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Exhibit 10.2  

 
 

SECOND AMENDED AND RESTATED
  EMPLOYMENT AGREEMENT    
    

        THIS
SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement"), is made as of this 25th day of August, 2004 (the
"Effective Date"), by and among New York & Company, Inc. (f/k/a NY & Co. Group, Inc.), a Delaware corporation
("Holdings"), Lerner New York, Inc., a Delaware corporation (the "Company"), and Ronald Ristau
("Executive", and, together with Holdings and the Company, the "Parties"). Certain capitalized terms
used herein are defined in Section 16. 

W  I  T  N  E  S  S  E  T  H:

        WHEREAS,
Executive is a party to an existing employment agreement (the "Existing Agreement" by and among Executive, the Company and
Holdings, dated as of December 2, 2002, and effective as of November 27, 2002 (the "Original Effective Date"), which amended and restated
an employment agreement dated as of November 22, 2002; and 

        WHEREAS,
the Company is a Subsidiary of Holdings; and 

        WHEREAS,
the Parties have determined that the Existing Agreement should be amended, superceded and replaced in its entirety by this Agreement as of the Effective Date. 

        NOW,
THEREFORE, in consideration of the foregoing and the respective agreements and mutual covenants of the Parties contained herein, the Parties hereby agree as follows: 

        1.    Term.    The term of employment under this Agreement shall be for the period commencing on the Effective Date
and ending on the third anniversary of the Effective Date (the "Term"). Upon the third anniversary of the Effective Date, and upon each anniversary of
the Effective Date thereafter, the Term automatically shall be extended upon the same terms and conditions for an additional period of one (1) year, except as otherwise provided in this  Section 1. No such automatic extension shall occur if either Holdings or Executive shall have  provided written notice to the other at least ninety (90) days prior to the end of the then current Term
that such Party elects not to extend the
Term. If such advance notice is provided, Executive's employment hereunder shall terminate at the end of the then current Term; provided that the Term shall be subject to earlier termination as
provided in Section 8 of this Agreement. The provision of notice not to extend the Term shall not constitute a breach of this Agreement. 

        2.    Employment.    

        (a)    Position.    Executive shall be employed as the Chief Operating Officer and Chief Financial Officer of Holdings
and of the Company. Executive shall perform the duties, undertake the responsibilities and exercise the authority customarily performed, undertaken and exercised by persons employed in a similar
executive capacity. Executive shall report to Holdings' Board of Directors (the "Board"), (including, with respect to compensation matters, any
compensation committee of the Board). For so long as Executive is the Chief Operating Officer of Holdings or the Company, Holdings shall nominate Executive for membership on the Board. 

        (b)    Obligations.    Executive agrees to devote his full business time and attention to the business and affairs of
Holdings, the Company and Holdings' and the Company's Subsidiaries. The foregoing, however, shall not preclude Executive from serving on corporate, civil or charitable boards or committees or managing
personal investments, so long as such activities do not interfere with the performance of Executive's responsibilities hereunder. Service on any for-profit board shall be subject to the
approval of the Board, which approval the Board may in its reasonable discretion grant for one outside board membership. 

 

        3.    Base Salary.    Holdings shall pay or cause to be paid to Executive during the Term a base salary at the rate of
$575,000 per annum. The base salary will be subject to annual review and may be increased by the Board for any period. (Executive's base salary as in effect from time to time is herein referred to as
his "Base Salary.") Any increase in Executive's Base Salary shall only be made after a consideration of factors such as Executive's responsibilities,
compensation of similar executives (within Holdings and the Company and in other companies), performance of Executive and other pertinent factors. Such Base Salary shall be payable in accordance with
Holdings' customary policies and practices applicable to its executives (which policies and practices shall be identical to those utilized by the Company). 

        4.    Bonus.    

        (a)   Executive
shall be entitled to participate in Holdings' then current incentive compensation plan on such terms and conditions as may be determined from time to time by
the Board (the "Bonus"), which incentive compensation plan shall utilize the identical methodology as the Company's plan;  provided that the parties hereto
agree that the express terms of this Section 4 shall supercede
any contrary provisions of such incentive compensation plan. 

        (b)   Bonuses,
to the extent earned, shall be payable semi-annually by Holdings, once in relation to the Company's results for Holdings' first and second fiscal
quarters (the "Spring Bonus") and once in relation to the Company's results for Holdings' third and fourth fiscal quarters (the
"Fall Bonus") (each, a "Bonus Period"). Executive's Bonus shall be based upon the attainment of certain
Operating Income targets for such Bonus Period (each, a "Target"). Executive's Bonus for each Bonus Period shall equal (A) for the Spring Bonus,
the product of 28% of Executive's Base Salary ("Spring Target Bonus"), multiplied by (ii) the Applicable Bonus Percentage (as defined below), and
(B) for the Fall Bonus, the product of 42% of Executive's Base Salary ("Fall Target Bonus"), multiplied by (ii) the Applicable Bonus
Percentage (as defined below). 

        (c)   For
the purposes of Section 4(b) above, and subject to  Section 4(d) below, the "Applicable Bonus Percentage" shall be calculated as follows
(provided, that in the event of any business acquisition or disposition in any Bonus Period, the Target shall be adjusted as the Board reasonably
determines appropriate): 

        (i)    If
Operating Income for the Bonus Period in question is less than Operating Income for the same Bonus Period in the prior year, then the Applicable Bonus Percentage
shall equal 0%; 

        (ii)   If
Operating Income for the Bonus Period in question is equal to Operating Income for the same Bonus Period in the prior year, then the Applicable Bonus Percentage
shall equal 20%; 

        (iii)  If
Operating Income for the Bonus Period in question is greater than Operating Income for the same Bonus Period in the prior year but less than 115% of Operating
Income for the same Bonus
Period in the prior year, then the Applicable Bonus Percentage shall equal 20% plus, for each 1% increase in Operating Income over the same Bonus Period in the prior year, the Applicable Bonus
Percentage shall be increased by 5?% (e.g., for an Operating Income increase in the Bonus Period in question of 103% the Applicable Bonus Percentage shall be equal to 36%); 

        (iv)  If
Operating Income for the Bonus Period in question is equal to 115% of Operating Income for the same Bonus Period in the prior year, then the Applicable Bonus
Percentage shall equal 100%; 

        (v)   If
Operating Income for the Bonus Period in question is greater than the 115% of Operating Income for the same Bonus Period in the prior year, but less than 125% of
Operating Income for the same Bonus Period in the prior year, then the Applicable Bonus Percentage shall equal 100% plus, for each 1% increase in Operating Income over 115% of Operating Income for the
same Bonus Period in the prior year, the Applicable Bonus Percentage shall be increased by 

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10%
(e.g., for an Operating Income increase in the Bonus Period in question of 120%, the Applicable Bonus Percentage shall be equal to 150%); provided,
that beginning with the Bonus Period for Spring 2006 if the Applicable Bonus Percentage for the same Bonus Period in the prior year was equal to 200%, then, notwithstanding the foregoing, if Operating
Income for the Bonus Period in question is greater than 115% of Operating Income for the same Bonus Period in the prior year but less than 120% of Operating Income for the same Bonus Period in the
prior year, then the Applicable Bonus Percentage shall equal 100% plus, for each 1% increase in Operating Income over 115% of Operating Income for the same Bonus Period in the prior year, the
Applicable Bonus Percentage shall be increased by 20% (e.g., for an Operating Income increase in the Bonus Period in question of 119% the Applicable Bonus Percentage shall be equal to 180%); and 

        (vi)  If
Operating Income for the Bonus Period in question is equal to or greater than 125% of Operating Income for the same Bonus Period in the prior year, then the
Applicable Bonus Percentage shall equal 200%; provided, that beginning with the Bonus Period for Spring 2006 if the Applicable Bonus Percentage for the
same Bonus Period in the prior year was equal to 200%, then, notwithstanding the foregoing, if Operating Income for the Bonus Period in question is equal to or greater than 120% of Operating Income
for the same Bonus Period in the prior year, then the Applicable Bonus Percentage shall equal 200%. 

