Exhibit No. 10.3

# RESTATED EMPLOYMENT
AGREEMENT

Agreement made as of the
3rd day of September, 2004 (referred to herein as the date first set
forth above), between UNITED RETAIL GROUP, INC., a Delaware corporation, with
principal offices at 365 West Passaic Street, Rochelle Park, New Jersey 07662-6563 (the
Company), and KENNETH P. CARROLL, residing at 140 Prospect Avenue, 11J,
Hackensack, New Jersey 07601 (the Executive).

WHEREAS, the Executive has
been employed by the Company and its predecessors for more than 10 years, most recently as
its Senior Vice President  General Counsel pursuant to an Employment Agreement,
dated November 20, 1998, as amended on August 18, 2000, November 29, 2001, December 6,
2002 and September 2, 2003 (as amended, the Original Agreement);

WHEREAS, the Executive is an
attorney admitted to practice before the courts of the State of New York and the United
States District Court for the Southern District of New York and has been employed to
provide advice to the Company on the laws of the State of New York and the federal laws of
the United States and to supervise the representation before courts and legislative and
administrative bodies of the Company and its subsidiaries;

WHEREAS, the Company desires
to continue the professional services of the Executive, and the Executive desires to
continue to provide such services to the Company, on the terms set forth in this
Agreement;

WHEREAS, this Agreement was
reviewed in executive sessions of the Compensation Committee of the Board of Directors on
August 27, 2004 and September 3, 2004 and was recommended at the latter meeting; and

WHEREAS, this Agreement was
reviewed in an executive session of the Companys Board of Directors on August 27,
2004 and approved in an executive session of the Board on September 3, 2004.

NOW, THEREFORE, in
consideration of the mutual covenants and obligations hereinafter set forth, the parties
hereto, intending to be legally bound, hereby agree that the Original Agreement is further
amended and restated effective immediately to read in its entirety as follows:

1.    
          Definitions.

1. Affiliated Companies shall mean, with respect to the Company,  any corporation,  limited
                  partnership, general partnership,  association,  joint-stock company, joint venture, trust, bank,
                  trust company,  land trust,  business trust,  fund or any organized group of persons,  whether or
                  not a legal entity, that is directly or indirectly controlled by the Company.
2. Base Salary shall have the meaning set forth in Section 4(a).
3. Board of Directors shall mean the Board of Directors of the Company.
4. Business of the Company  shall mean the  operation of a retail store chain which markets
                  and sells apparel for women  principally in sizes 14 and larger and any other future  business in
                  which the Company and its  subsidiaries  and Affiliated  Companies engage that produces more than
                  10% of the Company's consolidated sales.
5. By-laws shall mean the Restated By-laws of the Company as currently in force.
6. Cause shall mean the occurrence of one or more of the following events:

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| | (i)    a judgment of  conviction  against the  Executive  or a plea of guilty has been
                           entered  for  any  felony  which  is  both  based  on his  personal  actions  (excluding
                           liability  imputed to him by reason of his  position as an executive of the Company) and
                           involves  common  law  fraud,  embezzlement,  breach  of  duty as a  fiduciary,  willful
                           dishonesty or moral  turpitude  (the entry of a judgment or plea being the only event or
                           circumstance  sufficient to constitute  Cause under this  subparagraph  (i)),  provided,
                           however,  that any felony an essential  element of which is  predicated on the operation
                           of a vehicle shall be deemed not to involve moral turpitude;
| | (ii)    the Executive has been  disbarred by the New York Supreme Court or  permanently
                           barred from practice before the Securities and Exchange Commission ("SEC");                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (iii)    (A) the Executive has willfully and  continuously  failed to perform his duties
                           to the Company in any material  respect or (B) the  Executive has failed in any material
                           respect to follow  specific  directions of the Board of Directors or the Chief Executive
                           Officer in the performance of his duties;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (iv)    the Executive has  demonstrated  willful  misconduct in the  performance of his
                           duties  to the  Company  in any  material  respect  and  material  economic  harm to the
                           Company has resulted; or                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | (v)    there has been a breach in any  material  respect of any of the  provisions  of
                           Section 11;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

provided, however, that the judgment of conviction or a plea of guilty referred to in subparagraph
(i), the disbarment referred to in subparagraph (ii), the failure of performance referred
to in subparagraph (iii), the misconduct referred to in subparagraph (iv) and the breach
referred to in subparagraph (v) shall constitute Cause for a maximum of only 90 days after
the judgment of conviction or plea of guilty was entered, the failure of performance
commenced, the material economic harm resulted, or the breach first took place, as the
case may be.

1. Change of Control shall mean resignation or removal  (including  failure to reelect) for
                  any reason of the Chief Executive Officer of the Company, within 90 days after either:

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| | (i)    the  acquisition  after  August  27,  2004 by any  person  or group  acting in
                           concert of shares of Company  Common  Stock if, after such  acquisition,  such person or
                           group is the beneficial  owner of 30% or more of the Common Stock then  outstanding  but
                           shall not include acquisition by:

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| |  | (A)    the Company;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | (B)    any subsidiary of the Company;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | (C)    any employee  benefit plan of the Company,  or of any subsidiary of the
                                    Company,  or any person or entity  organized,  appointed or  established by the
                                    Company for or pursuant to the terms of any such plan;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | (D)    any  person  who  becomes  the  beneficial  owner of 30% or more of the
                                    shares of Company  Common Stock then  outstanding as a result of a reduction in
                                    the  number of shares of Common  Stock  outstanding  due to the  repurchase  of
                                    shares of Common  Stock by the  Company  unless  and until such  person,  after
                                    becoming aware that such person has become the beneficial  owner of 30% or more
                                    of the then outstanding shares of Common Stock,  acquires beneficial  ownership
                                    of additional  shares of Common Stock  representing 1% or more of the shares of
                                    Common Stock then outstanding;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | (E)    any person who has  reported or is  required  to report such  ownership
                                    (but less than 50%) on Schedule 13G under the Securities  Exchange Act of 1934,
                                    as amended and in effect on the date of this Agreement  (the  "Exchange  Act"),
                                    (or any  comparable or successor  report) or on Schedule 13D under the Exchange
                                    Act (or any  comparable or successor  report) which Schedule 13D does not state
                                    any  intention to or reserve the right to control or influence  the  management
                                    or policies of the Company or engage in any of the actions  specified in Item 4
                                    of such schedule  (other than the  disposition of the Common Stock) and, within
                                    10 business  days of being  requested by the Company to advise it regarding the
                                    same,  certifies  to the  Company  that such person  acquired  shares of Common
                                    Stock in excess of 29.9%  inadvertently  or without  knowledge  of the terms of
                                    the Company's  Stockholder  Rights Plan and who,  together with all affiliates,
                                    thereafter  does not  acquire  additional  shares  of  Common  Stock  while the
                                    beneficial  owner of 30% or more of the  shares of  Company  Common  Stock then
                                    outstanding,  provided,  however,  that if the person  requested  to so certify
                                    fails to do so within  10  business  days,  then such  person  shall  become an
                                    acquiring person immediately after such 10-business-day period;
| |  | (F)    the  Executive,  his  spouse,  any  descendant  of the  parents  of the
                                    Executive,  the  spouse  of  any  such  descendant,  the  estate  of any of the
                                    foregoing  individuals,  any  trust  for  the  primary  benefit  of  any of the
                                    foregoing  individuals  or for  the  primary  benefit  of any of the  foregoing
                                    individuals  and  any  charitable  organization,  any  corporation  or  limited
                                    liability  company  of which all the  shareholders  or  members  are any of the
                                    foregoing individuals,  any charitable  organization  established by any of the
                                    foregoing individuals, Raphael Benaroya or The Benaroya Foundation; or                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  | (G)    any person acting in concert with the Executive;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

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| | (ii)    the  election  of a majority  of the  Directors,  elected at any meeting of the
                           holders of voting  securities  of the Company,  who were not nominated for such election
                           by the Board or a duly constituted committee of the Board; or                                                                                                                                                                                                                                                                                                        
| | (iii)    the  merger  or  consolidation  of the  Company  with  another  person,  or the
                           transfer  to one or  more  persons  in a  single  transaction  or a  related  series  of
                           transactions  of  substantially  all of the assets of the  Company,  unless,  before the
                           Company  enters into any  agreement  for such merger,  consolidation  or  transfer,  the
                           Executive  sends the Company a written  consent  determining  that it is not a Change of
                           Control.

1. Company Car shall have the meaning set forth in Section 6(b).
2. Contract Term shall mean the period of time  commencing  November 20, 1998 and ending on
                  the fifth  anniversary  of the date first set forth  above or such later date as may be  mutually
                  agreed upon by the Company and the  Executive.  (For the  avoidance  of doubt,  Contract  Term as
                  used herein may extend beyond the termination of Executive's employment under this Agreement.)
3. CPI shall have the meaning set forth in Section 4(a).
4. Cure Period shall have the meaning set forth in Section 14(b).
5. Group Benefits shall have the meaning set forth in Section 6(a).
6. Incentive  Compensation  Participation shall mean 40% of Base Salary,  without regard to
                  whether any payment  actually  shall have been made under the  Company's  incentive  compensation
                  program.  (For  example,  as of the date  first  set  forth  above,  the  Incentive  Compensation
                  Participation was $119,200.)
7. Options shall mean employee  stock options under a benefit plan or  arrangement  between
                  the Company and the  Executive,  including  those which may be granted  during the Contract Term,
                  held by the Executive or his assigns or donees.
8. Performance Bonus shall have the meaning set forth in Section 4(b).
9. Permanent  Disability  shall mean the  inability of the  Executive to perform his duties
                  and  responsibilities  to the Company by reason of a physical or mental  disability  or infirmity
                  (i) for a  continuous  period  of at  least  four  months  or (ii)  at such  earlier  time as the
                  Executive  submits  medical  evidence  satisfactory  to the  Company  that  the  Executive  has a
                  physical  or mental  disability  or  infirmity  that will likely  prevent him from  substantially
                  performing  his  duties  and  responsibilities  for  four  months  or  longer  (the  date of such
                  Permanent  Disability  shall be on the earlier of the last day of such  four-month  period or the
                  day on which the Executive submits such evidence, as the case may be).
10. Protected   Information   shall  mean  trade   secrets,   confidential   or  proprietary
                  information,  and all other knowledge,  know-how,  information,  documents or materials, owned or
                  developed by the Company,  or otherwise in the possession of the Company,  whether in tangible or
                  intangible  form,  pertaining to the Business of the Company,  the  confidentiality  of which the
                  Company  takes  reasonable  measures to  protect,  including,  but not limited to, the  Company's
                  research and  development,  store  operating  results,  identities  and habits of  customers  and
                  prospective  customers,  suppliers,  business  relationships,  products (including prices, costs,
                  sales  or  content),  processes,  techniques,  machinery,  contracts,  financial  information  or
                  measures,  business  methods,  future business plans,  data bases,  computer  programs,  designs,
                  models,  operating  procedures,  knowledge  of the  organization,  and other  information  owned,
                  developed or possessed by the Company;  provided,  however,  that Protected Information shall not
                  include  information  that  shall  become  generally  known to the  public or the  trade  without
                  violation of Section 11.
11. Resignation Compensation shall have the meaning set forth in Section 14(e).
12. Severance Pay shall have the meaning set forth in Section 14(b).
13. Short Term  Disability  shall  mean the  inability  of the  Executive  to  substantially
                  perform  his  duties  and  responsibilities  to the  Company  by reason of a  physical  or mental
                  disability or infirmity for a continuous period of less than four months.
14. Successor shall have the meaning set forth in Section 20.
15. Tax shall  mean all taxes on  income,  which  shall be  assumed to be at a rate equal to
                  the sum of the highest  marginal rates,  including any applicable  surcharges,  of federal income
                  tax, state income tax, local income tax,  Medicare  payroll tax and any similar income or payroll
                  tax for a  married  citizen  filing a joint  return  from the  Executive's  residence,  as now in
                  effect or as amended from time to time.
16. Termination Without Cause shall have the meaning set forth in Section 14(b).
17. Unauthorized   shall  mean:  (i)  in   contravention   of  the  Company's   policies  or
                  procedures;  (ii) otherwise  inconsistent with the Company's measures to protect its interests in
                  its Protected Information; or (iii) in contravention of any duty existing under law or contract.

