF ITS ASSETS AND ITS ACTUAL
LIABILITIES AS OF THE EFFECTIVE DATE. REORGANIZED LOEHMANN'S WILL BE REQUIRED TO
MAKE SUCH ESTIMATIONS AS OF THE EFFECTIVE DATE. SUCH DETERMINATION WILL BE BASED
UPON THE FAIR VALUES AS OF THAT DATE, WHICH COULD BE MATERIALLY GREATER OR LOWER
THAN THE VALUES ASSUMED IN THE FOREGOING ESTIMATES.

      B.    Valuation

            Two methodologies were used to derive the value of Reorganized
Loehmann's based on the Projections: (i) a comparison of the company and its
projected performance to how the market values comparable companies, and (ii) a
calculation of the present value of the free cash flows under the Projections,
including an assumption for a terminal value.

            The market based approach involves identifying a group of publicly
traded companies whose businesses or product lines are comparable to those of
Loehmann's as a whole or significant portions of the company's operations, and
then calculating ratios of various financial results to the public market values
of these companies. The ranges of ratios derived are then applied to Loehmann's
projected financial results to derive a range of implied values. The discounted
cash flow approach involves deriving the unlevered free cash flows that
Loehmann's would generate assuming the projections were realized. These cash
flows, and an estimated

                                       52
<PAGE>

value of the company at the end of the projected period (the "Terminal Value"),
are discounted to the present at Loehmann's estimated post-restructuring
weighted average cost of capital to determine the company's enterprise value.

            ESTIMATES OF VALUE DO NOT PURPORT TO BE APPRAISALS NOR DO THEY
NECESSARILY REFLECT THE VALUES WHICH MAY BE REALIZED IF ASSETS ARE SOLD. THE
ESTIMATES OF VALUE REPRESENT HYPOTHETICAL REORGANIZED ENTERPRISE VALUES ASSUMING
THE IMPLEMENTATION OF MANAGEMENT'S PROJECTIONS AS WELL AS OTHER SIGNIFICANT
ASSUMPTIONS. SUCH ESTIMATES WERE DEVELOPED SOLELY FOR PURPOSES OF FORMULATING
AND NEGOTIATING A PLAN OF REORGANIZATION AND ANALYZING THE PROJECTED RECOVERIES
THEREUNDER.

            Based upon the methods described above, the estimated enterprise
value for Reorganized Loehmann's is between $95 million and $125 million, with a
midpoint value of $109 million. After deducting the estimated, long-term
indebtedness of Loehmann's at the Effective Date of approximately $35 million,
the estimated total equity value is between $60 million and $90 million, with a
midpoint value of $75 million. Therefore, assuming 5,000,000 shares of New
Common Stock will be issued on the Effective Date, the range of values of New
Common Stock is estimated to be $12.00 to $18.00 per share, with a midpoint
value of $15.00 per share.

            THE ESTIMATED ENTERPRISE VALUE IS HIGHLY DEPENDENT UPON ACHIEVING
THE FUTURE FINANCIAL RESULTS SET FORTH IN THE PROJECTIONS AS WELL AS THE
REALIZATION OF CERTAIN OTHER ASSUMPTIONS WHICH ARE NOT GUARANTEED.

            THE VALUATIONS SET FORTH HEREIN REPRESENT ESTIMATED REORGANIZATION
VALUES AND DO NOT NECESSARILY REFLECT VALUES THAT COULD BE ATTAINABLE IN PUBLIC
OR PRIVATE MARKETS. THE EQUITY VALUE ASCRIBED IN THE ANALYSIS DOES NOT PURPORT
TO BE AN ESTIMATE OF THE POST-REORGANIZATION MARKET VALUE. SUCH TRADING VALUE,
IF ANY, MAY BE MATERIALLY DIFFERENT FROM THE REORGANIZATION EQUITY VALUE RANGES
ASSOCIATED WITH THE VALUATION ANALYSIS.

                                       53
<PAGE>

                                       X.

                      CERTAIN RISK FACTORS TO BE CONSIDERED

            HOLDERS OF CLAIMS AGAINST THE DEBTOR SHOULD READ AND CONSIDER
CAREFULLY THE FACTORS SET FORTH BELOW AS WELL AS THE OTHER INFORMATION SET FORTH
IN THIS DISCLOSURE STATEMENT (AND THE DOCUMENTS DELIVERED TOGETHER HEREWITH
AND/OR INCORPORATED BY REFERENCE), PRIOR TO VOTING TO ACCEPT OR REJECT THE PLAN.
THESE RISK FACTORS SHOULD NOT, HOWEVER, BE REGARDED AS CONSTITUTING THE ONLY
RISKS INVOLVED IN CONNECTION WITH THE PLAN AND ITS IMPLEMENTATION.

            The ultimate recoveries under the Plan to holders of Claims depend
upon the realizable value of the New Common Stock. The securities to be issued
pursuant to the Plan are subject to a number of material risks, including, but
not limited to, those specified below. The factors specified below assume that
the Plan is approved by the Bankruptcy Court and that the Effective Date occurs
on or about June 1, 2000. Although such risk factors are based upon a June 1,
2000 Effective Date, Loehmann's believes that an actual Effective Date later in
the second quarter of Fiscal 2000 would not have any material effect on the risk
factors.

      A.    Projected Financial Information

            The financial projections included in this Disclosure Statement are
dependent upon the successful implementation of the Reorganized Debtor's
business plan and the validity of the other assumptions contained therein. These
projections reflect numerous assumptions, including confirmation and
consummation of the Plan in accordance with its terms, and anticipated future
performance of Loehmann's, retail industry performance, certain assumptions with
respect to competitors of Loehmann's, general business and economic conditions
and other matters, many of which are beyond the control of Loehmann's. In
addition, unanticipated events and circumstances occurring subsequent to the
preparation of the projections may affect the actual financial results of
Loehmann's. Although Loehmann's believes that the projections are reasonably
attainable, variations between the actual financial results and those projected
may occur and be material.

                                       54
<PAGE>

      B.    Ability to Refinance Certain Indebtedness and
            Restrictions Imposed by Indebtedness

            Following the Effective Date of the Plan, the Reorganized Debtor's
working capital borrowings and letters of credit requirements are anticipated to
be funded by a new credit facility (the "New Credit Facility"), a portion of the
proceeds of which will be used to repay in full the DIP Credit Facility. There
can be no assurance that the Reorganized Debtor will be able to obtain such
financing or that such financing may be obtained on acceptable terms.