        (d)   Notwithstanding
anything set forth in Section 4(c), the Applicable Bonus Percentage for the Fall 2004 Bonus Period
shall be calculated as follows (provided, that in the event of any business acquisition or disposition in any Bonus Period, the Target for such period
shall be adjusted as the Board reasonably determines appropriate): 

        (i)    If
EBITDA (as such term is defined in the Existing Agreement) for the Fall 2004 Bonus Period is less than $57 million, then the Applicable Bonus Percentage shall
equal 0%; 

        (ii)   If
EBITDA for the Fall 2004 Bonus Period is equal to $57 million, then the Applicable Bonus Percentage shall equal 20%; 

        (iii)  If
EBITDA for the Fall 2004 Bonus Period is greater than $57 million but less than $70 million, then the Applicable Bonus Percentage shall equal 20%
plus, for each $162,500 increase in EBITDA for such Bonus Period over $57 million, the Applicable Bonus Percentage shall be increased by 1% (e.g., if EBITDA for the Fall 2004 Bonus Period is
$62.2 million, the Applicable Bonus Percentage shall be equal to 52%); 

        (iv)  If
EBITDA for the Fall 2004 Bonus Period is equal to $70 million, then the Applicable Bonus Percentage shall equal 100%; 

        (v)   If
EBITDA for the Fall 2004 Bonus Period is greater than $70 million, but less than $80 million, then the Applicable Bonus Percentage shall equal 100%
plus, for each $100,000 increase in EBITDA for such Bonus Period over $70 million, the Applicable Bonus Percentage shall be increased by 1% (e.g., if EBITDA for the Fall 2004 Bonus Period is
$75 million, the Applicable Bonus Percentage shall be equal to 150%); and 

        (vi)  If
EBITDA for the Fall 2004 Bonus Period is equal to or greater than $80 million, then the Applicable Bonus Percentage shall equal 200%. 

        (e)   Subject
to Section 28 of this Agreement, upon the consummation of a Company Sale, if the BSMB Holders (as defined
in the Securityholders Agreement) realize proceeds equal in value to their initial capital investment, plus one times such initial capital investment (i.e., the BSMB holders receive total proceeds in
aggregate of two times their initial capital investment), then Holdings shall pay to Executive $150,000. 

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        5.    Long-Term Incentive Compensation.    With respect to any long-term cash incentive
compensation plan maintained by Holdings or the Company during the Term, Executive shall be eligible to participate in accordance with its terms and conditions and receive a long-term cash
incentive compensation opportunity as determined by the Board. Executive also shall be eligible for awards under any stock option, restricted stock or other equity-based long-term
incentive plan established by Holdings or the Company which covers executive officers, as determined by the Board. 

        6.    Employee Benefits.    Executive shall be entitled to participate in all employee benefit plans, practices and
programs maintained by Holdings or the Company and made available to executive officers generally and as may be in effect from time to time. Executive's participation in such plans, practices and
programs shall be on the same basis and terms as are applicable to executive officers of Holdings or the Company generally. 

        7.    Other Benefits, Perquisites and Rights.    

        (a)    Life Insurance.    During the Term Holdings shall pay Executive the premiums on a term policy on the life of
Executive in the face coverage amount of $2,000,000, which policy is owned by an irrevocable trust previously established by Executive; provided that
Holdings shall not be obligated to pay more than $10,000 per year for premiums in respect of such insurance, and Executive shall be responsible for payment of all premiums in excess of $10,000 per
year. Executive shall be responsible for forwarding all such premium payments to the trustee for such irrevocable trust. For each life insurance premium payment that Holdings makes to Executive in
respect of such term life insurance policy, Holdings shall make a tax "gross-up" payment to Executive in an amount sufficient to pay all federal, state and local taxes (including, without
limitation, income or payroll taxes) payable by Executive (whether payable directly by Executive or payable by Executive through withholdings made by Holdings from Executive's compensation) in respect
of (i) such life insurance premium payment, and (ii) the related tax "gross-up" payment. In addition, Holdings shall be entitled to maintain a "key person" term life
insurance policy on the life of Executive, the proceeds of which shall be payable to Holdings or its designees. Executive agrees to undergo any reasonable physical examination and other procedures as
may be necessary to maintain any such policy. 

        (b)    Expenses.    Subject to applicable Company policies, Executive shall be entitled to receive prompt
reimbursement of all expenses reasonably incurred by him in connection with the performance of his duties hereunder or for promoting, pursuing or otherwise furthering the business or interests of
Holdings and its Subsidiaries. 

        (c)    Office and Facilities.    During the Term Executive shall be provided with an appropriate office and with such
secretarial and other support facilities as are commensurate with Executive's status with Holdings and the Company and adequate for the performance of those duties hereunder. 

        (d)    Vacation and Sick Leave.    During the Term Executive shall be entitled to annual vacation and sick leave in
accordance with the prevailing policies of the Company. 

        (e)    Amendment to Option Agreement.    Holdings and Executive shall amend that certain Option Agreement, dated as of
November 27, 2002, as amended by that certain Option Agreement Amendment, dated January 16, 2003, each between Holdings and Executive (as amended, the "Option Agreement") to provide: 

        (i)    that
if Executive's employment is terminated by Holdings other than with Cause (including by reason of Disability or Holdings' written notice to Executive of its
decision not to extend the Term, as contemplated in Section 1), or by Executive for Good Reason, or as a result of Executive's death, then
notwithstanding the provisions of the Option Agreement, Executive's Return Vest Options (as defined in such Option Agreement) shall not expire on or ninety (90) days following the Termination
Date but shall instead continue to vest and be exercisable in accordance with the terms thereof as if Executive had remained an employee of Holdings; 

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        (ii)   that
in the event of a Sale of Holdings in which the Investors (as defined in the Option Agreement) receive property or other non-cash consideration in
respect of their Holdings securities, any determination of whether Executive's Return Vest Options shall have vested shall take into consideration the fair market value of such property; 

        (iii)  that
in the event of a Sale of Holdings in which Holdings receives some or all of the (cash or non-cash) proceeds from such transaction, (x) in the
case of a Sale of Holdings structured as an asset sale, for purposes of determining whether Executive's Return Vest Options have vested, the Investors shall be deemed to have received an amount in
cash equal to the amount the Investors would receive if, immediately following the consummation of such Sale of Holdings, Holdings were liquidated and the proceeds of such liquidation (less corporate
level taxes and amounts set aside for discharge of all debts, liabilities (including contingent liabilities) and obligations of Holdings) were paid as a dividend to Holdings' stockholders, and
(y) in the case of a Sale of Holdings structured as an issuance of equity securities, for purposes of determining whether Executive's Return Vest Options have vested, the Investors shall be
deemed to have received an amount in cash equal to the value of their Holdings securities implied by the terms of such Sale of Holdings (taking into account the percentage interest in Holdings sold
and the purchase price thereof); and 

        (iv)  that
the final sentence of Section 3(f) of the Option Agreement shall read as follows: "Unless otherwise determined by the Committee or the Board, immediately
prior to a Company Sale (i) any portion of the Option which is unvested and does not vest prior to or in connection with such Company Sale shall be forfeited and (ii) any portion of the
Option which is vested and which has not been exercised prior to or in connection with such Company Sale shall be forfeited." 

        8.    Termination.    Executive's employment hereunder may be terminated under the following circumstances: 

        (a)    Disability.    Holdings shall be entitled to terminate Executive's employment after having established
Executive's Disability. In the event Executive's employment is terminated pursuant to this Section 8(a), Executive shall be entitled to no
severance or other termination benefits from and after the termination of his employment except as provided in Section 8(d). For purposes of this
Agreement, "Disability" shall
mean the inability, by reason of bodily injury or physical or mental disease, or any combination thereof, of Executive to perform his customary or other comparable duties with Holdings and the Company
for a period of at least six (6) months in any twelve (12)-month calendar period as determined in accordance with the Company's Long-Term Disability Plan. In the event the Parties
are unable to agree as to whether Executive is suffering a Disability, Executive and Holdings shall each select a physician and the two (2) physicians so chosen shall make the determination or,
if they are unable to agree, they shall select a third physician, and the determination as to whether Executive is suffering a Disability shall be based upon the determination of a majority of the
three (3) physicians. Any other rights and benefits Executive may have under employee benefit plans and programs of Holdings generally in the event of Executive's Disability shall be determined
in accordance with the terms of such plans and programs. 