2.    Term; and Location.

1. The  Company  hereby  employs the  Executive,  and the  Executive  hereby  accepts  such
                  employment,  in the capacities and upon the terms and conditions  hereinafter  set forth,  during
                  the Contract Term.
2. In no event  shall  the  Executive's  office be  relocated  without  his  prior  written
                  consent.

3.    Duties.

1. During the  Contract  Term,  the  Executive  shall serve as the Senior Vice  President -
                  General  Counsel of the Company.  In such  capacity,  the Executive  shall (i) provide  advice on
                  the laws of the State of New York and the federal laws of the United  States,  (ii) supervise the
                  representation  before courts and  legislative and  administrative  bodies of the Company and its
                  subsidiaries,  (iii)  engage and approve the fees of all  attorneys  who  represent or advise the
                  Company or a subsidiary of the Company,  (iv) approve the form of all material  contracts entered
                  into by the Company or one of its subsidiaries,  and (vi) perform such other professional  duties
                  as may be determined  and assigned to the  Executive  from time to time by the Board of Directors
                  and  the  Chief  Executive  Officer.  Notwithstanding  the  above,  the  Executive  shall  not be
                  required  to  perform  any  duties  and  responsibilities  which  would be  likely to result in a
                  non-compliance  with or violation of any  applicable  law or regulation or canon of legal ethics.
                  The Executive shall report solely and directly to the Chief Executive Officer.
2. The  Executive   accepts  such  employment  and  hereby  agrees  to  serve  the  Company
                  faithfully,  industriously  and to the best of his  ability in such  capacities,  with  undivided
                  loyalty,  devoting  substantially  all of his business  time,  attention,  knowledge,  energy and
                  skills to such  employment  except  during  vacation  not to exceed  three weeks in any  12-month
                  period and except as otherwise  provided in the following  sentence.  However,  the Executive may
                  engage in overseeing  personal and family  investments  in a manner in which the  Executive  does
                  not actively operate portfolio companies in the ordinary course of business.

4.    Compensation.

1. As  compensation  to the Executive for  performance of the services  required  hereunder
                  and as  consideration  for his  execution and delivery of this  Agreement,  the Company shall pay
                  him (subject to Sections 7 and 14),  and the  Executive  agrees to accept a base salary,  payable
                  in  accordance  with  the  regular  executive  payroll  practices  of the  Company,  at a rate of
                  $298,000 per annum  during the period  ending on January 31, 2005 and  thereafter  at such higher
                  rate as may be  determined  by the Board of Directors  upon  recommendation  of the  Compensation
                  Committee of the Board of Directors,  but in any event base salary shall  increase as of February
                  1, 2005 by a percentage at least equal to the increase,  if any, in the Consumer  Price Index for
                  All Urban  Consumers  for New York and  Northern  New  Jersey  published  by the  Bureau of Labor
                  Statistics of the  Department  of Labor  ("CPI")  during the year ending on December 31, 2004 and
                  shall  increase as of each  anniversary  of February  1, 2005 by a  percentage  at least equal to
                  the annual  increase,  if any, in the CPI at the time (as increased from time to time and whether
                  or not deferred, the "Base Salary").
2. The Executive  shall continue to be eligible to receive,  and the Company shall continue
                  to pay, a semi-annual  cash incentive  compensation  payment  ("Performance  Bonus") based on the
                  Company's  consolidated  operating income for the six-month  periods ending January 31st and July
                  31st,  respectively.  The Executive's  participation  percentage  shall be 40% with a semi-annual
                  award  ranging from zero to 80% of Base Salary for the six-month  period in  accordance  with the
                  Summary Plan  Description  for United  Retail  Group,  Inc.  Incentive  Compensation  Program for
                  Executives as of the date first set forth above,  provided,  however,  that the Performance Bonus
                  shall be earned and fully vested in the  Executive  as of January 31st or July 31st,  as the case
                  may be, whether or not the Executive  shall remain in the Company's  employ after the Performance
                  Bonus shall have vested and provided,  further,  that the Performance  Bonus shall be paid to the
                  Executive  as soon as  practicable  after the  consolidated  operating  income  for the period in
                  question shall be determined.

5.    Expenses.

The Executive will continue to be
required to incur reasonable and necessary travel, business entertainment and other business expenses. The Company shall reimburse the
Executive for all reasonable and necessary travel, business entertainment and other
business expenses incurred or expended by the Executive incident to the performance of the
Executives duties hereunder, upon submission by the Executive to the Company of
vouchers or expense statements satisfactorily evidencing such expenses.

