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                                                                Exhibit No. 10.3


                              EMPLOYMENT AGREEMENT


      Agreement made as of the 20th day of November, 1998, 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, Apartment 11J, Hackensack, New Jersey
07601 (the "Executive").

      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;

      WHEREAS, the Executive has been employed by the Company as its Senior Vice
President - General Counsel to provide, among other things, advice 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, the provisions of this Agreement were recommended by the
Compensation Committee of the Company's Board of Directors on November 9, 1998;
and

      WHEREAS, this Agreement was reviewed by special counsel retained by the
Compensation Committee of the Board of Directors of the Company and approved by
the Company's Board of Directors on November 20, 1998.

      NOW, THEREFORE, in consideration of the mutual covenants and obligations
hereinafter set forth, the parties hereto, intending to be legally bound, hereby
agree as follows:

      1.    DEFINITIONS.

      (a)   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.

      (b)   Base Salary shall have the meaning set forth in Section 4(a).
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      (c)   Board of Directors shall mean the Board of Directors of the Company.

      (d)   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.

      (e)   By-laws shall mean the Restated By-laws of the Company as currently
            in force.

      (f)   Cause shall mean the occurrence of one or more of the following
            events:

                  (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, 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 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, plea of guilty or disbarment was entered, the failure of
            performance commenced, the material economic harm resulted, or the
            breach first took place, as the case may be.


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      (g)   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 (i) the acquisition after
            the date first set forth above by any person (defined for the
            purposes of this paragraph to mean any person within the meaning of
            Section 13(d) of the Securities Exchange Act of 1934 ("Exchange
            Act")), other than the Company, the resigned or removed Chief
            Executive Officer, the Executive or an employee benefit plan created
            by the Board of Directors for the benefit of the Company's
            Associates, either directly or indirectly, of the beneficial
            ownership (determined under Rule 13d-3 of the Regulations
            promulgated by the SEC under Section 13(d) of the Exchange Act) of
            any securities issued by the Company if, after such acquisition,
            such person is the beneficial owner of securities issued by the
            Company having 30% or more of the voting power in the election of
            Directors at the next meeting of the holders of voting securities to
            be held for such purpose of all of the voting securities issued by
            the Company, (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 of
            Directors or a duly constituted committee of the Board of Directors,
            or (iii) the merger or consolidation of the Company with, or
            transfer of substantially all of the assets of the Company to,
            another person; provided, however that any such acquisition,
            election, merger, consolidation or transfer that is approved in
            advance in writing by the Executive shall not be a predicate for a
            Change of Control.

      (h)   CPI shall have the meaning set forth in Section 4(a).

      (i)   Cure Period shall have the meaning set forth in Section 14(b).

      (j)   Group Benefits shall have the meaning set forth in Section 6(a).

      (k)   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 Term of Employment, held by the
            Executive or his assigns or donees.

      (l)   Performance Bonus shall have the meaning set forth in Section 4(b).

      (m)   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 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


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            prevent him from substantially performing his duties and
            responsibilities for four months or longer (the date of such
            Permanent Disability shall be on the last day of such four-month
            period or the day on which the Executive submits such evidence, as
            the case may be).

      (n)   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.

      (o)   Resignation Compensation shall have the meaning set forth in Section
            14(c).

      (p)   Severance Pay shall have the meaning set forth in Section 14(b).

      (q)   Successor shall have the meaning set forth in Section 20.

      (r)   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
            county of the Executive's residence, as now in effect or as amended
            from time to time.

      (s)   Term of Employment shall mean the period of time commencing on the
            date first set forth above and ending on August 3, 2003 or such
            later date as may be mutually agreed upon by the Board of Directors
            and the Executive.

      (t)   Termination Without Cause shall have the meaning set forth in
            Section 14(b).

      (u)   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.


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      2.    TERM.

      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 Term of Employment.

      3.    DUTIES.

      (a)   During the Term of Employment, the Executive shall serve as the
            Senior Vice President - General Counsel of the Company. The
            Executive shall also occupy a similar position in the Company's
            subsidiaries other than The Avenue, Inc. and United Retail
            International, Ltd. 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, (v) comment on drafts of all
            documents to be filed by the Company with the SEC, 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.

      (b)   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 professional time, attention, knowledge, energy and skills to
            such employment except during vacation not to exceed three weeks in
            any year. The Executive may oversee 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. 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, the following salary and other
compensation:

      (a)   A base salary, payable in accordance with the regular executive
            payroll practices of the Company, at a rate of $220,000 per annum
            during the period ending on January 31, 1999 and thereafter at such
            higher rate as may be determined by the


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            Compensation Committee of the Board of Directors, but in any event
            base salary shall increase as of February 1, 1999 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")
            since January 31, 1998 and shall increase as of each anniversary of
            February 1, 1999 by a percentage at least equal to the increase, if
            any, in the CPI since the previous January 31st (as increased from
            time to time, the "Base Salary").