        (b)    Cause.    Holdings shall be entitled to terminate Executive's employment for "Cause" without prior written
notice. For purposes of this Agreement, "Cause" shall mean: (i) wrongful misappropriation of Holdings' or any of its Subsidiaries' assets of a
material value; (ii) alcoholism or drug addiction, any of which materially impairs the ability of Executive to perform his duties and responsibilities hereunder or is seriously injurious to the
business of Holdings and its Subsidiaries; (iii) the conviction of, or pleading "guilty" or "no contest" to, a felony; (iv) intentionally causing Holdings or any of its Subsidiaries to
violate a material local state or federal law in any material respect; (v) gross negligence or willful misconduct in the conduct or management of Holdings and its Subsidiaries not remedied
within thirty (30) days after receipt of written notice from Holdings which 

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materially
affects Holdings or any of its Subsidiaries; (vi) willful refusal to comply with any significant, lawful and proper policy, directive or decision of the Board in furtherance of a
legitimate business purpose or willful refusal to perform the duties reasonably assigned to Executive by the Board consistent with Executive's functions, duties and responsibilities set forth in  Section 2, in each case, in any material respect, and only if not remedied within thirty (30) days after receipt of written notice from
Holdings; or (vii) breach by Executive of this Agreement, in any material respect, not remedied within thirty (30) days after receipt of written notice from Holdings. In the event of a
termination "with Cause" pursuant to the provisions of clauses (i) through (vii) above, inclusive, Executive shall be entitled to no severance or other termination benefits, except as
provided in Section 9(a). 

        (c)    Other than With Cause.    Holdings may, unilaterally, terminate Executive's employment hereunder at any time
during the term of this Agreement without cause upon prior written notice to Executive of Holdings' election to terminate, consistent with  Section 8(f) below. 

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        (d)    Termination by Executive.    Executive may terminate employment hereunder for Good Reason by delivering to
Holdings (1) a Preliminary Notice of Good Reason (as defined below), and (2) not earlier than thirty (30) days from the delivery of such Preliminary Notice of Good Reason, a
Notice of Termination (as defined below). For purposes of this Agreement, "Good Reason" means: (i) the demotion of Executive to a position not
comparable to Chief Operating Officer of Holdings or the Company; (ii) the assignment to Executive of any duties materially inconsistent with Executive's positions, duties, authority,
responsibilities and reporting requirements as set forth in Section 2; (iii) a reduction in or a delay in payment of Executive's total
cash compensation and benefits from those required to be provided in accordance with the provisions of this Agreement; (iv) Holdings, the Board, the Company, the Company's board of directors or
any person controlling Holdings or the Company requires Executive to be based anywhere that is greater than fifty (50) miles from Manhattan, other than on travel reasonably required to carry
out Executive's obligations under the Agreement; (v) the failure of Holdings or the Company to obtain the assumption in writing of its obligation to perform this Agreement by any successor to
all or substantially all of the assets of Holdings or the Company, as applicable, within fifteen (15) days after a merger, consolidation, sale or similar transaction; or (vi) Executive
is removed from or not re-elected to the Board or the office of Chief Operating Officer of the Company. Notwithstanding the foregoing provisions of this  Section 8(d), "Good Reason" shall not
include (A) acts not taken in bad faith which are cured by Holdings or the Company in all material
respects not later than thirty (30) days from the date of receipt by Holdings or the Company of a written notice from Executive identifying in reasonable detail the act or acts constituting
"Good Reason" (a "Preliminary Notice of Good Reason") or (B) acts taken by Holdings or the Company by reason of Executive's physical or mental
infirmity which impairs Executive's ability to substantially perform the duties under this Agreement. A Preliminary Notice of Good Reason shall not, by itself, constitute a Notice of Termination. 

        (e)    Executive's Death.    Executive's employment shall be terminated upon the death of Executive. Any rights and
benefits that Executive's estate or any other person may have under employee benefit plans and programs of Holdings and its Subsidiaries generally in the event of Executive's death shall be determined
in accordance with the terms of such plans and programs. In the event Executive's employment is terminated pursuant to this Section 8(e).
Executive shall be entitled to no severance or other termination benefits from and after the termination of his employment, except as provided in  Section 9(a). 

        (f)    Notice of Termination.    Subject to Section 8(b), any
purported termination by Holdings or by Executive shall be communicated by a written Notice of Termination to the other at least two weeks prior to the Termination Date. 

        9.    Compensation Upon Termination.    Subject to (i) execution and delivery to Holdings by Executive of a
general release covering employment-related claims (but not claims as a shareholder), in form and substance satisfactory to Holdings, and (ii) continued observance by Executive in all material
respects of
the covenants contained in Section 11, following the termination of Executive's employment pursuant to the terms and conditions of this
Agreement: 

        (a)   If,
during the Term, Executive's employment is terminated by Holdings for Cause or by reason of Executive's death, or if Executive terminates this Agreement without Good
Reason or gives written notice not to extend the Term, then Holdings' sole obligation hereunder shall be to pay Executive the following amounts earned hereunder but not paid as of the Termination
Date: (i) any Base Salary due and owing through the Termination Date but not yet paid, (ii) reimbursement for any and all monies advanced or expenses incurred pursuant to  Section 7(b)
through the Termination Date, and (iii) any earned compensation which Executive had previously deferred (including any
interest earned or credited thereon) (collectively, the "Accrued Compensation"). Executive's entitlement to any other benefits shall be determined in
accordance with Holdings' and its Subsidiaries' employee benefit plans then in effect in which Executive is a participant at the Termination Date. 

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        (b)    Termination Other Than for Cause.    

        (i)    Subject
to Sections 9(b)(ii), 9(b)(iii) and  28 below, if Executive's employment is terminated by Holdings other
than with Cause (including by reason of Holdings' written notice to Executive of its
decision not to extend the Term, as contemplated in Section 1, and not including termination by reason of death or Disability) or by Executive
for Good Reason, Holdings' sole obligation hereunder shall be as follows: 

	(A)
	Holdings
shall pay Executive the Accrued Compensation;

	(B)
	Holdings
shall pay Executive a Bonus with respect to the Bonus Period in which occurs the Termination Date, such Bonus (x) to be equal to the Bonus which would have been
payable under Section 4 for such Bonus Period had Executive continued to be an employee of Holdings during such Bonus Period, multiplied by a
ratio, the numerator of which is the number of days in such Bonus Period during which Executive was an employee at Holdings and the denominator of which is the total number of days in such Bonus
Period (the "Pro Rata Bonus"), and (y) to be payable when bonuses for such Bonus Period are paid to the Company's employees generally; and

	(C)
	Holdings
shall take such actions as may be necessary to immediately vest Executive's then unvested stock options (other than any Return Vest Options) or other unvested long term
incentive awards that, by their terms, would have vested during the calendar year in which Executive's employment was terminated; and

	(D)
	As
consideration for the continued observance by Executive in all material respects of the covenants contained in Section 11(b),
Holdings shall continue to pay Executive the Base Salary in effect on the Termination Date, in accordance with Holdings' customary practices applicable to its executives, for a period of two years
after Executive's Termination Date, and shall pay Executive a bonus for each of the first four consecutive Bonus Periods commencing after Executive's Termination Date equal to the Spring Target Bonus
or Fall Target Bonus, as applicable, based on Executive's Base Salary as of Executive's Termination Date, payable semi-annually in accordance with prior practice. 