6.    Executive Benefits.

1. The Company shall provide the Executive  with benefits  ("Group  Benefits"),  taken as a
                  whole,  that are at least equal to those  provided by the Company to the other senior  executives
                  of the Company as of the date first set forth above including,  without limitation,  availability
                  of enhanced group disability  insurance  benefits (or, if the group  disability  insurance policy
                  can not be  continued  in force,  the Company  shall make  available  other  disability  benefits
                  equivalent to the benefits  under the group  policy).  The  Executive  shall be entitled to three
                  weeks'  vacation and two personal  days with pay at any time during the year after the date first
                  set forth above and each 12 months thereafter.
2. The Company shall provide the Executive  perquisites  in accordance  with past practice,
                  including,  without  limitation,  exclusive use of a full size sedan (the "Company  Car") free of
                  charge for business and personal travel.
3. Group  Benefits  and the Company Car shall be provided  while the  Executive is employed
                  under this Agreement and thereafter as provided pursuant to the terms of this Agreement.
4. All Options shall be fully vested and immediately  exercisable after either  Termination
                  Without  Cause or a Change  of  Control,  anything  in any stock  option  agreement  between  the
                  Company and the Executive to the contrary  notwithstanding.  In the event of Termination  Without
                  Cause,  Options  shall be  exercisable  for the lesser of 90 days  thereafter or the remainder of
                  the term of the Option.  In the event of Change of Control,  Options shall be  exercisable  until
                  the earlier of 90 days after the termination of the Executive's  employment  hereunder (including
                  resignation) or the expiration of the term of the Option.

7.    Permanent Disability; Death.

1. In the event of the  Permanent  Disability of the  Executive  during the Contract  Term,
                  the Board of Directors shall,  upon written notice to the Executive,  have the right to terminate
                  the Executive's employment hereunder by reason of Permanent Disability.
2. In the event of the death of the  Executive  during the Contract  Term,  this  Agreement
                  shall automatically terminate.

8.    Benefits Upon Death or Disability.

In the event of the  Executive's  death or a termination  of the Executives employment by the Company due to Permanent Disability, the Executive, his
executor or his heirs at law, as the case may be, shall be entitled to:

1. any Base Salary accrued or any Performance Bonus vested but not yet paid;
2. a pro rata  Performance  Bonus for the  season in which  death or  Permanent  Disability
                  occurs  determined  and payable on the basis of the number of days  worked  during the season and
                  the bonus percentage established for the season;
3. any accrued vacation pay;
4. reimbursement  for  expenses  incurred but not yet paid prior to such death or Permanent
                  Disability;
5. any other  compensation  and  benefits as may be provided in  accordance  with the terms
                  and provisions of the Group Benefits or of this Agreement; and
6. in the case of  Permanent  Disability,  for five years  following  the date of Permanent
                  Disability,  first, COBRA health insurance benefits,  including supplemental executive preventive
                  medicine and wellness  benefits,  for the Executive and his  dependents at the Company's  expense
                  until the COBRA benefits  expire and,  thereafter,  for the remainder of such  five-year  period,
                  equivalent reimbursement of healthcare expenses directly by the Company.

The provisions of this Section 8
shall survive the termination of the Executives employment hereunder.

9.    Representation, Warranty and Covenant of Executive.

The Executive represents, warrants and covenants to the Company that he is not and will not
become a party to any agreement, contract or understanding, whether employment or
otherwise, which would in any way restrict or prohibit him from undertaking or performing
his employment in accordance with the terms and conditions of this Agreement.

10.    Representation, Warranty and Covenant of the Company.

1. The  Company  represents  and  warrants  that  this  Agreement  constitutes  a valid and
                  legally  binding  obligation of the Company  enforceable in accordance  with the terms herein set
                  forth,  except to the  extent  that the  enforceability  of this  Agreement  may be  affected  by
                  bankruptcy,  insolvency,  reorganization,  moratorium,  or similar laws or  equitable  principles
                  affecting creditors' rights generally.
2. The  Company  covenants  that it shall give  notice  promptly  to the  Executive  of the
                  occurrence of Change of Control pursuant to Section 21.
3. The  provisions  of this Section 10 shall  survive the  termination  of the  Executive's
                  employment hereunder, irrespective of the reason therefor.

11.    Restrictive Covenants and Confidentiality.

1. The Executive shall not:

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| | (i)    solicit,  raid,  entice,  encourage or induce any person,  firm or  corporation
                           that  at any  time  within  one  year  prior  to  the  termination  of  the  Executive's
                           employment  hereunder  shall have been an exclusive  supplier to the Company,  or any of
                           its  subsidiaries  or  Affiliated  Companies,  to become a supplier to any other person,
                           firm or  corporation  that derives more than 10% of its sales,  directly or  indirectly,
                           from a business  the same as the  Business of the Company  and the  Executive  shall not
                           approach  any  such  person,  firm or  corporation  for such  purpose  or  authorize  or
                           knowingly  approve the taking of such actions by any other person,  firm or  corporation
                           or assist any such person, firm or corporation in taking such action; or
| | (ii)    solicit,  raid,  entice,  encourage or induce any person who at any time within
                           one year  prior to the  termination  of the  Executive's  employment  shall have been an
                           employee of the Company, or any of its subsidiaries or Affiliated  Companies,  to become
                           employed by any person,  firm or  corporation,  and the Executive shall not approach any
                           such  employee for such  purpose or  authorize  or knowingly  approve the taking of such
                           actions by any other  person,  firm or  corporation  or assist any such person,  firm or
                           corporation in taking such action.                                                                                                                                                                                                                                                                             