            The New Credit Facility will restrict, among other things,
Loehmann's' ability to incur additional indebtedness, pay dividends or make
certain other restricted payments, consummate certain asset sales, create liens
on assets, enter into transactions with affiliates, make investments, loans or
advances, consolidate or merge with or into any other person or convey, transfer
or lease all or substantially all of its assets or change the business to be
conducted by Reorganized Loehmann's. In addition, the New Credit Facility may
contain certain other and more restrictive covenants. A breach of any of these
covenants could result in a default under the New Credit Facility. Further, the
restrictions in the New Credit Facility likely will therefore restrict
Loehmann's' ability to obtain additional financing for working capital, capital
expenditures or general corporate purposes. In addition, substantially all of
the assets of Loehmann's will be pledged as security under the New Credit
Facility.

      C.    Competitive Conditions and Need to Fund Future
            Capital Requirements

            The off-price retail apparel business is highly competitive and may
be affected by general economic conditions. The number of competitors and the
degree of competition experienced by Loehmann's' stores vary by location.
Loehmann's competes with several multi-regional and regional off-price retailers
and department stores and other retailers. In addition, in order to continue to
remain competitive over time, Loehmann's will be required to make substantial
capital expenditures to remodel and replace its existing retail stores.
Loehmann's anticipates utilizing its operating cash flow and amounts available
under the New Credit Facility to finance these capital expenditure requirements.

      D.    Significant Holders

            If holders of significant numbers of shares of New Common Stock were
to act as a group, such holders could be in a position to control the outcome of
actions requiring stockholder approval, including the election of directors.
This

                                       55
<PAGE>

concentration of ownership could also facilitate or hinder a negotiated change
of control of the Reorganized Debtor and, consequently, have an impact upon the
value of the New Common Stock.

            Further, the possibility that one or more of the holders of
significant numbers of shares of New Common Stock may determine to sell all or a
large portion of their shares of New Common Stock in a short period of time may
adversely affect the market price of the New Common Stock.

      E.    Lack of Established Market for New Common Stock

            The Debtor shall use its best efforts to cause the New Common Stock
to be listed on a national securities exchange. There can be no assurance that
such an application will be approved.

            The New Common Stock will be issued to holders of Allowed General
Unsecured Claims, some or all of whom may prefer to liquidate their investment
rather than to hold it on a long-term basis. There currently is no trading
market for the New Common Stock nor is it known whether or when one would
develop. Further, there can be no assurance as to the degree of price volatility
in any such market. While the Plan was developed based on an assumed
reorganization value of $15 per share of the New Common Stock (which was
calculated based on the company's mid-point enterprise valuation), such
valuation is not an estimate of the price at which the New Common Stock may
trade in the market. Loehmann's has not attempted to make any such estimate in
connection with the development of the Plan. No assurance can be given as to the
market prices that will prevail following the Effective Date.

      F.    Dividend Policies

            The Debtor does not anticipate paying any dividends on the New
Common Stock in the foreseeable future. In addition, the covenants in certain
debt instruments to which Reorganized Loehmann's will be a party (including the
New Credit Facility) may limit the ability of Loehmann's to pay dividends.
Certain institutional investors may only invest in dividend-paying equity
securities or may operate under other restrictions which may prohibit or limit
their ability to invest in New Common Stock.

                                       56
<PAGE>

      G.    Certain Bankruptcy Law Considerations

            1     Risk of Non-Confirmation of the Plan

            Although Loehmann's believes that the Plan will satisfy all
requirements necessary for confirmation by the Court, there can be no assurance
that the Bankruptcy Court will reach the same conclusion. Moreover, there can be
no assurance that modifications of the Plan will not be required for
confirmation or that such modifications would not necessitate the resolicitation
of votes.

            2     Risk of Non-Occurrence of the Effective Date

            Although Loehmann's believes that the Effective Date may occur as
soon as 10 days after the entry of the Confirmation Order, there can be no
assurance as to such timing or that such conditions will ever occur.

      H.    Certain Tax Matters

            For a summary of certain federal income tax consequences of the Plan
to holders of Claims and to Loehmann's, see Section XVI, "Certain Federal Income
Tax Consequences Of The Plan."

                                       XI.

                             CONFIRMATION PROCEDURE

            Under the Bankruptcy Code, the following steps must be taken to
confirm the Plan:

      A.    Solicitation of Votes

            In accordance with sections 1126 and 1129 of the Bankruptcy Code,
the Claims and Equity Interests in Classes 4, 5 and 6 of the Plan are impaired
and the holders of Allowed Claims in Classes 4 and 5 are entitled to vote to
accept or reject the Plan. Claims in Classes 1, 2 and 3 are unimpaired. The
holders of Allowed Claims in each of such Classes are conclusively presumed to
have accepted the Plan and the solicitation of acceptances with respect to such
Classes therefore is not required under section 1126(f) of the Bankruptcy Code.
As the holders of Class 6 Equity Interests shall receive no distribution under
the Plan, the holders of such claims are presumed to have voted to reject the
Plan and the solicitation of

                                       57
<PAGE>

acceptances with respect to such Class is therefore not required under section
1126(g) of the Bankruptcy Code.

            As to classes of claims entitled to vote on a plan, the Bankruptcy
Code defines acceptance of a plan by a class of creditors as acceptance by
holders of at least two-thirds in dollar amount and more than one-half in number
of the claims of that class that have timely voted to accept or reject a plan.

            A vote may be disregarded if the Court determines, after notice and
a hearing, that acceptance or rejection was not solicited or procured in good
faith or in accordance with the provisions of the Code.

            Any creditor in an impaired Class (i) whose Claim has been listed by
the Debtor in the Debtor's Schedules filed with the Court (provided that such
Claim has not been scheduled as disputed, contingent or unliquidated) or (ii)
who filed a proof of claim on or before November 8, 1999 (or, if not filed by
such date, any proof of claim filed within any other applicable period of
limitations or with leave of the Court), which Claim is not the subject of an
objection or request for estimation, is entitled to vote.