        (ii)   Following
the IPO Effective Date, if, within twenty-four (24) months following a Change of Control, Executive's employment is terminated by Holdings
other than for Cause (including by reason of Holdings' written notice to Executive of its decision not to extend the Term, as contemplated in  Section 1, but only if as a result thereof the Term
would expire within twenty-four (24) months following the Change of
Control, and not including termination by reason of death or Disability), or by Executive for Good Reason, Holdings' sole obligation hereunder shall be as follows: 

	(A)
	Holdings
shall pay Executive the Accrued Compensation;

	(B)
	Holdings
shall pay Executive a Pro Rata Bonus with respect to the Bonus Period in which occurs the Termination Date, such Pro Rata Bonus to be payable when bonuses for such Bonus
Period are paid to the Company's employees generally;

	(C)
	Holdings
shall take such actions as may be necessary to immediately vest any of Executive's then unvested stock options (other than the Return Vest Options) or other unvested
long-term incentive awards; and

	(D)
	Holdings
shall pay Executive, in a lump sum within ten (10) business days after his Termination Date, an amount equal to 3.0 times the sum of (x) the Base Salary in
effect on the Termination Date, plus (y) the greater of (1) the aggregate Bonus paid to Executive for the latest fiscal year ended prior
to Executive's Termination Date, and (2) 50% of the aggregate Bonus paid to Executive for the latest two fiscal years ended 

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prior
to Executive's Termination Date. The parties agree that, of the total lump sum amount received by Executive as described in the preceding sentence of this  Section 9(b)(ii)(D),
2/3 of such total lump sum amount shall be treated by the parties as consideration for the continued
observance by Executive in all material respects of the covenants contained in Section 11(b). 

        (iii)  For
the avoidance of doubt, the parties agree that (A) the provisions of Section 9(b)(ii) shall
not apply prior to the IPO Effective Date and (B) as of the IPO Effective Date, the provisions of Section 9(b)(ii) shall apply, and
the provisions of Section 9(b)(i) shall not apply, with respect to any termination of Executive's employment of the type described in  Section 9(b)(ii)
 (i.e. that Sections 9(b)(i) and  9(b)(ii) are mutually exclusive, and that Section 9(b)
(ii) shall control with
respect to any termination to which it applies). 

        (c)   If
Executive's employment is terminated by Holdings by reason of Executive's Disability, Holdings' sole obligation hereunder shall be as follows: 

        (i)    Holdings
shall pay Executive the Accrued Compensation; and 

        (ii)   Holdings
shall continue to pay the Base Salary in accordance with Holdings' customary practices applicable to its executives for five months following the Termination
Date; provided that such Base Salary shall be reduced by the amount of any benefits Executive receives by reason of his Disability under Holdings' and
its Subsidiaries' relevant disability plan or plans. 

        (d)   During
the period Executive is receiving salary continuation pursuant to Section 9(b)(i)(D),  9(b)(ii)(D) or 9(c)(ii), Holdings shall, at its expense, provide to Executive and Executive's
beneficiaries medical and dental benefits substantially similar in the aggregate to those provided to Executive immediately prior to the date of Executive's termination of employment;  provided,
however, that Holdings' obligation with respect to the foregoing benefits shall be eliminated
to the extent that Executive or Executive's beneficiaries obtain any such benefits pursuant to a subsequent employer's benefit plans. 

        (e)   Executive
shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise and no such payment shall
be offset or reduced by the amount of any compensation provided to Executive in any subsequent employment. 

        10.    No Parachute Payments.    Notwithstanding the provisions of  Section 9, if (a) the amount of payments or other
benefits to be received by Executive thereunder in connection with Executive's
termination would, when taken together with any other payments or benefits that Executive receives or is entitled to receive from Holdings or any of its Subsidiaries, constitute a "parachute payment"
within the meaning of Section 280G(b)(2) of the Code or the Treasury regulations issued thereunder, and (b) the payments and benefits otherwise to be provided to Executive under  Section 9
of this Agreement, after reduction by the sum of (i) the actual excise tax that would be imposed on Executive on the portion of
such payments and benefits that constitute an "excess parachute payment" under Section 4999 of the Code (the "Parachute Tax") and (ii) the
actual federal, state and local income taxes that would be imposed on Executive on an amount equal to the amount of the Parachute Tax and on all amounts determined under this clause (ii), would
be less than what Executive would have received had such payment and benefits been reduced or deferred to the extent necessary so that the Parachute Tax would not apply, then the payments and benefits
otherwise to be provided to Executive under Section 9 of this Agreement shall be reduced or deferred to the extent necessary such that no
payments or other benefits to be received by Executive thereunder in connection with Executive's termination would, when taken together with any other payments or benefits that Executive receives or
is entitled to receive from Holdings or any of its Subsidiaries, constitute a "parachute payment" within the meaning of Section 280G(b)(2) of the Code or the Treasury regulations issued
thereunder. The determination of whether or not all or any portion of the payments and benefits provided to Executive 

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would
constitute parachute payments and the determination regarding amounts, if any, to be deferred or reduced as set forth in clause (b) of the first sentence of this  Section 10 shall be made
jointly by Holdings, Executive and their respective tax advisors;  provided that if Holdings and Executive are unable to agree on such determinations, those determinations shall be submitted to the
binding determination
of (x) a "Big Four" accounting firm mutually acceptable to Holdings and Executive or (y) in the absence of a mutually acceptable accounting firm, a "Big Four" accounting firm selected by
lot after exclusion of Holdings' auditor. The parties agree that any reduction of amounts that Executive receives or is entitled to receive as provided in this  Section 10 shall be made first by
Holdings reducing the amounts of any cash bonuses or other cash compensation that would otherwise then be
payable to Executive or in such other manner as Executive reasonably requests. 

        11.    Employee Covenants.    

        (a)    Unauthorized Disclosure.    Executive shall not, during the Term and thereafter, make any Unauthorized
Disclosure. For purposes of this Agreement, "Unauthorized Disclosure" shall mean disclosure by Executive without the prior written consent of the Board
to any person, other than an employee of Holdings or any of its Subsidiaries or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by Executive of
duties as an executive of Holdings or the Company or as may be legally required, of any information relating to the business or prospects of Holdings (including, but not limited to, any confidential
information with respect to any of Holdings' or
its Subsidiaries' customers, products, methods of distribution, strategies, business and marketing plans and business policies and practices); provided,  however, that such term shall not include the use or disclosure by Executive, without consent, of any information known generally to the public (other
than as a result of disclosure by Executive in violation of this Section 11(a)). This confidentiality covenant has no temporal, geographical or
territorial restriction. 

        (b)    Non-Competition.    During the period Executive is employed by Holdings or any of its Subsidiaries
and for a period of two (2) years after Executive ceases to be employed by Holdings or any of its Subsidiaries (the "Non-Competition
Period"), Executive shall not, directly or indirectly, without the prior written consent of the Board (which may be given or withheld in its sole discretion), own, manage,
operate, join, control, be employed by, consult with or participate in the ownership, management, operation or control of, or be connected with (as a stockholder, partner or otherwise) the retail
business of women's fashion apparel, accessories and related products or any other product sold or intended to be sold by the Company or its Subsidiaries during Executive's employment with Holdings
(each such activity, a "Competitive Activity") for any business, individual, partnership, association, firm, company, corporation, or other entity.
Notwithstanding the foregoing, the "beneficial ownership" by Executive after termination of employment with Holdings, either individually or as a member of a "group," as such terms are used in
Section 13(d) under the Exchange Act, of not more than two percent (2%) of the voting stock of any publicly held corporation shall not be a violation of this  Section 11(b). 

        (c)    Non-Solicitation.    During the period Executive is employed by Holdings or any of its Subsidiaries
and for a period of three (3) years after Executive ceases to be employed by Holdings or any of its Subsidiaries (the "No-Raid
Period"), Executive shall not (i) directly or indirectly, either for himself or for any other person, business, partnership, association, firm, company or corporation,
hire from Holdings or any of its Subsidiaries, or attempt to hire, divert or take away from Holdings or any of its Subsidiaries, any of the business of Holdings or any of its Subsidiaries or officers
or employees of Holdings or any of its Subsidiaries in existence from time to time during his employment with Holdings, (ii) interfere with or harm, or attempt to interfere with or harm, the
relationship of Holdings, its Subsidiaries or affiliates, with any person who at any time was an employee, customer or supplier of Holdings, its Subsidiaries or affiliates or otherwise had a business
relationship with Holdings, its Subsidiaries or affiliates, or (iii) directly or indirectly, knowingly make any statement or other communication that impugns or attacks the reputation or
character of Holdings or its Subsidiaries or 

10

 

affiliates,
or damages the goodwill of Holdings or its Subsidiaries or affiliates, or knowingly take any action, directly or indirectly, that would interfere with any contractual or customer or
supplier relationships of Holdings or its Subsidiaries or affiliates (each of acts described in clause (i), (ii) and (iii) set forth herein, a "Raiding
Activity"). 