1. During the  Contract  Term and  thereafter,  the  Executive  will not use,  disclose  or
                  divulge,   furnish  or  make  accessible  to  anyone,  directly  or  indirectly,   any  Protected
                  Information in any Unauthorized manner or for any Unauthorized purpose,  provided,  however, that
                  in the event that the  Executive  is required  to disclose  any  Protected  Information  by court
                  order or decree or in compliance  with the rules and  regulations of a governmental  agency or in
                  compliance  with law, the Executive  will provide the Company with prompt notice of such required
                  disclosure  so that the  Company  may seek an  appropriate  protective  order  and/or  waive  the
                  Executive's  compliance  with the provisions of this Section 11 and provided,  further,  that if,
                  in the absence of a  protective  order or the receipt of a waiver  hereunder,  the  Executive  is
                  advised by his  counsel  that such  disclosure  is  necessary  to comply  with such court  order,
                  decree, rules, regulation or law, he may disclose such information without liability hereunder.
2. The  Executive  agrees that all  processes,  techniques,  know-how,  inventions,  plans,
                  products,  and devices  developed,  made or invented  by the  Executive,  alone or with others in
                  connection  with the Executive's  employment  hereunder,  during the Contract Term,  shall become
                  and be the sole property of the Company unless released in writing by the Company.
3. The Executive agrees that the Executive shall not, directly or indirectly, within any
                  area  in the  United  States  or  elsewhere  where  the  Company  or any of its  subsidiaries  or
                  Affiliated  Companies is transacting  business during the Contract Term, engage or participate or
                  make any  financial  investments  in or  become  employed  by,  or act as an  attorney,  agent or
                  principal of, or render  advisory or other  services to or for any person,  firm or  corporation,
                  or  in  connection  with  any  business  activity  (other  than  that  of  the  Company  and  its
                  subsidiaries  or  Affiliated  Companies),  that derives  more than 10% of its sales,  directly or
                  indirectly,  from a business the same as the Business of the Company.  Nothing herein  contained,
                  however,   shall  restrict  the  Executive  from  overseeing  personal  and  family  investments,
                  including  any  investments  in not more than 3% of the voting  securities  in any company  whose
                  stock is listed on a national  securities  exchange  or actively  traded in the  over-the-counter
                  market,  so long as in connection with such  investments the Executive does not actively  operate
                  any  such  business  or  enterprise  that  derives  more  than  10% of  its  sales,  directly  or
                  indirectly,  from a business  the same as the  Business of the  Company.  The  Executive  further
                  agrees that the Executive  shall not act as trial counsel for any party in a lawsuit  against the
                  Company  or any of  its  subsidiaries  or  Affiliated  Companies,  provided,  however,  that  the
                  Executive shall be permitted to appear pro se.
4. The  Executive  shall be bound by the  provisions  of Section  11(a) and (d),  and shall
                  perform his  obligations  pursuant to Section 11(a) and (d),  during the Contract Term and for 18
                  months  thereafter,  provided,  however,  that in the event of  Termination  Without  Cause,  the
                  Executive  shall be bound by the  provisions  of Section  11(a) and (d),  and shall  perform  his
                  obligations  pursuant to Section  11(a) and (d),  only in the event that the Company  shall remit
                  his  Severance  Pay strictly in  accordance  with the  provisions  of Section 14(c) and provided,
                  further,  that in the event of  resignation  by the Executive in accordance  with Section  14(d),
                  the  Executive  shall be bound by the  provisions of Section 11(a) and (d), and shall perform his
                  obligations  pursuant to Section  11(a) and (d),  only in the event that the Company  shall remit
                  his Resignation Compensation within 15 days after his resignation, time being of the essence.
5. The  provisions  of this Section 11 shall  survive the  termination  of the  Executive's
                  employment hereunder, irrespective of the reason therefor.
6. The  Executive  acknowledges  that the services to be rendered by the Executive are of a
                  special,  unique  and  extraordinary  character  and,  in  connection  with  such  services,  the
                  Executive  will  have  access  to  confidential  information  vital  to  the  Company's  and  its
                  subsidiaries  and Affiliated  Companies'  businesses.  By reason of this, the Executive  consents
                  and agrees that if the Executive  violates any of the  provisions of this Section 11, the Company
                  and its subsidiaries and Affiliated  Companies would sustain irreparable harm, and therefore,  in
                  addition to any other  remedies  which the Company may have under this  Agreement  or  otherwise,
                  the  Company  shall be  entitled  to an  injunction  from any  court  of  competent  jurisdiction
                  restraining  the Executive  from  committing or continuing any such violation of this Section 11.
                  The Executive  acknowledges  that damages at law would not be an adequate remedy for violation of
                  this Section 11, and the Executive  therefore  agrees that the  provisions of this Section 11 may
                  be specifically  enforced against the Executive in any court of competent  jurisdiction.  Nothing
                  herein shall be construed as prohibiting  the Company from pursuing any other remedies  available
                  to the Company for such breach or threatened  breach,  including the recovery of damages from the
                  Executive.

12.    Deductions and Withholding.

The Executive agrees that the Company
shall withhold from any and all compensation required to be paid to the Executive pursuant to this Agreement all Federal,
state, local and/or other taxes which the Company determines are required to be withheld
in accordance with applicable statues and/or regulations from time to time in effect.

13.    Mutual Non-Disparagement.

Neither the  Executive  nor the Company  will make or  authorize  any public
statement disparaging the other in its or his business interests and affairs.
Notwithstanding the foregoing, neither party shall be (i) required to make any statement
which it or he believes to be false or inaccurate, or (ii) restricted in connection with
any litigation, arbitration or similar proceeding or with respect to its response to any
legal process. The provisions of this Section 13 shall survive the termination of the
Executives employment hereunder, irrespective of the reason therefor.