      B.    The Confirmation Hearing

            The Bankruptcy Code requires the Court, after notice, to hold a
confirmation hearing. The Confirmation Hearing in respect of the Plan has been
scheduled for June 27, 2000 at 2:00 p.m., Eastern Time, before the Honorable
Mary F. Walrath at the United States Bankruptcy Court for the District of
Delaware, 824 North Market Street, Wilmington, Delaware 19801. The Confirmation
Hearing may be adjourned from time to time by the Court without further notice
except for an announcement of the adjourned date made at the Confirmation
Hearing. Any objection to confirmation must be made in writing and specify in
detail the name and address of the objector, all grounds for the objection and
the amount of the Claim or number of shares of common stock of the Debtor or
other Interests held by the objector. Any such objection must be filed with the
Court and served so that it is received by the Court and the following parties
on or before June 20, 2000 at 4:00 p.m., Eastern Time:

Paul, Weiss, Rifkind, Wharton & Garrison  Young Conaway Stargatt & Taylor, LLP
Attorneys for the Debtor                  Attorneys for the Debtor
1285 Avenue of the Americas               1110 North Market Street
New York, New York  10019-6064            Rodney Square North, 11th Floor
Attn: Alan W. Kornberg, Esq.              Wilmington, Delaware  19801
      Jeffrey D. Saferstein, Esq.         Attn: Pauline K. Morgan, Esq.

                                       58
<PAGE>

Kronish Lieb Weiner & Hellman LLP         Morris, Nichols, Arsht & Tunnell
Attorneys for the Creditors Committee     Attorneys for the Creditors Committee
1114 Avenue of the Americas               1201 North Market Street
New York, New York  10036-7798            P.O. Box 1347
Attn: Lawrence C. Gottlieb, Esq.          Wilmington, Delaware 19899-1347
      Robert J. Feinstein, Esq.           Attn: Robert J. Dehney, Esq.

Office of the United States Trustee
601 Walnut Street
Curtis Center, Suite 950 West
Philadelphia, Pennsylvania  19106
Attn: John D. McLaughlin, Jr., Esq.

Objections to confirmation of the Plan are governed by Bankruptcy Rule 9014 and
orders of the Bankruptcy Court.

      C.    Confirmation

            At the Confirmation Hearing, the Court will confirm the Plan only if
all of the requirements of section 1129 of the Bankruptcy Code are met. Among
the requirements for confirmation of a plan are that the plan is (i) accepted by
all impaired classes of claims and equity interests or, if rejected by an
impaired class, that the plan "does not discriminate unfairly" and is "fair and
equitable" as to such class, (ii) feasible and (iii) in the "best interests" of
creditors and stockholders that are impaired under the plan.

            1     Acceptance

            Classes 4, 5 and 6 of the Plan are impaired under the Plan. Class 6
is presumed to have rejected the Plan. Classes 1, 2 and 3 of the Plan are
unimpaired and, therefore, are conclusively presumed to have voted to accept the
Plan. Thus, only Classes 4 and 5 can vote to accept or reject the Plan. If Class
4 or 5 rejects the Plan, the Debtor reserves the right to amend the Plan in
accordance with Section IX.C of the Plan or to seek nonconsensual confirmation
of the Plan under section 1129(b) of the Bankruptcy Code, or both, with respect
to Classes 4 and 5.

            2     Unfair Discrimination and Fair and Equitable Tests

            To obtain nonconsensual confirmation of the Plan, it must be
demonstrated to the Court that the Plan "does not discriminate unfairly" and is
"fair and equitable" with respect to each impaired, nonaccepting Class. The
Bankruptcy Code provides a non-exclusive definition of the phrase "fair and
equitable." The

                                       59
<PAGE>

Bankruptcy Code establishes "cram down" tests for unsecured creditors and equity
holders, as follows:

                  (a) Secured Creditors. Either (i) each impaired creditor
retains its liens securing its secured claim and receives on account of its
secured claim deferred cash payments having a present value equal to the amount
of its allowed secured claim, (ii) each impaired secured creditor realizes the
"indubitable equivalent" of its allowed secured claim or (iii) the property
securing the claim is sold free and clear of liens with such liens to attach to
the proceeds of the sale and the treatment of such liens on proceeds to be as
provided in clause (i) or (ii) of this subparagraph.

                  (b) Unsecured Creditors. Either (i) each impaired unsecured
creditor receives or retains under the plan property of a value equal to the
amount of its allowed claim or (ii) the holders of claims and interests that are
junior to the claims of the dissenting class will not receive any property under
the plan.

                  (c) Equity Interests. Either (i) each holder of an equity
interest will receive or retain under the plan property of a value equal to the
greatest of the fixed liquidation preference to which such holder is entitled,
the fixed redemption price to which such holder is entitled or the value of its
interest or (ii) the holder of an interest that is junior to the nonaccepting
class will not receive or retain any property under the plan.

            3     Feasibility

            The Bankruptcy Code permits a plan to be confirmed if it is not
likely to be followed by liquidation or the need for further financial
reorganization. For purposes of determining whether the Plan meets this
requirement, the Debtor has analyzed its ability to meet its obligations under
the Plan. As part of this analysis, the Debtor has prepared projections of its
financial performance for the five fiscal year period ending January 31, 2005
(the "Projection Period"). These projections, and the assumptions on which they
are based, are included in the Projected Financial Information, annexed hereto
as Exhibit D. Based upon such projections, the Debtor believes that it will be
able to make all distributions required pursuant to the Plan and, therefore,
that confirmation of the Plan is not likely to be followed by liquidation or the
need for further reorganization.

            The financial information and projections appended to the Disclosure
Statement include for the Projection Period:

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<PAGE>

            o     Pro-forma Reorganized Loehmann's balance sheet at June 1,
                  2000, including all reorganization and fresh-start
                  adjustments.

            o     Projected balance sheets for fiscal years ending in 2001,
                  2002, 2003, 2004 and 2005.

            o     Projected income statements for fiscal years ending in 2001,
                  2002, 2003, 2004 and 2005.

            o     Projected statements of cash flow for the fiscal years ending
                  in 2001, 2002, 2003, 2004 and 2005.

            The pro forma financial information and the projections are based on
the assumption that the Plan will be confirmed by the Court and, for projection
purposes, that the Effective Date under the Plan will occur on June 1, 2000.
Although the projections and information are based upon a June 1, 2000 Effective
Date, the Debtor believes that an actual Effective Date in the second quarter of
fiscal year 2000 would not have any material effect on the projections.