        (d)    Intellectual Property, Inventions and Patents.    Executive acknowledges that all discoveries, concepts, ideas,
inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports, patent applications, copyrightable work and mask work (whether or not including any confidential
information) and all registrations or applications related thereto, all other proprietary
information and all similar or related information (whether or not patentable) which relate to Holdings' and its Subsidiaries' actual or anticipated business, research and development or existing or
future products or services and which are conceived, developed or made by Executive (whether above or jointly with others) while employed by Holdings whether before or after the date of this Agreement
("Work Product"), belong to Holdings. Executive shall promptly disclose such Work Product to the Board and, at Holdings' expense, perform all actions
reasonably requested by the Board (whether during or after Executive's employment with Holdings) to establish and confirm such ownership (including, without limitation, assignments, consents, powers
of attorney and other instruments). 

        (e)    Remedies.    Executive agrees that any breach of the terms of this  Section 11 would result in irreparable injury and
damage to Holdings for which Holdings would have no adequate remedy at law; Executive therefore
also agrees that in the event of said breach or any threat of breach, Holdings shall be entitled to an immediate injunction and restraining order to prevent such breach or threatened breach or
continued breach by Executive or any and all Persons acting for or with Executive, without having to prove damages, and to all costs and expenses, including reasonable attorneys' fees and costs, in
addition to any other remedies to which Holdings may be entitled at law or in equity; provided that Holdings shall be entitled to costs and expenses,
including reasonable attorneys' fees and costs, only to the extent that Holdings has acted in response to an actual, and not merely a threatened, breach by Executive. The terms of this paragraph shall
not prevent Holdings from pursuing any other available remedies for any breach or threatened breach hereof, including but not limited to the recovery of damages from Executive. Executive and Holdings
further agree that the provisions of the covenants not to compete and solicit are reasonable and that Holdings would not have entered into this Agreement but for the inclusion of such covenants
herein. Should a court or arbitrator determine, however, that any provision of the covenants is unreasonable, either in period of time, geographical area, or otherwise, the parties hereto agree that
the covenant should be interpreted and enforced to the maximum extent which such court or arbitrator deems reasonable. 

        The
provisions of this Section 11 shall survive any termination of this Agreement, and the existence of any claim or cause of
action by Executive against Holdings, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by Holdings of the covenants and agreements of this  Section 11;
provided that this paragraph shall not, in and of itself, preclude Executive from defending himself against the enforceability of the
covenants and agreements of this Section 11. 

        12.    Indemnification and Reimbursement of Payments on Behalf of Executive.    All payments to Executive under this
Agreement shall be subject to all applicable federal and state withholding, payroll and other taxes. Executive shall be solely responsible for all applicable taxes imposed upon him as a result of any
payment made to him by the Company or Holdings, including any such payments that are subject to withholding taxes. If the Company or Holdings is required to make any payment of such taxes, Executive
shall indemnify the Company and Holdings for any amounts so paid. 

        13.    Acknowledgements.    Executive hereby acknowledges that the enforcement of the provisions of  Section 11 may potentially
interfere with his ability to pursue a proper livelihood. Executive recognizes and agrees that the enforcement of this
Agreement is necessary to ensure the preservation, protection and continuity of the business, trade secrets and goodwill of Holdings and the Company. Executive 

11

 

agrees
that, due to the proprietary nature of Holdings' business, the restrictions set forth in this Agreement are reasonable as to time and scope. Executive hereby acknowledges that he has been
advised to consult with an attorney before executing this Agreement and that he has done so or, after careful reading and consideration, he has chosen not to do so of his own volition. 

        14.    Employee Representation.    Executive expressly represents and warrants to Holdings that (a) Executive
is not a party to any contract or agreement and is not otherwise obligated in any way, and is not subject to any rules or regulations, whether governmentally imposed or otherwise, which will or may
restrict in any way Executive's ability to fully perform Executive's duties and responsibilities under this Agreement, and (b) Executive has no claims against Holdings or any of its
Subsidiaries, other than claims for salary and bonus, ordinary course expense reimbursement arising under his existing employment agreement and existing benefit plans and stock arrangements of
Holdings or its Subsidiaries. 

        15.    Obligations Joint and Several.    The Company shall be jointly and severally liable for all obligations of
Holdings to Executive under this Agreement. 

12

   
        16.    Certain Defined Terms.    As used herein, the following terms shall have the following meanings: 

        "Affiliate" (a) in the case of any Person, means any other Person, directly or indirectly controlling, controlled by or under
common control with such Person and any partner, member or equityholder of such Person, where "control" means the possession, directly or indirectly, of the power to direct the management and policies
of a Person whether through the ownership of voting securities, by contract or otherwise, (b) in the case of Bear Stearns Merchant Banking Partners II, L.P., includes any Person identified in
clause (b), (c), (d) or (e) of the definition of BSMB Group, and in (c) all cases shall not include Holdings or any of its Subsidiaries. 

        "Bear Stearns" means collectively The Bear Stearns Companies Inc. and its Subsidiaries. 

        "BSMB" means BSMB/NYCG LLC, a Delaware limited liability company. 

        "BSMB Group" means (a) BSMB, (b) Bear Stearns, (c) any investment fund sponsored by the merchant banking group of
Bear Stearns, (d) any investment fund managed by employees of the merchant banking group of Bear Stearns, (e) the general partner or manager of any investment fund described in
clause (c) or (d) above, and (f) each of the partners, members or equityholders of any Person described in clause (c), (d) or (e) above. 

        "Change of Control" means: 

        (a)   any
acquisition by a "person", as such term is used in Sections 13(d) and 14(d) of the Exchange Act, (other than the Permitted Holders) that results in such person
becoming the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), of voting securities of Holdings representing (A) 30% or more of the combined voting power
of Holdings' then outstanding voting securities and (B) a greater percentage of Holdings' then outstanding voting securities than the percentage of Holdings' then outstanding voting securities
for which one or more Permitted Holders are the "beneficial owners" (as defined in Rule 13d-3 under the Exchange Act) (a "Covered
Person"); 

        (b)   during
any period of two consecutive years commencing after the IPO Effective Date, individuals who at the beginning of such period constitute the Board, and any
director whose election by the Board or nomination for election by Holdings' stockholders was approved by a vote of at least a majority of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof; 

        (c)   there
is consummated a merger or consolidation of Holdings with any other corporation, other than (i) a merger or consolidation which would result in the holders
of the voting securities of Holdings outstanding immediately prior thereto holding more than 50% of the combined voting power of the voting securities of Holdings, the surviving entity or its parent
outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a recapitalization of Holdings (or similar transaction) in which no "person"
(as defined in clause (a) above) is or becomes a Covered Person; or 

        (d)   there
is consummated a sale of all or substantially all of the assets of Holdings as determined on a consolidated basis, or the stockholders of Holdings approve a plan
of complete liquidation of Holdings (other than any transaction which results in Related Parties owning or acquiring more than fifty percent (50%) of the assets owned by Holdings immediately prior to
the transaction). 

        Notwithstanding
the foregoing, in no event shall a Change of Control be deemed to have occurred with respect to Executive, if Executive is part of a purchasing group which consummates
the Change of Control transaction. Executive shall be deemed "part of a purchasing group" for purposes of the preceding sentence if Executive is an equity participant in the purchasing company or
group, other than equity participation limited to: (i) passive ownership by Executive and any other Person that would be considered the same "person" (as defined in clause (a) above) of
less than five (5%) percent of any class of equity securities of the purchasing company that are registered under Section 12 of the 

13

 

Exchange
Act; (ii) equity participation following a transaction retained or received in respect of securities of Holdings outstanding immediately prior to such transaction on the same basis as
the other holders of such securities; or (iii) ownership of equity participation in the purchasing company or group which is otherwise not significant, as determined prior to the Change of
Control by a majority of the non-employee continuing directors. 