14.    Termination.

1. For purposes of this  Agreement,  removal of the  Executive  from office shall be deemed
                  to be for  "Cause" as  defined in Section  1(f) only if the  Company  delivers  to the  Executive
                  within  a  reasonable  time  before  the  removal  of the  Executive  from  office  a  notice  of
                  termination  for Cause  specifying  in reasonable  detail the  conviction,  plea, or  disbarment,
                  material  failure,  misconduct and economic harm or breach by the Executive that is the basis for
                  termination  and the  Executive  shall have  failed  prior to his  removal to correct  the stated
                  failure,   misconduct  and  economic  harm  or  breach  in  all  material  respects.  Short  Term
                  Disability shall not be a basis for removal of the Executive from office.
2. In the event:

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)    the Company terminates the Executive's  employment under this Agreement without
                           Cause;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | (ii)    the Company  terminates  the  Executive's  employment  under this Agreement for
                           Cause by reason of a  conviction  or  disbarment  that is later  reversed  on appeal and
                           fails to reinstate him with full back pay and uninterrupted Group Benefits; or                                                                                                                                                                                                                                                                                                                                                                  
| | (iii)    (A) the Company  breaches  any of the  covenants  and  agreements  set forth in
                           Sections  2(b),  3(a), 4, 5, 6, 15 (a) or (c), or 20(c) in any material  respect and (B)
                           the Executive  tenders to the Company a letter of resignation  specifying such breach or
                           election  in  reasonable  detail  and  demanding   Severance  Pay  (any  termination  or
                           resignation  under the  circumstances  referred to in clauses  (i)  through  (iii) above
                           being referred to as "Termination Without Cause" whether or not Cause shall exist);

then the Company shall pay the Executive an amount equal to the product of three times the sum
of (A) the annual Base Salary at the rate payable immediately prior to termination, plus
(B) the Incentive Compensation Participation (Severance Pay). For example, on
the date first set forth above, Severance Pay is $1,251,600. No demand or other notice
from the Executive with respect to Severance Pay shall be necessary except in connection
with clause (iii) of the preceding sentence. Anything in clause (iii) of the penultimate
sentence to the contrary notwithstanding, the Executive shall not be entitled to Severance
Pay, and the Company shall have no obligation to pay Severance Pay, if:

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)    within  15 days  after  the  delivery  of a letter of  resignation  (the  "Cure
                           Period"),  the  Company  shall  cure the  Company's  breach  specified  in the letter of
                           resignation  in all material  respects (or shall begin in good faith to cure a breach of
                           a nature that  requires  more than 15 days to cure in all material  respects)  and shall
                           deliver to the Executive a notice to that effect;
| | (ii)    during  the Cure  Period  the Chief  Executive  Officer  of the  Company  shall
                           request in writing that the Executive withdraw his letter of resignation; and                                                                                                                                                                                                                                                                                                                               
| | (iii)    the Company shall  deliver or send to the  Executive  during the Cure Period in
                           accordance  with Section 21 a written offer to reinstate  the  Executive  with full back
                           pay  and  uninterrupted   Group  Benefits  and  other  benefits  under  this  Agreement,
                           including eligibility for a Performance Bonus.                                                                                                                     

1. Severance Pay shall be remitted as follows:

| |                                                                                                                                                                                                                                                    
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)    pursuant to clause (i) of the first sentence of Section  14(b),  within 15 days
                           following the termination of the Executive's employment under this Agreement;                                                    
| | (ii)    pursuant to clause (ii) of the first sentence of Section 14(b),  within 15 days
                           after  notice  requesting  reinstatement  with  full  back pay and  uninterrupted  Group
                           Benefits; or
| | (iii)    pursuant  to clause  (iii) of the first  sentence of Section  14(b),  within 15
                           days after the end of the Cure Period.                                                                                         

No grace period shall be allowed for
remittance of Severance Pay, time being of the essence.

1. In the event  (i) a Change of  Control  occurs  on a day at the  beginning  of which the
                  Executive is an employee of the Company,  and (ii) the  Executive  within 10 business  days after
                  first  receiving  notice  from  the  Company  of the  Change  of  Control  tenders  a  letter  of
                  resignation  to the  Company  specifying  such Change of Control  (whether  or not the  Executive
                  shall be an  employee  of the  Company  during the period  between  the end of the day  preceding
                  Change of Control and the tender of such  letter) and  demanding  Resignation  Compensation,  the
                  Company shall pay the Executive  immediately  after the  resignation of the Executive under this Section 14(d),
                  an amount  equal to three times the annual Base Salary at the rate payable  immediately  prior to
                  resignation  ("Resignation  Compensation").  No grace period shall be allowed for  remittance  of
                  Resignation  Compensation,  time  being of the  essence.  Notice of Change  of  Control  shall be
                  given to the  Executive  by the  Company  pursuant  to Section 21,  provided,  however,  that the
                  Executive,  in his discretion,  may accept as notice filing with the SEC of reports setting forth
                  facts that, taken together, constitute Change of Control.
2. In  the  event  of  Termination  Without  Cause  or  resignation  by  the  Executive  in
                  accordance with Section 14(d):