            The Debtor has prepared these financial projections based upon
certain assumptions that it believes to be reasonable under the circumstances.
Those assumptions considered to be significant are described in the financial
projections, which are annexed hereto as Exhibit D. The financial projections
have not been examined or compiled by independent accountants. The Debtor makes
no representation as to the accuracy of the projections or their ability to
achieve the projected results. Many of the assumptions on which the projections
are based are subject to significant uncertainties. Inevitably, some assumptions
will not materialize and unanticipated events and circumstances may affect the
actual financial results. Therefore, the actual results achieved throughout the
Projection Period may vary from the projected results and the variations may be
material. All holders of Claims that are entitled to vote to accept or reject
the Plan are urged to examine carefully all of the assumptions on which the
financial projections are based in evaluating the Plan.

            4     Best Interests Test

            With respect to each impaired Class of Claims and Equity Interests,
confirmation of the Plan requires that each holder of an Allowed Claim or Equity
Interest either (i) accept the Plan or (ii) receive or retain under the Plan
property of a value, as of the Effective Date, that is not less than the value
such holder would receive or retain if the Debtor was liquidated under chapter 7
of the Bankruptcy Code. To determine what holders of Claims and Equity Interests
of each impaired Class would receive if the Debtor was liquidated under chapter
7, the Bankruptcy

                                       61
<PAGE>

Court must determine the dollar amount that would be generated from the
liquidation of the Debtor's assets and properties in the context of a chapter 7
liquidation case. The Cash amount that would be available for satisfaction of
Claims and Equity Interests would consist of the proceeds resulting from the
disposition of the unencumbered assets and properties of the Debtor, augmented
by the unencumbered Cash held by the Debtor at the time of the commencement of
the liquidation case. Such Cash amount would be reduced by the amount of the
costs and expenses of the liquidation and by such additional administrative and
priority claims that might result from the termination of the Debtor's business
and the use of chapter 7 for the purposes of liquidation.

            The Debtor's costs of liquidation under chapter 7 would include the
fees payable to a chapter 7 trustee, as well as those fees that might be payable
to attorneys and other professionals that such a trustee might engage. In
addition, claims would arise by reason of the breach or rejection of obligations
incurred and leases and executory contracts assumed or entered into by the
Debtor during the pendency of the Chapter 11 Case. The foregoing types of claims
and other claims that might arise in a liquidation case or result from the
pending Chapter 11 Case, including any unpaid expenses incurred by the Debtor
and the Creditors Committee during the Chapter 11 Case such as compensation for
attorneys, financial advisors and accountants, would be paid in full from the
liquidation proceeds before the balance of those proceeds would be made
available to pay prepetition Claims.

            To determine if the Plan is in the best interests of each impaired
class, the present value of the distributions from the proceeds of a liquidation
of the Debtor's unencumbered assets and properties, after subtracting the
amounts attributable to the foregoing claims, are then compared with the value
of the property offered to such Classes of Claims and Equity Interests under the
Plan.

            After considering the effects that a chapter 7 liquidation would
have on the ultimate proceeds available for distribution to creditors in the
Chapter 11 Case, including (i) the increased costs and expenses of a liquidation
under chapter 7 arising from fees payable to a trustee in bankruptcy and
professional advisors to such trustee, (ii) the erosion in value of assets in a
chapter 7 case in the context of the expeditious liquidation required under
chapter 7 and the "forced sale" atmosphere that would prevail and (iii) the
substantial increases in Claims which would be satisfied on a priority basis or
on parity with creditors in the Chapter 11 Case, the Debtor has determined that
confirmation of the Plan will provide each holder of an Allowed Claim or Equity
Interest with a recovery that is not less than such holder would receive
pursuant to liquidation of the Debtor under chapter 7.

                                       62
<PAGE>

            The Debtor also believes that the value of any distributions to each
class of Allowed Claims in a chapter 7 case, including all Secured Claims, would
be less than the value of distributions under the Plan because such
distributions in a chapter 7 case would not occur for a substantial period of
time. It is likely that distribution of the proceeds of the liquidation could be
delayed for two years after the completion of such liquidation in order to
resolve Claims and prepare for distributions. In the likely event litigation
were necessary to resolve Claims asserted in the chapter 7 case, the delay could
be prolonged.

            The Debtor's Liquidation Analysis is attached hereto as Exhibit E.
The information set forth in Exhibit E provides a summary of the liquidation
values of the Debtor's assets, assuming a chapter 7 liquidation in which a
trustee appointed by the Bankruptcy Court would liquidate the assets of the
Debtor's estate. Reference should be made to the Liquidation Analysis for a
complete discussion and presentation of the Liquidation Analysis. The
Liquidation Analysis was prepared by the Debtor with the assistance of
Blackstone.

            Underlying the Liquidation Analysis are a number of estimates and
assumptions that, although developed and considered reasonable by management,
are inherently subject to significant economic and competitive uncertainties and
contingencies beyond the control of the Debtor and its management. The
Liquidation Analysis is also based on assumptions with regard to liquidation
decisions that are subject to change. Accordingly, the values reflected might
not be realized if the Debtor was, in fact, to undergo such a liquidation. The
chapter 7 liquidation period is assumed to be a period of more than one year,
allowing for, among other things, the (i) discontinuation of operations, (ii)
selling of assets and (iii) collection of receivables.

                                      XII.

                            EFFECTIVENESS OF THE PLAN

      A.    Conditions Precedent to Effectiveness

            The Plan shall not become effective unless and until it has been
confirmed and the following conditions have been satisfied in full or waived
pursuant to Section XII.B thereof: (1) the Confirmation Order in a form
satisfactory to the Debtor and the Creditors Committee shall have become a Final
Order; (2) the Amended Certificate of Incorporation shall have been properly
filed with the Secretary of State of the State of Delaware; (3) all
authorizations, consents and regulatory approvals required (if any) for the
Plan's effectiveness shall have been

                                       63
<PAGE>

obtained; and (4) and on the Effective Date, the Reorganized Debtor has entered
into a senior secured New Credit Facility, on terms acceptable to the Creditors
Committee.