        "Code" means the Internal Revenue Code of 1986, as amended from time to time. 

        "Company Sale" means a transaction, whether in a single transaction or in a series of related transactions, with any Person or Persons
other than Bear Stearns Merchant Banking Partners II, L.P. and/or one or more of its Affiliates, pursuant to which such Person or Persons (i) acquire (whether by merger, consolidation,
recapitalization, reorganization, redemption, transfer or issuance of capital stock
or otherwise) capital stock of Holdings (or any surviving or resulting corporation) possessing the voting power to elect, or otherwise have the power to elect, a majority of the board of directors of
Holdings (or such surviving or resulting corporation) or (ii) acquire assets constituting all or substantially all of the assets of Holdings and its Subsidiaries (as determined on a
consolidated basis). Notwithstanding the foregoing, under no circumstances shall a sale of Holdings securities for cash in a Public Offering be deemed to be a Company Sale for the purposes hereof. 

        "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time. 

        "IPO Effective Date" means the date of sale of Holdings' common stock to the public in a Qualified Public Offering. 

        "Notice of Termination" means a notice, which indicates the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated. For purposes of this Agreement, no such
purported termination of employment shall be effective without such Notice of Termination. 

        "Operating Income" means, for any period, consolidated operating income (or loss) of Holdings and its subsidiaries for such period, as
determined in accordance with GAAP, subject to such adjustments as the Board may in its reasonable discretion determine to exclude items that are not indicative of underlying financial results,
including without limitation fees to BSMB and any unusual FAS 123 non-cash charges. 

        "Permitted Holders" means collectively (a) any member of the BSMB Group described in clause (a), (c), (d) or
(e) of the definition of BSMB Group, (b) any member of the BSMB Group described in clause (b) or (f) of the definition of BSMB Group (but only to the extent that such
Person acquires voting securities of Holdings as part of a distribution of Holdings' voting securities by any Person described in clause (a) above), (c) the members of management of
Holdings and its Subsidiaries on the IPO Effective Date that are parties to the Stockholders Agreement, (d) any family member of any individual described in clause (a), (b) or
(c) above, (e) any trust, corporation, partnership or other entity, the beneficiaries, stockholders partners, owners of which consist solely of one or more of the individuals described
in clause (a), (b), (c) or (d) above, (f) any trustee or other fiduciary holding securities under an employee benefit plan of Holdings or any of its majority-owned
subsidiaries, and (g) any Person owned, directly or indirectly, by the stockholders of Holdings in substantially the same proportion as their ownership of Holdings' voting securities. 

        "Person" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or other entity and a governmental entity or any department, agency or political subdivision thereof. 

        "Public Offering" means any offering by Holdings of its capital stock or equity securities to the public pursuant to an effective
registration statement under the Securities Act; provided that a Public Offering shall not include an offering made in connection with a business acquisition or combination or an employee benefit
plan. 

14

 

        "Qualified Public Offering" means an underwritten Public Offering of shares of Holdings' common stock which results in aggregate gross
proceeds to Holdings and any selling stockholders of more than $75,000,000. 

        "Related Party" means (a) a majority-owned subsidiary of Holdings, (b) a trustee or other fiduciary holding securities under
an employee benefit plan of Holdings or any of its majority-owned subsidiaries, or (c) a corporation owned directly or indirectly by the stockholders of Holdings in substantially the same
proportion as their ownership of Holdings' voting securities. 

        "Sale of Holdings" means a "Company Sale" as defined in the Option Agreement. 

        "Securities Act" means the Securities Act of 1933, as amended from time to time. 

        "Securityholders Agreement" means that certain Securityholders Agreement, dated as of November 27, 2002 among Holdings, Executive,
BSMB and the other parties thereto. 

        "Stockholders Agreement" means that certain Stockholders Agreement dated August 25, 2004 among Holdings, Executive, BSMB and the
other parties thereto. 

        "Subsidiary" means, with respect to any Person, any corporation, limited liability company, partnership, association or other business
entity of which (a) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or
(b) if a limited liability company, partnership, association or other business entity, a majority of the limited liability company, partnership or other similar ownership interest thereof is at
the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to
have a majority ownership interest in a limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall be or control the managing director or
general partner of such limited liability company, partnership, association or other business entity. 

        "Termination Date" means, in the case of Executive's death, the date of death, in the case of a termination for Cause, the date of such
termination for Cause, or in all other cases, the date specified in the Notice of Termination; provided that if Executive's employment is terminated by Holdings due to Disability, the date specified
in the Notice of Termination shall be at least thirty (30) days from the date the Notice of Termination is given to Executive. 

        17.    Successors and Assigns.    

        (a)   This
Agreement shall be binding upon and shall inure to the benefit of Holdings, the Company and their respective successors and assigns, and Holdings and the Company
shall require any successor or assign to expressly assume and agree to perform this Agreement in the same manner and to the same extent that Holdings or the Company, as applicable, would be required
to perform it if no such succession or assignment had taken place. The term "Holdings" as used herein shall include any such successors and assigns to Holdings' business or assets. The term "the
Company" as used herein shall include any such successors and assigns to the Company's business or assets. The term "successors and assigns" as used
herein shall mean a corporation or other entity acquiring or otherwise succeeding to, directly or indirectly, all or substantially all the assets (including this Agreement) and business of Holdings or
the Company, as applicable, whether by operation of law or otherwise. 

        (b)   Neither
this Agreement nor any right or interest hereunder shall be assignable or transferable by Executive, Executive's beneficiaries or legal representatives, except
by will or by the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by Executive's legal personal representative. 

15

 

        18.    Arbitration.    Except with respect to the remedies set forth in  Section 11(e), if in the event of any controversy or
claim between Holdings or any of its Subsidiaries and Executive arising out of or relating
to this Agreement, either Party delivers to the other Party a written demand for arbitration of a controversy or claim then such claim or controversy shall be submitted to binding arbitration. The
binding arbitration shall be administered by the American Arbitration Association under its Commercial Arbitration Rules. The arbitration shall take place in New York, New York before a single
arbitrator. The arbitrator shall have no authority to award punitive damages against Holdings, the Company or Executive. The arbitrator shall have no authority to add to, alter, amend or refuse to
enforce any portion of the disputed agreements. THE COMPANY, HOLDINGS AND EXECUTIVE EACH WAIVE ANY RIGHT TO A JURY TRIAL OR TO PETITION FOR STAY IN ANY
ACTION OR PROCEEDING OF ANY KIND ARISING OUT OF OR RELATING TO THIS AGREEMENT. 

        19.    Notices.    For the purposes of this Agreement, notices and all other communications provided for in the
Agreement (including the Notice of Termination) shall be in writing and shall be deemed to have been duly given when personally delivered or sent by registered or certified mail, return receipt
requested, postage prepaid, or upon receipt if overnight delivery service or facsimile is used, addressed as follows: 

To Executive:  

Ronald
Ristau

c/o New York & Company, Inc.

450 West 33rd Street

New York, New York 10001 

With a copy, which shall not constitute notice, to:  

Kramer
Levin Naftalis & Frankel LLP

919 Third Avenue

New York, New York 10022

Attention: Thomas E. Molner, Esq.

Tel: (212) 715-9429

Fax: (212) 715-8000 

To Holdings or the Company:  

New
York & Company, Inc.

450 West 33rd Street

New York, New York 10001

Attention: Richard P. Crystal

Tel: (212) 884-2010

Fax: (212) 884-2399 

With a copy, which shall not constitute notice, to:  

Bear
Stearns Merchant Banking

c/o Bear, Stearns & Co. Inc.

383 Madison Avenue, 40th Floor

New York. New York 10179

Attention: Bodil Arlander

Tel.: 212-272-3988

Fax: 212-272-7425 

or
at such address or to the attention of such other person as the recipient Party has specified by prior written notice to the sending Party. 