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)    the Executive  shall be under no obligation to seek other  employment and there
                           shall be no offset  against  any  amounts  due the  Executive  under this  Agreement  on
                           account  of  any  remuneration  attributable  to  any  subsequent  employment  that  the
                           Executive may obtain  (Severance  Pay or  Resignation  Compensation  is in the nature of
                           liquidated damages and not in the nature of a penalty); and
| | (ii)    even though no longer in the Company's employ,  the Executive shall be entitled
                           to the following benefits and additional payments:                                                                                                                                                                                                                                                                                                                                                                    

| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | (A)    any Base Salary accrued or Performance Bonus vested but not yet paid;                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | (B)    a pro rata  Performance  Bonus for the  season in which  employment  is
                                    terminated  determined  and  payable on the basis of the number of days  worked
                                    during the season and the bonus percentage established for the season;                                                                                                                                                                                                                              
| |  | (C)    any accrued vacation pay;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | (D)    reimbursement  for  expenses  incurred,  but  not  paid  prior  to such
                                    termination of employment;                                                                                                                                                                                                                                                                                                                                                                                              
| |  | (E)    COBRA health  insurance  benefits,  including  supplemental  executive
                                    preventive   medicine  and  wellness  benefits,   for  the  Executive  and  his
                                    dependents  at the  Company's  expense  until the COBRA  benefits  expire  and,
                                    thereafter,  through the  remainder,  if any, of the Contract  Term  equivalent
                                    reimbursement of healthcare expenses directly by the Company;
| |  | (F)    conversion at the Company's  expense  through the remainder of the Contract
                                    Term of the group life insurance coverage on the Executive's life;                                                                                                                                                                                                                                                                                                                                                  
| |  | (G)    payment  to the  Executive  by  April  14th of each  year of an  amount
                                    equal to the Tax with  respect  to the  payments  made to or on  behalf  of the
                                    Executive  pursuant  to clauses (E) and (F) of this  sentence in the  preceding
                                    calendar year; and                                                                                                                                                              
| |  | (H)    use of the  Company  Car free of  charge  for  three  years  after  the
                                    Termination Without Cause or resignation by the Executive occurs.                                                                                                                                                                                                                                                                                                                                                       

1. If the Company  terminates  the  Executive's  employment  hereunder for Cause (except as
                  provided in clause (ii) of the first  sentence of Section  14(b)),  or in the event the Executive
                  resigns  (except  as  provided  in clause  (iii) of the first  sentence  of  Section  14(b) or in
                  14(d)), the Executive shall be entitled to:

| |                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i)    any Base Salary accrued and any Performance Bonus vested but not paid;                                                                                                                                                                   
| | (ii)    any accrued vacation pay;                                                                                                                                                                                                               
| | (iii)    reimbursement  for  expenses   incurred,   but  not  yet  paid  prior  to  such
                           termination of employment; and                                                                                              
| | (iv)    any other  compensation  and benefits  that  accrued  prior to  termination  of
                           employment as may be provided in accordance  with the terms and  provisions of the Group
                           Benefits.

1. In the event  the  Company  removes  the  Executive  from  office,  and  terminates  the
                  Executive's  employment  under  this  Agreement,  or in the  event  the  Executive  resigns,  the
                  Executive  shall  continue  to have the  obligations  provided  for in  Section  11  hereof.  The
                  provisions  of this  Section 14 shall  survive  the  termination  of the  Executive's  employment
                  hereunder, irrespective of the reason therefor.
2. The  Executive  shall accept the payments  referred to in this Section 14 as  liquidated
                  damages  in  full  discharge  and  release  of  the  Company  of and  from  any  further  payment
                  obligations under this Agreement except obligations under Sections 15 and 16.
3. Every  payment made  hereunder by authority of the  Executive  Committee of the Board or
                  of the Board itself  shall be final and the Company  shall not seek to recover all or any part of
                  such  payment from the  Executive or from  whomsoever  may be entitled  thereto,  for any reasons
                  whatsoever  other  than the  Executive's  breach in any  material  respect of the  provisions  of
                  Section 11.

15.    Indemnification.

1. The Company shall indemnify the Executive as provided in the By-laws.
2. In the event of payment  of  indemnities  under this  Agreement,  the  Company  shall be
                  subrogated to the extent of such payment to all of the rights of recovery of the Executive.
3. The  Company  shall use  reasonable  efforts to continue  the  existing  directors'  and
                  officers'  liability  policies  covering  the  Executive  for $20  million  and to  maintain  the
                  policies during the Contract Term and for three years thereafter.
4. If the  federal  excise  tax  pursuant  to  Section  280G of the  Code or any  successor
                  provision  on  "golden  parachute"  payments  applies  to the  payments  made  pursuant  to  this
                  Agreement,  to any  acceleration of vesting of Options or to any other benefit or distribution to
                  the Executive from the Company,  the Company shall  immediately pay the Executive an amount equal
                  to the  excise tax  incurred  plus (i) an amount  equal to the Tax with  respect to the amount of
                  the excise  tax,  plus (ii) an amount  equal to the  federal  excise  tax on  "golden  parachute"
                  payments  with respect to the payment,  if any, made pursuant to clause (i) of this sentence plus
                  (iii) an amount  equal to the Tax with  respect to the  payment  made  pursuant to clause (ii) of
                  this  sentence  and  continuing  sequentially  until the amount of federal  excise tax on "golden
                  parachute"  payments  unreimbursed  by the  Company  shall be less  than 1% of Base  Salary.  The
                  amount of the payments due from the Company  pursuant to this Section  15(d) may be determined in
                  writing by a certified public accountant  ("CPA") selected by the Executive,  provided,  however,
                  that the CPA selected by the Executive shall,  upon the Company's  request,  consult with another
                  CPA selected by the  Company.  Such  determination  by the CPA  selected by the  Executive  after
                  such  consultation,  if so requested,  shall be conclusive  and binding on the Company except for
                  manifest error.
5. The  provisions  of this Section 15 shall  survive the  termination  of the  Executive's
                  employment hereunder, irrespective of the reason therefor.