      B.    Waiver of Conditions

            The Debtor may waive any or all of the other conditions set forth in
Section XII.A of the Plan, with the prior consent of the Creditors Committee,
without leave of or order of the Court and without any formal action.

      C.    Effect of Failure of Conditions

            In the event that the Effective Date does not occur on or before one
hundred twenty (120) days after the Confirmation Date, upon notification
submitted by the Debtor to the Court: (a) the Confirmation Order shall be
vacated, (b) no distributions under the Plan shall be made, (c) the Debtor and
all holders of Claims and Equity Interests shall be restored to the status quo
ante as of the day immediately preceding the Confirmation Date as though the
Confirmation Date had never occurred, and (d) the Debtor's obligations with
respect to the Claims and Equity Interests shall remain unchanged and nothing
contained in the Plan shall constitute or be deemed a waiver or release of any
Claims or Equity Interests by or against the Debtor or any other person or to
prejudice in any manner the rights of the Debtor or any person in any further
proceedings involving the Debtor.

      D.    Vacatur of Plan

            If an order denying confirmation of the Plan is entered, then the
Plan shall be null and void in all respects, and nothing contained in the Plan
shall (a) constitute a waiver or release of any Claims against or Equity
Interests in the Debtor; (b) prejudice in any manner the rights of the holder of
any Claim against, or Equity Interest in, the Debtor; (c) prejudice in any
manner any right, remedy or claim of the Debtor; or (d) be deemed an admission
against interest by the Debtor.

                                      XIII.

                             SECURITIES LAWS MATTERS

            No registration statement will be filed under the Securities Act of
1933, as amended (the "Securities Act"), or any state securities laws with
respect to the offer and distribution under the Plan of New Common Stock (the
"Plan Securities"). The Debtor believes that the provisions of section
1145(a)(1) exempt the offer and

                                       64
<PAGE>

distribution of the Plan Securities to the Debtor's creditors from federal and
state securities registration requirements.

      A.    Bankruptcy Code Exemptions from Registration Requirements

            1     Initial Offer and Sale of Plan Securities

            Section 1145(a)(1) of the Bankruptcy Code exempts the offer and sale
of securities under a plan of reorganization from registration under the
Securities Act and state laws if three principal requirements are satisfied: (i)
the securities must be offered and sold under a plan of reorganization and must
be securities of the debtor, of an affiliate participating in a joint plan with
the debtor or of a successor to the debtor under the plan; (ii) the recipients
of the securities must each hold a prepetition or administrative expense claim
against the debtor or an interest in the debtor; and (iii) the securities must
be issued entirely in exchange for the recipient's claim against or interest in
the debtor, or principally in such exchange and partly for cash or property.
Loehmann's believes that the offer and sale of the Plan Securities under the
Plan satisfy the requirements of section 1145(a)(1) of the Bankruptcy Code and
are, therefore, exempt from registration under the Securities Act and state
securities laws.

            2     Subsequent Transfers of Plan Securities

            In general, all resales and subsequent transactions in the New
Common Stock will be exempt from registration under the Securities Act pursuant
to section 4(1) of the Securities Act, unless the holder thereof is deemed to be
an "underwriter" with respect to such securities, an "affiliate" of the issuer
of such securities or a "dealer." Section 1145(b) of the Bankruptcy Code defines
four types of "underwriters":

            (i)   persons who purchase a claim against, an interest in or a
                  claim for administrative expense against the debtor with a
                  view to distributing any security received in exchange for
                  such a claim or interest ("accumulators");

            (ii)  persons who offer to sell securities offered under a plan
                  for the holders of such securities ("distributors");

            (iii) persons who offer to buy securities from the holders of such
                  securities, if the offer to buy is (a) with a view to
                  distributing such securities and (b) made under a distribution
                  agreement; and

                                       65
<PAGE>

            (iv)  a person who is an "issuer" with respect to the securities, as
                  the term "issuer" is defined in section 2(11) of the
                  Securities Act.

Under section 2(11) of the Securities Act, an "issuer" includes any "affiliate"
of the issuer, which means any person directly or indirectly through one or more
intermediaries controlling, controlled by or under common control with the
issuer. Under section 2(12) of the Securities Act, a "dealer" is any person who
engages either for all or part of his or her time, directly or indirectly, as
agent, broker or principal, in the business of offering, buying, selling or
otherwise dealing or trading in securities issued by another person. Whether or
not any particular person would be deemed to be an "underwriter" or an
"affiliate" with respect to any Plan Security or to be a "dealer" would depend
upon various facts and circumstances applicable to that person. Accordingly,
Loehmann's expresses no view as to whether any person would be an "underwriter"
or an "affiliate" with respect to any Plan Security or would be a "dealer."

            The SEC has taken the position that resales by accumulators and
distributors of securities distributed under a plan of reorganization who are
not affiliates of the issuer of such securities are exempt from registration
under the Securities Act if effected in "ordinary trading transactions." The
staff of the SEC has indicated in this context that a transaction by such
non-affiliates may be considered an "ordinary trading transaction" if it is made
on an exchange or in the over-the-counter market and does not involve any of the
following factors:

            (i)   (a) concerted action by the recipients of securities issued
                  under a plan in connection with the sale of such securities or
                  (b) concerted action by distributors on behalf of one or more
                  such recipients in connection with such sales;

            (ii)  the use of informational documents concerning the offering of
                  the securities prepared or used to assist in the resale of
                  such securities, other than a bankruptcy court- approved
                  disclosure statement and supplements thereto, and documents
                  filed with the SEC pursuant to the Exchange Act; or

            (iii) the payment of special compensation to brokers and dealers in
                  connection with the sale of such securities designed as a
                  special incentive to the resale of such securities (other than
                  the compensation that would be

                                       66
<PAGE>

                  paid pursuant to arm's-length negotiations between a seller
                  and a broker or dealer, each acting unilaterally, not greater
                  than the compensation that would be paid for a routine
                  similar-sized sale of similar securities of a similar issuer).

The views of the SEC on the matter have not, however, been sought by Loehmann's
and, therefore, no assurance can be given regarding the proper application of
the "ordinary trading transaction" exemption described above. Any person
intending to rely on such exemption is urged to consult his or her counsel as to
the applicability thereof to his or her circumstances.