16

 

        20.    Settlement of Claims.    Holdings' obligation to make the payments provided for in this Agreement and otherwise
to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other right which Holdings
may have against Executive or others. 

        21.    Amendment; Miscellaneous.    No provision of this Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing and signed by Executive and Holdings. No waiver by any Party hereto at any time of any breach by the other Party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other Party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreement or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by any Party which is not expressly set forth in this
Agreement. 

        22.    Resignation as Officer or Director.    Upon the termination of Executive's employment in accordance with this
Agreement, Executive shall resign each position (if any) that he then holds as an officer, director or manager of Holdings or any of its Subsidiaries. 

        23.    Insurance and Indemnity.    Holdings and the Company shall indemnify Executive to the fullest extent permitted
by law and the certificate of incorporation and bylaws of Holdings and the Company as in effect on the date hereof, and shall advance to Executive reasonable fees and expenses of attorneys and other
advisors as such fees and expenses are incurred (subject to an undertaking from Executive to repay such advances if it shall be finally determined by a judicial decision which is not subject to
further appeal that Executive was not entitled to reimbursement of such fees and expenses), against all amounts (including, without limitation, judgments, fines, settlement payments, losses, damages,
costs and expenses (including reasonable attorneys' fees)) incurred or paid by Executive in connection with any action, proceeding, suit or investigation arising out of or relating to the performance
by Executive of services for, or acting as a fiduciary of any employee benefit plans, programs or arrangements of Holdings or the Company, or as a director, officer or employee of, Holdings, the
Company or Holdings' and the Company's Subsidiaries. Holdings agrees that Executive shall at all times receive the benefit of indemnifications and directors' and officers' insurance as an officer and
director of Holdings and its Subsidiaries, on terms no less favorable than those provided to the other officers and directors of Holdings and its Subsidiaries as of the date hereof and hereafter. 

        24.    Governing Law.    This Agreement shall be governed by and construed and enforced in accordance with the laws of
the State of New York without giving effect to the conflict of law principles thereof. 

        25.    Severability.    The provisions of this Agreement shall be deemed severable and the invalidity or
unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. 

        26.    Fees and Expenses.    Holdings will pay the reasonable legal fees and expenses of Executive in connection with
the negotiation of this Agreement. 

        27.    Entire Agreement.    This Agreement constitutes the entire agreement between the Parties hereto with respect to
the subject matter hereof and supersedes all prior agreements, if any, understandings and arrangements, oral or written, between the Parties hereto with respect to the subject matter hereof. 

        28.    Effect of IPO.    Each of Executive, the Company and Holdings agree that
(a) Section 9(b)(ii) of this Agreement shall be without force or effective until the IPO Effective Date, and shall have full force and
effect thereafter, and (ii) as of the IPO Effective Date, Section 4(e) of this Agreement shall be void and of no further force and effect. 

[END
OF PAGE]

[SIGNATURE PAGE FOLLOWS] 

17

 

        IN
WITNESS WHEREOF, Holdings and the Company have each caused this Agreement to be executed by its duly authorized officer and Executive has executed this Agreement, all as of the day
and year first above written. 

	 	 	NEW YORK & COMPANY, INC.
	

 	
 	

By:	

/s/  RICHARD CRYSTAL      
 Name: Richard Crystal

Title: Chief Executive Officer
	

 	
 	

LERNER NEW YORK, INC.
	

 	
 	

By:	

/s/  RICHARD CRYSTAL      
 Name: Richard Crystal

Title: Chief Executive Officer
	

 	
 	

/s/  RONALD RISTAU      
 RONALD RISTAU

18

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Exhibit 10.8  

 
 

FIRST AMENDMENT TO
  AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT    
    

        THIS FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this "Amendment"), dated as of
May 19, 2004, is entered into by and among the lenders signatory hereto (the "Lenders"), CONGRESS FINANCIAL CORPORATION, a Delaware corporation,
as agent for the Lenders (in such capacity, "Agent"), THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation, as documentation agent
("Documentation Agent"), and LERNER NEW YORK, INC., a Delaware corporation ("Lerner") and
LERNCO, INC., a Delaware corporation ("Lernco" and together with Lerner, "Borrowers" and each a
"Borrower"). 

 
 

RECITALS    
    

        A.    Borrowers,
Agent, Documentation Agent and the Lenders have previously entered into that certain Amended and Restated Loan and Security Agreement, dated March 16,
2004 (the "Loan Agreement"), pursuant to which the Lenders have made certain loans and financial accommodations available to Borrowers. Terms used
herein without definition shall have the meanings ascribed to them in the Loan Agreement. 

        B.    Borrowers,
Agent, Documentation Agent and the Lenders now wish to amend the Loan Agreement on the terms and conditions set forth herein in order to, among other things,
allow the Borrowers to incur Indebtedness of up to $75,000,000 pursuant to a loan agreement with Ableco Finance LLC, in its capacity as agent for the lenders party thereto. 

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

 
 

AGREEMENT    
    

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

        1.    Amendment to Loan Agreement.    

        (a)   The
following defined terms are hereby added to Section 1 of the Loan Agreement: 

        1.1.1     "Ableco Agent" shall mean Ableco in its capacity as agent for the lenders party to the Ableco Loan
Agreement, or any successor agent for the lenders party to the Ableco Loan Agreement. 

        1.1.2     "Ableco Loan" shall mean the Indebtedness of Borrowers incurred pursuant to the Ableco Loan
Documentation. 

        1.1.3     "Ableco Loan Agreement" shall mean that certain Term Loan and Security Agreement, dated as of
May 19, 2004, by and among the lenders party thereto, Ableco Agent, and Borrowers, as the same may be amended, modified or supplemented from time to time in accordance with the terms of this
Agreement. 

        1.1.4     "Ableco Loan Documentation" shall mean the Ableco Loan Agreement and all documents, agreements and
instruments related thereto, as the same may be amended, modified or supplemented from time to time in accordance with the terms of this Agreement. 

        1.1.5     "Ableco Loan Intercreditor Agreement" shall mean that certain Intercreditor Agreement, dated as of
May 19, 2004, by and between the Ableco Agent and Agent and 

 

acknowledged
by Borrowers and the Obligors, as the same may be amended, modified or supplemented from time to time. 

        (b)   Section 1.7
of the Loan Agreement is hereby amended by adding the following sentence to the end of such definition: 

"Notwithstanding
anything herein to the contrary, Aozora Bank, Ltd. shall be deemed to be an Affiliate of Ableco for purposes of the Eligible Transferee definition." 

        (c)   Section 1.22
of the Loan Agreement is hereby amended and restated to read in its entirety as follows: 

        "1.22     "Bank Product Reserve" shall mean any and all reserves that Agent may establish from time to time, in its
sole discretion, for the Bank Products then provided and outstanding so long as either (i) such reserve was established by Agent at the time the Bank Product related thereto was provided by a
Bank Product Provider or (ii) such reserve was established with the consent of the Required Term Loan Lenders; provided, however, at all times
during which any obligations of any Borrower are outstanding with respect to any Hedging Transaction, Agent shall establish and maintain a reserve in an amount equal to such obligations (calculated on
a marked to market basis) as of any date of determination." 

        (d)   The
defined terms set forth in Sections 1.24, 1.25, 1.26 and 1.144 of the Loan Agreement are hereby replaced with "[Reserved]". 

        (e)   Section 1.38(e)
of the Loan Agreement is hereby amended to read as follows: 

"(e)
the occurrence of any "Change of Control" as defined in the Ableco Loan Documentation." 