      (b)   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, with a semi-annual award
            ranging from zero to 80% of Base Salary for the six-month period in
            accordance with past practice, 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.

      (c)   If the federal excise tax pursuant to Section 280G of the Code or
            any successor provision on "golden parachute" payments applies to
            any acceleration of the vesting of Options during the Term of
            Employment, the Company shall immediately pay the Executive (w) an
            amount equal to the excise tax incurred plus (x) an amount equal to
            the Tax with respect to the payment made pursuant to clause (w) of
            this sentence, plus (y) an amount equal to the federal excise tax on
            "golden parachute" payments with respect to the payment, if any,
            made pursuant to clause (x) of this sentence plus (z) an amount
            equal to the Tax with respect to the payment made pursuant to clause
            (y) of this sentence.

      5.    EXPENSES. The Executive will continue to be required to incur
reasonable and necessary travel, business entertainment and other business
expenses. The Company agrees to 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.

      (a)   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, including, without limitation, enhanced disability
            insurance benefits at the level insured on the date first set forth
            above


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            (or, if the group disability insurance can not be continued in
            force, the Company shall provide other disability benefits
            equivalent to the benefits under the group policy).

      (b)   Group Benefits shall be provided while the Executive is employed by
            the Company under this Agreement and thereafter as provided pursuant
            to the terms of this Agreement.

      (c)   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.

      (a)   In the event of the Permanent Disability of the Executive during the
            Term of Employment, the Company shall, upon written notice to the
            Executive, have the right to terminate the Executive's employment
            hereunder by reason of Permanent Disability.

      (b)   In the event of the death of the Executive during the Term of
            Employment, 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:

      (a)   any Base Salary accrued or any Performance Bonus vested but not yet
            paid;

      (b)   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;

      (c)   any accrued vacation pay;

      (d)   reimbursement for expenses incurred but not yet paid prior to such
            death or Permanent Disability;


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      (e)   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

      (f)   in the case of Permanent Disability, for five years following the
            date of Permanent Disability, first, COBRA health insurance 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. 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. The
Company covenants that it shall give notice promptly to the Executive of the
occurrence of Change of Control pursuant to Section 21.

      11.   RESTRICTIVE COVENANTS AND CONFIDENTIALITY.

      (a)   The Executive agrees that he shall not:

            (i)   solicit, raid, entice, encourage or induce any person, firm or
                  corporation that at any time within one year prior to the
                  termination of this Agreement 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 this
                  Agreement 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


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                  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.

      (b)   During the Term of Employment 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.

      (c)   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 Term of Employment,
            shall become and be the sole property of the Company unless released
            in writing by the Company.

      (d)   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 Term of Employment, 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


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            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.

      (e)   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 Term of Employment and for 18 months thereafter,
            provided, however, that in the event of Termination Without Cause or
            resignation by the Executive in accordance with Section 14(c) 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 pay his Severance Pay in
            accordance with the provisions of Section 14(b) no later than the
            15th day after the termination of the Executive's employment under
            this Agreement or his Resignation Compensation in accordance with
            the provisions of Section 14(c) no later than the 15th day after the
            effective date of the Executive's resignation, as the case may be.
            For purposes of the proviso in the preceding sentence only, payment
            of Severance Pay or Resignation Compensation within the time
            specified above in an amount at least equal to the amount determined
            in advance to be due and owing to the Executive by a firm of
            independent public accountants of nationally recognized standing
            shall satisfy the condition of said proviso, and cause the Executive
            to be bound by the provisions of Section 11(a) and (d) and shall
            obligate the Executive to perform his obligations pursuant to
            Section 11(a) and (d) even if such amount is less than the amount
            actually due and owing.

      (f)   The provisions of this Section 11 shall survive the termination of
            the Executive's employment hereunder, irrespective of the reason
            therefor.

      (g)   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.


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      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 shall survive the termination of the Executive's
employment hereunder, irrespective of the reason therefor.

      14.   TERMINATION.

      (a)   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.

      (b)   Subject to Section 7(a), 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, or

            (iii) (A) the Company breaches any of the covenants and agreements
                  set forth in Sections 3(a), 4, 5, 6, or 15 (a) or (c), in any
                  material respect, and (B) the Executive tenders to the Company
                  a letter of resignation specifying such breach in reasonable
                  detail and demanding Severance Pay,