            Securities Act Rule 144 provides an exemption from registration
under the Securities Act for certain limited public resales of unrestricted
securities by "affiliates" of the issuer of such securities. Rule 144 allows a
holder of unrestricted securities that is an affiliate of the issuer of such
securities to sell, without registration, within any three-month period a number
of shares of such unrestricted securities that does not exceed the greater of
one percent (1%) of the number of outstanding securities in question or the
average weekly trading volume in the securities in question during the four
calendar weeks preceding the date on which notice of such sale was filed
pursuant to Rule 144, subject to the satisfaction of certain other requirements
of Rule 144 regarding the manner of sale, notice requirements and the
availability of current public information regarding the issuer. Loehmann's
believes that, pursuant to section 1145(c) of the Bankruptcy Code, the Plan
Securities will be unrestricted for purposes of Rule 144.

            GIVEN THE COMPLEX NATURE OF THE QUESTION OF WHETHER A PARTICULAR
PERSON MAY BE AN UNDERWRITER, THE DEBTOR MAKES NO REPRESENTATIONS CONCERNING THE
RIGHT OF ANY PERSON TO TRADE IN THE PLAN SECURITIES. THE DEBTOR RECOMMENDS THAT
HOLDERS OF CLAIMS CONSULT THEIR OWN COUNSEL CONCERNING WHETHER THEY MAY FREELY
TRADE SUCH SECURITIES.

            State securities laws generally provide registration exemptions for
subsequent transfers by a bona-fide owner for his or her own account and
subsequent transfers to institutional or accredited investors. Such exemptions
are generally expected to be available for subsequent transfers of New Common
Stock.

            3     Certain Transactions by Stockbrokers

            Under section 1145(a)(4) of the Bankruptcy Code, stockbrokers
effecting transactions in the New Common Stock prior to the expiration of 40
days

                                       67
<PAGE>

after the Confirmation Date are required to deliver to the purchaser of such
securities a copy of this Disclosure Statement (and supplements hereto, if any,
if ordered by the Court) at or before the time of delivery of such securities to
such purchaser. In connection with prior cases under the Bankruptcy Code, the
staff of the SEC has taken so-called "no-action" positions with respect to
noncompliance by stockbrokers with such requirement in circumstances in which
the debtor was, and the reorganized debtor was to continue to be, subject to and
in compliance with the periodic reporting requirements of the Exchange Act.
Loehmann's was and will continue to be subject to the periodic reporting
requirements of the Exchange Act. The views of the SEC on the matter have not,
however, been sought by Loehmann's and, therefore, no assurance can be given
regarding the possible consequences of noncompliance by stockbrokers with the
disclosure statement delivery requirements of section 1145(a)(4). Stockbrokers
are urged to consult their own counsel with respect to such requirements.

                                      XIV.

                              FINANCIAL INFORMATION

      A.    Financial Statements

            The audited consolidated balance sheets of the Debtor for the fiscal
year ended January 30, 1999 and the related consolidated statements of
operations, cash flows and shareholders' equity (deficit) for the 3 years ended
January 30, 1999, are contained in "Financial Statements" in the Annual Report
on Form 10-K, a copy of which is annexed as Exhibit C to this Disclosure
Statement and the full text of which is incorporated herein by reference. This
financial information is provided to permit the holders of Claims and Equity
Interests to better understand the Debtor's historical business performance and
the impact of the Chapter 11 Case on the Debtor's business. During the Chapter
11 Case, the Debtor is required to file monthly operating reports with the
Court. Such financial information is on file with the Court and available to the
public for review.

      B.    Management's Discussion and Analysis of Financial
            Condition and Results of Operations

            For a detailed discussion by management of the Debtor's financial
condition, most recent results of operations, liquidity, and capital resources,
see Item 7 -- "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Annual Report on Form 10-K and the Form 10-Q for
the quarter ended on October 30, 1999, annexed as Exhibits C and F,
respectively, to this Disclosure Statement.

                                       68
<PAGE>

      C.    Recent Performance

            See the Annual Report on Form 10-K for the fiscal year ended January
30, 1999 and the Form 10-Q for the quarter ended on October 30, 1999 annexed as
Exhibits C and F, respectively, to this Disclosure Statement.

                                       XV.

                        ALTERNATIVES TO CONFIRMATION AND
                            CONSUMMATION OF THE PLAN

            If the Plan is not confirmed and consummated, the alternatives to
the Plan include (i) liquidation of the Debtor under chapter 7 of the Bankruptcy
Code and (ii) an alternative plan of reorganization.

      A.    Liquidation Under Chapter 7

            If no plan is confirmed, the Chapter 11 Case may be converted to a
case under chapter 7 of the Bankruptcy Code, pursuant to which a trustee would
be elected to liquidate the Debtor's assets for distribution in accordance with
the priorities established by chapter 7. A discussion of the effects that a
chapter 7 liquidation would have on the recoveries of holders of Claims and
Equity Interests and the Debtor's liquidation analysis are set forth herein. The
Debtor believes that liquidation under chapter 7 would result in smaller
distributions being made to creditors than those provided for in the Plan
because (a) the Debtor's assets would have to be sold or otherwise disposed of
in a forced sale situation over a short period of time, (b) additional
administrative expenses would be involved in the appointment of a trustee, and
(c) additional expenses and claims, some of which would be entitled to priority,
would be generated during the liquidation and from the rejection of leases and
other executory contracts in connection with a cessation of the Debtor's
operations.

      B.    Alternative Plan of Reorganization

            If the Plan is not confirmed, the Debtor (or if the Debtor's
exclusive period in which to file a plan of reorganization has expired, any
other party in interest) could attempt to formulate a different plan. Such a
plan might involve either a reorganization and continuation of the Debtor's
business or an orderly liquidation of its assets. With respect to an alternative
plan, the Debtor has explored various alternatives in connection with the
formulation and development of the Plan. The Debtor believes that the Plan, as
described herein, enables creditors to realize the

                                       69
<PAGE>

most value under the circumstances. In a liquidation under chapter 11, the
Debtor's assets would be sold in an orderly fashion over a more extended period
of time than in a liquidation under chapter 7, possibly resulting in somewhat
greater (but indeterminate) recoveries than would be obtained in chapter 7.
Further, if a trustee were not appointed, because such appointment is not
required in a chapter 11 case, the expenses for professional fees would most
likely be lower than those incurred in a chapter 7 case. Although preferable to
a chapter 7 liquidation, the Debtor believes that any alternative liquidation
under chapter 11 is a much less attractive alternative to creditors than the
Plan because of the greater returns provided by the Plan.