16.    Enforcement; Interest.

1. If any amount owing to the  Executive  under this  Agreement is not paid by the Company,
                  or on its behalf,  within 15 days after a written  demand,  claim or request for payment has been
                  delivered  or sent to the  Company,  time being of the  essence,  the  Executive  may at any time
                  thereafter  bring suit  against  the Company to recover the unpaid  amount and  interest  thereon
                  and,  if  successful  in whole or in part,  the  Executive  shall be entitled to be paid also the
                  expenses of  prosecuting  such suit,  including  reasonable  attorneys'  fees.  Interest shall be
                  payable  from the date any amount is first due and  payable to the  Executive  at a rate equal to
                  the highest  rate  payable on any of the  Company's  indebtedness  after the date first set forth
                  above but in no event at a rate higher than the maximum rate then permitted by law.
2. The  provisions  of this Section 16 shall survive the  termination  of the  Executive's
                  employment hereunder, irrespective of the reason therefor.

17.    Entire Agreement; Legal Representation.

1. This Agreement,  the By-laws,  the stock option  agreements  between the Company and the
                  Executive and the  provisions of the Group  Benefits  embody the entire  agreement of the parties
                  with respect to the  Executive's  employment and shall be interpreted in accordance with the past
                  practice of the parties.  This  Agreement may not be changed or terminated  orally but only by an
                  agreement in writing  signed by the parties  hereto.  No Company  policy  adopted  after the date
                  first  set  forth  above  shall  change  this  Agreement,  even if  approved  as a policy  by the
                  Executive.  This  Agreement  amends the Initial  Agreement and cancels and supersedes any and all
                  other prior agreements and  understandings  between the parties hereto  respecting the employment
                  of the  Executive  by the  Company  and/or its  subsidiaries  or any  Affiliated  Company and the
                  payment of compensation.
2. The Company has been  represented  by  independent  counsel in the  preparation  of this
                  Agreement.  This Agreement shall not be deemed to have been drafted by either party.

18.   Waiver.

The waiver by the Company of a breach of any provision of this Agreement by the Executive
shall not operate or be construed as a waiver of any subsequent breach by him. The waiver
by the Executive of a breach of any provision of this Agreement by the Company shall not
operate or be construed as a waiver of any subsequent breach by the Company.

19.   Governing Law.

This Agreement shall be subject to,
and governed by, the laws of the State of New Jersey.

20.    Assignability.

1. The  obligations  of  the  Executive  may  not  be  delegated  and,  except  as  to  the
                  designation of  beneficiaries of insurance and similar  benefits,  the Executive may not, without
                  the Company's written consent thereto,  assign, transfer,  convey, pledge, encumber,  hypothecate
                  or otherwise  dispose of this Agreement or any interest  herein.  Any such  attempted  delegation
                  or disposition shall be null and void ab initio and without effect.
2. This  Agreement  and  all of the  Company's  rights  and  obligations  hereunder  may be
                  assigned or  transferred  by the  Company to, and shall be binding  upon and inure to the benefit
                  of, any  subsidiary  of the Company or any  Successor  to the  Company,  but any such  assignment
                  shall not relieve the assigning  party of any of its  obligations  hereunder.  Except as provided
                  in this Section  20(b),  this  Agreement may not otherwise be assigned by the Company.  (The term
                  "Successor" shall mean, with respect to the Company or any of its  subsidiaries,  any corporation
                  or other business entity which, by merger,  consolidation,  purchase of the assets, or otherwise,
                  acquires all or substantially all of the assets of the Company or such subsidiary.)
3. The Company  shall  obtain the  agreement  of any  Successor  that the  Successor  shall
                  assume  and be  bound by the  terms of this  Agreement  prior  to the  effectiveness  of any such
                  succession.  Failure of the Company to obtain the  agreement  of any  Successor  to assume and be
                  bound by the terms of this Agreement prior to the  effectiveness  of any such succession shall be
                  a breach of this Agreement.

21.    Notices.

All notices, requests, demands and other communications hereunder shall (i) be in writing,
(ii) shall be delivered personally or sent by registered mail to the other party hereto at
his or its address as set forth at the beginning of this Agreement and, in the case of the
Company, addressed to the attention of its Chief Administrative Officer and (iii) if
mailed, be effective on the date stamped on the postage receipt of the post office. A copy
of each notice, request, demand, and other communication to the Company hereunder shall be
sent by first class mail to its counsel, Richard W. Rubenstein, Esq., Squire, Sanders
& Dempsey, Huntington Center, 41 South High Street, 13th Floor, Columbus, Ohio 43215.
Either party may change the address to which notices, requests, demands and other
communications hereunder shall be sent by sending written notice of such change of address
to the other party.

22.    Severability.

If any provision of this Agreement as applied to either party or to any circumstances shall
be adjudged by a court of competent jurisdiction to be void or unenforceable, the same
shall in no way affect any other provision of this Agreement or the validity or
enforceability of this Agreement.

23.    Section Headings.

The section headings contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.

24.    Counterparts.

This Agreement may be executed in one or more counterparts, which shall, collectively and
separately, constitute one agreement.

---

IN WITNESS WHEREOF, the
parties hereto have duly executed this Agreement in Englewood, New Jersey, in duplicate
originals on September 6, 2004, in the case of the Company by an officer thereunto duly
authorized.

| |                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------
| | UNITED RETAIL GROUP, INC.                                                                                           
| |                                                                                                                     
| | By: /s/ RAPHAEL BENAROYAName: Raphael BenaroyaTitle: Chief Executive Officer/s/ KENNETH P. CARROLLKenneth P. Carroll

empagKPC 8.18.04.doc