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                  (any termination or resignation under the circumstances
                  referred to in Section 14(b)(i) through (iii) above being
                  referred to as "Termination Without Cause" whether or not
                  Cause shall exist) the Company shall pay the Executive within
                  15 days following the termination of the Executive's
                  employment under this Agreement, an amount equal to three
                  times the sum of (A) the annual Base Salary at the rate
                  payable immediately prior to termination plus (B) the
                  aggregate Performance Bonus with respect to the two
                  consecutive most recently completed six-month seasons
                  immediately prior to termination. If the federal excise tax
                  pursuant to Section 280G of the Internal Revenue Code (the
                  "Code") or any successor provision on "golden parachute"
                  payments applies to the payment made pursuant to the preceding
                  sentence, 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 (x) an amount
                  equal to the Tax with respect to the amount of the excise tax,
                  plus (y) an amount equal to the federal excise tax on "golden
                  parachute" payments with respect to the payment, if any, made
                  pursuant to clause (x) of this sentence plus (z) an amount
                  equal to the Tax with respect to the payment made pursuant to
                  clause (y) of this sentence (collectively with the payment
                  made pursuant to the preceding sentence, "Severance Pay"). No
                  demand or other notice from the Executive with respect to
                  Severance Pay shall be necessary in connection with Section
                  14(b) (i) above. Anything in this Section 14(b) 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:

                  (x) within 15 days after the delivery of a letter of
                  resignation to the Company (the "Cure Period") pursuant to
                  Section 14(b)(iii) 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;

                  (y) during the Cure Period the Chief Executive Officer shall
                  request in writing that the Executive withdraw his letter of
                  resignation pursuant to Section 14(b)(iii); and

                  (z) the Company shall deliver to the Executive during the Cure
                  Period 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.

            (c)   In the event (A) a Change of Control occurs on a day at the
                  beginning of which the Executive is an employee of the
                  Company, and (B) 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


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<PAGE>   13
            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 upon the resignation of the Executive under this Section
            14(c), an amount equal to three times the annual Base Salary at the
            rate payable immediately prior to resignation. If the federal excise
            tax pursuant to Section 280G of the Code or any successor provision
            on "golden parachute" payments applies to the payment made pursuant
            to the preceding sentence 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 (x) an
            amount equal to the Tax with respect to the amount of the excise
            tax, plus (y) an amount equal to the federal excise tax on "golden
            parachute" payments with respect to the payment, if any, made
            pursuant to clause (x) of this sentence plus (z) an amount equal to
            the Tax with respect to the payment made pursuant to clause (y) of
            this sentence (collectively with the payment made pursuant to the
            preceding sentence, "Resignation Compensation"). 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.

      (d)   In the event of Termination Without Cause or resignation by the
            Executive in accordance with Section 14(c):

            (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)  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;


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<PAGE>   14
                  (D) reimbursement for expenses incurred, but not paid prior to
            such termination of employment; and

                  (E) (x) COBRA health insurance 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 Term of
            Employment equivalent reimbursement of healthcare expenses directly
            by the Company, (y) conversion at the Company's expense through the
            remainder of the Term of Employment of the group life insurance
            coverage on the Executive's life and (z) payment to the Executive on
            April 15th of each year of an amount equal to the Tax with respect
            to the payments made to the Executive pursuant to clauses (x) and
            (y) of this sentence in the preceding calendar year.

      (e)   If the Company terminates the Executive's employment hereunder for
            Cause (except as provided in Section 14(b)(ii)), or in the event the
            Executive resigns (except as provided in Section 14(b)(iii) or
            14(c)), 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.

      (f)   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.

      (g)   The Executive shall accept the payments referred to in this Section
            14 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.


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<PAGE>   15
      15.   INDEMNIFICATION.

      (a)   The Company shall indemnify the Executive as provided in the
            By-laws.

      (b)   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.

      (c)   The Company shall use reasonable efforts to obtain a directors' and
            officers' liability insurance policy covering the Executive at the
            level insured on the date first set forth above and to maintain the
            policy during the Term of Employment and for three years thereafter.

      (d)   The provisions of this Section 15 shall survive the termination of
            the Executive's employment hereunder.

      16.   ENFORCEMENT; INTEREST.

            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, 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 of this
Agreement but in no event at a rate higher than the maximum rate then permitted
by law.

      17.   ENTIRE AGREEMENT.

            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. This Agreement cancels and supersedes any
and all 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 severance pay.


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<PAGE>   16
      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.

            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. 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. (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.)

      21.   NOTICES.

            All notices, requests, demands and other communications hereunder
shall be in writing and shall be delivered personally or sent by registered or
certified mail, return receipt requested, 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 Secretary. 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.


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<PAGE>   17
      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 Rochelle Park, New Jersey, in duplicate originals on November 20, 1998.


                                          UNITED RETAIL GROUP, INC.


                                          By: /s/ RAPHAEL BENAROYA
                                              ------------------------
                                          Name:  Raphael Benaroya
                                          Title: Chairman of the Board

                                          /s/ KENNETH P. CARROLL
                                          ----------------------------
                                          Kenneth P. Carroll


empagkpc.sam
KPC:JW 11/98

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