                                      XVI.

               CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN

            The following discussion summarizes certain federal income tax
consequences of the implementation of the Plan to holders of Senior Notes and to
the Debtor. It does not address the federal income tax consequences to holders
whose secured or priority Claims are entitled to reinstatement or payment in
full in cash under the Plan.

            The following summary is based on the Internal Revenue Code of 1986,
as amended (the "Tax Code"), Treasury regulations promulgated and proposed
thereunder, judicial decisions, and published administrative rules and
pronouncements of the IRS in effect on the date hereof. Changes in, or new
interpretations of, such rules may have retroactive effect and could
significantly affect the federal income tax consequences described below.

            The federal income tax consequences of the Plan are complex and are
subject to uncertainties. The Debtor has not requested a ruling from the IRS or
an opinion of counsel with respect to any of the tax aspects of the Plan. Thus,
no assurance can be given as to the interpretation that the IRS will adopt. In
addition, this summary does not address foreign, state or local tax consequences
of the Plan, and it does not purport to address the federal income tax
consequences of the Plan to special classes of taxpayer (such as foreign
taxpayers, broker-dealers, banks, mutual funds, insurance companies, financial
institutions, small business investment companies, regulated investment
companies, tax-exempt organizations and investors in pass-through entities).

            ACCORDINGLY, THE FOLLOWING SUMMARY OF CERTAIN FEDERAL INCOME TAX
CONSEQUENCES IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT A SUBSTITUTE FOR
CAREFUL TAX

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<PAGE>

PLANNING AND ADVICE BASED UPON THE INDIVIDUAL CIRCUMSTANCES OF A HOLDER OF A
CLAIM. EACH HOLDER OF A CLAIM IS URGED TO CONSULT ITS OWN TAX ADVISOR FOR THE
FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES APPLICABLE UNDER THE PLAN.

      A.    Consequences to Creditors

            1     Tax Securities

            The federal income tax consequences of the Plan may vary depending
upon, among other things, whether a holder's Claim being exchanged constitutes a
"security" of the Debtor for federal income tax purposes (a "Tax Security"). The
term "security" is not defined in the Tax Code but is generally understood to
include stock, rights to purchase stock, and debt instruments with a maturity
more than 10 years from the date of issuance, although the determination whether
a particular claim or debt constitutes a Tax Security depends upon an overall
evaluation of the nature of the claim or debt. An instrument with an original
term of as little as 5 years may qualify. Under these principles, the New Common
Stock will be characterized as Tax Securities. However, each holder should
consult its tax advisor regarding the tax status of its Claim or Claims.

            The Tax Security issue arises because the Tax Code's corporate
reorganization provisions generally provide that a holder recognizes no gain or
loss upon exchanging an issuer's Tax Securities for other Tax Securities of such
issuer (except that consideration received for a claim for accrued but unpaid
interest must be included as current income). By contrast, a holder will
recognize gain upon exchanging (i) an issuer's obligations that are not Tax
Securities for Tax Securities of such issuer, or (ii) an issuer's Tax Securities
for obligations of such issuer that are not Tax Securities. See also subsection
A.3 below ("Consequences to Creditors--Claims or Consideration Not Constituting
Tax Securities").

            To the extent a Claim holder's receipt of the New Common Stock is
attributable to accrued interest, the exchanging holder will recognize current
income.

            2     Claims and Consideration Constituting Tax Securities

            In general, each holder of a Claim that constitutes a Tax Security
will not recognize any gain or loss upon implementation of the Plan, but may
recognize gain (computed as described below in Section A.3), to the extent of
any consideration other than Tax Securities issued by the Debtor in satisfaction
of its Claim. The character of any such gain or loss would be determined in
accordance with the principles discussed below in subsection A.3. See also
Section C below ("Additional Tax Considerations for All Holders of Claims").

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            A holder's tax basis in New Common Stock received in satisfaction of
a Claim represented by a Tax Security of the Debtor will be such holder's
adjusted tax basis in such Claim, decreased by the sum of the cash received and
increased by any gain recognized by such holder on the exchange.

            A holder's holding period for New Common Stock received in exchange
for the Debtor's Tax Securities will include such holder's holding period for
the obligations so exchanged, except to the extent the New Common Stock is
issued in respect of such holder's Claim for accrued interest. A holder's
holding period for New Common Stock issued in respect of its Claim for accrued
interest (or in respect of which the holder is otherwise required to recognize
gain) will begin on the day after its issuance.

            3     Claims not Constituting Tax Securities

            If the Senior Notes were not treated as Tax Securities, an exchange
relating to such notes that were not treated as Tax Securities would constitute
a taxable event in which a holder of Senior Notes would generally recognize gain
or loss in an amount equal to the difference between (a) the "amount realized,"
i.e., the cash and/or aggregate fair market value of all property received by
the Claim holder in exchange for its Claim (other than a Claim for interest),
and (b) its adjusted basis in the exchanged debt instruments (exclusive of any
basis attributable to accrued interest).

            The character of any gain or loss recognized as long-term or
short-term capital gain or loss or as ordinary income or loss will be determined
by a number of factors, including the tax status of the holder, whether the
claim constitutes a capital asset in the hand of the holder, whether the claim
has been held for more than twelve months, whether the claim was purchased at a
discount (in which case the market discount rules of the Tax Code may apply to
recharacterize a portion of any gain as ordinary income), and whether and to
what extent the holder has previously claimed a bad debt deduction in respect of
such Claim. Also in this regard, Tax Code section 582(c) provides that the sale
or exchange of a bond, debenture, note, certificate, or other evidence of
indebtedness by certain financial institutions will be considered the sale or
exchange of a non-capital asset. Accordingly, any gain or loss recognized by
such financial institutions as a result of the implementation of the Plan will
be ordinary gain or loss, regardless of the nature of their claims. See also
Section C below ("Additional Tax Considerations for All Holders of Claims").

            A holder's tax basis in any New Common Stock received in a taxable
exchange will be the fair market value thereof included in the holder's amount

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realized on the exchange.  The holding period for the New Common Stock so
received will begin on the day following the exchange.

      B.    Consequences to the Debtor

            The Debtor has reported for federal income tax purposes substantial
consolidated net operating loss ("NOL") carryforwards. In addition, the Debtor
has substantial tax basis in its assets. As discussed below, certain tax
attributes of the Debtor, such as NOLs and tax basis, will be subject to
reduction and limitation as a result of implementing the Plan.

            1     Cancellation of Debt

            In general, the Tax Code provides that a debtor in a bankruptcy case
does not include cancellation of debt ("COD") income in its gross income, but
rather must reduce its tax attributes, to the extent it has such attributes to
reduce, by the amount of COD that otherwise would have been recognized. The
amount of COD is the amount by which the indebtedness discharged exceeds the
consideration for which it is exchanged. A debtor's tax attributes are generally
reduced in the following order until COD is exhausted: NOLs, general business
credits, alternative minimum tax credits, capital losses, the tax basis of its
assets, passive activity losses, credits and foreign tax credits. Losses (and
tax credits) are reduced only after the debtor's tax liability for the current
year is determined (with, in each case, current-year losses being reduced before
any carryforwards from prior years), and tax basis is reduced as of the first
day of the succeeding year. A debtor's tax basis in its assets will not be
reduced below the amount of its liabilities (as defined) outstanding immediately
after the COD is recognized. Any COD remaining after exhausting available tax
attributes is simply forgiven.

            As a result of the reduction of the Debtor's indebtedness pursuant
to the Plan, the Debtor will suffer attribute reduction. The Debtor believes it
will have significant COD. The extent of resulting attribute reduction to the
Debtor will depend, however, primarily upon the amount of its liabilities
outstanding on the Effective Date. The attribute reduction is expected to
eliminate NOL carryforwards that otherwise might be available to the Debtor and
some of the tax basis of the Debtor's long-term assets. This will reduce the
amount of tax depreciation and amortization that the Debtor will be able to
utilize on its tax returns starting in the fiscal year ending February 3, 2001,
and therefore potentially may increase taxes due in future tax periods.

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            2     Alternative Minimum Tax

            In general, an alternative minimum tax ("AMT") is imposed on a
corporation's alternative minimum taxable income ("AMTI") at a 20-percent rate
to the extent such tax exceeds the corporation's regular federal income tax. For
purposes of computing AMTI, certain tax deductions and other beneficial
allowances are modified or eliminated. In particular, even though a corporation
otherwise might be able to offset all its taxable income for regular tax
purposes by available NOL carryforwards, only 90 percent of AMTI may be offset
by available NOL carryforwards (as computed for AMT purposes). Any AMT a
corporation pays will generally be allowed as a nonrefundable credit against its
regular federal income tax liability in future taxable years when the
corporation is no longer subject to AMT.

      C.    Additional Tax Considerations for All Claim Holders

            1     Distributions in Discharge of Accrued Interest

            A Claim holder that receives stock or other property in discharge of
a Claim for interest accrued during the period the holder owned such Claim and
not previously included in such holder's income will be required to recognize
ordinary income equal to the fair market value of the New Common Stock received
in respect of such Claim. A holder generally will recognize a deductible loss
(or, possibly, a write-off against a reserve for bad debts) to the extent any
accrued interest claimed was previously included in its gross income and is not
paid in full by the Debtor. The tax basis of any New Common Stock received in
exchange for Claims for accrued interest will be the fair market value of the
New Common Stock on the day of the exchange. The holding period for such New
Common Stock will begin the day after the exchange.

            Under the Plan, distributions of New Common Stock in respect of
Allowed Claims will be allocated first to the stated principal amount of such
Claims, with any excess allocated to interest. However, there can be no
assurance that the IRS or the courts will respect the Plan allocation for
federal income tax purposes.

            2     Subsequent Sale of New Common Stock

            Any gain recognized by a holder upon a subsequent taxable
disposition of New Common Stock received pursuant to the Plan in satisfaction of
a Claim (or any stock or other property received for them in a later tax-free
exchange) may be treated as ordinary income to the extent of (i) any bad debt
deductions (or additions to a bad debt reserve) previously claimed with respect
to its Claim and any ordinary loss deduction incurred upon satisfaction of its
Claim, less any income (other than interest

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income) recognized by the holder upon satisfaction of its Claim, (ii) with
respect to a cash-basis holder, any amounts that would have been included in its
gross income if the holder's Claim had been satisfied in full but were not
included by reason of the cash method of accounting, and (iii) any accrued
market discount that is assigned to the New Common Stock as discussed in
subsection XVI.C.3. ("Additional Tax Considerations for All Claim
Holders--Market Discount").

            3     Market Discount

            The Treasury Department is expected to promulgate regulations that
will provide that any accrued "market discount" not treated as ordinary income
upon a tax-free exchange of market-discount bonds (generally, bonds acquired for
less than their issue price) would carry over to any nonrecognition property
received in the exchange. If such regulations are promulgated and applicable to
the Plan, any accrued but unrecognized market discount on an exchanged Claim
that constitutes a Tax Security would carry over to any New Common Stock
received pursuant to the Plan. Any gain recognized by a holder upon a subsequent
disposition of such New Common Stock also would be treated as ordinary income to
the extent of any accrued market discount not previously included in such
holder's income. Holders are urged to consult their tax advisors as to the
application of the market discount rules.

            THE FOREGOING FEDERAL INCOME TAX SUMMARY HAS BEEN PROVIDED FOR
INFORMATIONAL PURPOSES ONLY. ALL CREDITORS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES OF THE
PLAN.

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                                      XVII.

                                   CONCLUSION

            The Debtor believes the Plan is in the best interests of all
Creditors and Equity Holders and urges those entitled to vote to accept the
Plan.

Dated: April 24, 2000

LOEHMANN'S, INC.

By: /s/ Robert Glass
    ----------------
    Name:  Robert Glass
    Title: President, Chief Operating Officer

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                      EXHIBITS TO THE DISCLOSURE STATEMENT


A     Proposed Plan of Reorganization
B     Disclosure Statement Order
C     Annual Report on Form 10-K
D     Financial Projections
E     Liquidation Analysis
F     Quarterly Report on Form 10-Q
G     Recovery Analysis

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