        (f)    Section 1.69
of the Loan Agreement is hereby amended and restated to read in its entirety as follows: 

        "1.69     "Eligible Transferee" shall mean (a) any Lender; (b) the parent company of any Lender
and/or any other Affiliate of such Lender; (c) any person (whether a corporation, partnership, trust or otherwise) that is engaged in the business of making, purchasing, holding or otherwise
investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or with respect to any Lender that is a fund which invests in
bank loans and similar extensions of credit, any other fund that invests in bank loans and similar extensions of credit and is managed by the same investment advisor as such Lender or by an Affiliate
of such investment advisor, and in each case is approved by Agent (except that no such Agent approval is required with regard to the Term Loan); and (d) any other commercial bank, financial
institution or "accredited investor" (as defined in Regulation D under the Securities Act of 1933) approved by Agent, provided, that,
(i) except with respect to an assignment of the Term Loan by Ableco to a Borrower pursuant to that certain Agreement Regarding Assignments dated March 16, 2004 among the Borrowers and
Ableco and subject to the terms of Section 2.3(d) hereof, no Borrower, Obligor, Affiliate of any Borrower or Obligor, BSMB or any Affiliate of BSMB shall qualify as an Eligible Transferee,
(ii) no Person to whom any Indebtedness which is in any way subordinated in right of payment to any other Indebtedness of any Borrower or Obligor shall qualify as an Eligible Transferee, except
as Agent may otherwise specifically agree and (iii) no Person that is organized under the laws of a jurisdiction other than the United States or any state thereof shall qualify as an Eligible
Transferee pursuant to clause (d) above unless, at the time such Person becomes a Lender hereunder, such Person qualifies for an exemption from the withholding of taxes imposed by the United
States or waives its right to receive any additional 

2

 

payments
pursuant to Section 6.4(d) hereof on account of such Taxes (other than Covered Taxes)." 

        (g)   Section 1.122
of the Loan Agreement is hereby amended and restated to read in its entirety as follows: 

        "1.122     "Leverage Ratio" shall mean, at the end of any fiscal month, the ratio computed for the period
consisting of twelve consecutive fiscal months ended on such date of (a) the principal amounts of the Loans and any other secured Indebtedness of any Borrower (other than the Ableco Loan or any
refinancing of the Ableco Loan permitted by this Agreement) that are outstanding as of the last day of such period to (b) Borrowers' EBITDA for such period." 

        (h)   Section 1.123
of the Loan Agreement is hereby amended and restated to read in its entirety as follows: 

        "1.123     "Leverage Ratio (Funded)" shall mean, at the end of any fiscal month, the ratio computed for the period
consisting of twelve consecutive fiscal months ended on such date of (a) the principal amounts of the Loans and any other secured Indebtedness of any Borrower (other than Letter of Credit
Accommodations and the Ableco Loan or any refinancing of the Ableco Loan permitted by this Agreement) that are outstanding as of the last day of such period to (b) Borrowers' EBITDA for such
period." 

        (i)    Section 1.147
of the Loan Agreement is hereby amended and restated to read in its entirety as follows: 

        "1.147     "Obligations" shall mean the Term Loan, any and all Revolving Loans, Letter of Credit Accommodations and
all other obligations, liabilities and indebtedness of every kind, nature and description owing by any Borrower to Agent or any Lender and/or any of their Affiliates, including all obligations arising
under or in connection with Bank Products, whether consisting of principal, interest, charges, fees, costs and expenses, fees relating to Letters of Credit even if such fees were incurred prior to the
date of the Original Loan Agreement, however evidenced, whether as principal, surety, endorser, guarantor or otherwise, arising under this Agreement or any of the other Financing Agreements, whether
now existing or hereafter arising, whether arising before, during or after the initial or any renewal term of this Agreement or after the commencement of any case with respect to any Borrower or any
Guarantor or Obligor under the United States Bankruptcy Code or any similar statute (including the payment of interest and other amounts which would accrue and become due but for the commencement of
such case, whether or not such amounts are allowed or allowable in whole or in part in such case), whether direct or indirect, absolute or contingent, joint or several, due or not due, primary or
secondary, liquidated or unliquidated, or secured or unsecured; provided, however, Obligations shall not include the Ableco Loan or any other
obligations or liabilities owed to any person by any Borrower or Obligor pursuant to the Ableco Loan Documentation." 

        (j)    Section 1.165
of the Loan Agreement is hereby amended and restated to read in its entirety as follows: 

        "1.165     "Qualified Cash" shall mean, as of any date of determination, the amount of cash carried by any Borrower
on its balance sheet, other than cash in the Cash Collateral Account or any Blocked Account, which is in an account subject to a Deposit Account Control Agreement and with respect to which Agent has
received statements of the available balances thereof from the bank or other financial institution at which such account is maintained which confirm such amounts; provided,
however, for purposes of any calculation of the amount of Qualified Cash that may be required under the provisions of this Agreement, such calculation 

3

 

shall
not include any proceeds of the Ableco Loan then contained in any such account or otherwise held by any Borrower." 

        (k)   Section 8.14
of the Loan Agreement is hereby amended and restated to read in its entirety as follows: 

        "8.14     Restrictions on Subsidiaries.    Except for restrictions contained in this Agreement, the
Covenant Agreement, the Transition Services Agreement, the Ableco Loan Documentation or any other agreement with respect to Indebtedness of any Borrower permitted hereunder as in effect on the date
hereof (or hereafter in effect pursuant to any refinancing thereof permitted under the terms of this Agreement), there are no contractual or consensual restrictions on any Borrower or any of its
Subsidiaries which prohibit or otherwise restrict (a) the transfer of cash or other assets (i) between Borrowers, (ii) between any Borrower and any Subsidiary of a Borrower, or
(iii) between any Subsidiaries of any Borrower or (b) the ability of any Borrower or any of its Subsidiaries to incur Indebtedness or grant security interests to Agent or any Lender in
the Collateral." 

        (l)    Schedule 8.15
to the Loan Agreement is hereby amended by adding the Ableco Loan Documentation thereto. 

        (m)      A
new subsection (f) is hereby added to Section 9.6 which reads as follows: 

"(f)  As
and when provided to the Ableco Agent, Borrowers shall provide to Agent a copy of each (i) enterprise valuation report provided by Borrowers pursuant to
Section 7.7(b) of the Ableco Loan Agreement and (ii) compliance certificate and calculations provided by Borrowers pursuant to Section 9.6(a) of the Ableco Loan Agreement." 

        (n)   Section 9.8
of the Loan Agreement is hereby amended by deleting the "and" at the end of subsection (k) thereof, replacing the "." at the end of subsection
(l) thereof with "; and" and adding the following subsection (m) thereto: 

"(m)  to
the extent subject to the Ableco Loan Intercreditor Agreement, the liens and security interests of (i) the Ableco Agent in the Collateral securing the Ableco Loan or
(ii) of any other lender or agent party to any refinancing of the Ableco Loan permitted under the terms of this Agreement which liens and security interests secure such refinancing
Indebtedness." 

        (o)   Section 9.9(d)
of the Loan Agreement is hereby amended and restated to read in its entirety as follows: 

        "(d)   the
Ableco Loan and guaranties thereof by the Obligors so long as the outstanding principal amount thereof does not exceed $75,000,000 minus all principal
payments made with respect thereto and provided, that, (i) Borrowers shall not, directly or indirectly, (A) amend, modify, alter or change the Ableco Loan Documentation in any way which
causes the terms thereof to be, when taken as a whole, materially more adverse to Borrowers, Agent or any Lender than previously existed or which amends, modifies, alters or changes the payment terms
thereof so as to increase the amount, frequency or maturity date of any payments thereof, (B) grant any liens or security interests in a Borrower's or Obligor's assets to secure such
Indebtedness unless a lien or security interest in such assets is also granted to Agent to secure the Obligations or (C) prepay, redeem, retire, defease, purchase or otherwise acquire such
Indebtedness except pursuant to repayments thereof permitted under Section 9.10(a)(ii) hereof, or set aside or otherwise deposit or invest any sums for such purpose,
(ii) Borrowers furnish to Agent all (A) notices or demands in connection with such Indebtedness either received by any Borrower or on its behalf promptly after the receipt 

4

 

thereof,
or sent by any Borrower or on its behalf concurrently with the sending thereof, as the case may be and (B) amendments, modifications, alterations or changes to the Ableco Documentation
as and when entered into by the parties thereto and (iii) without limiting any other provision of this Agreement, any refinancing of such Indebtedness is not on terms which, taken as a whole,
are materially more adverse to Borrowers, Agent or any Lender than previously existed and the principal amount of such Indebtedness as refinanced does not exceed the previously outstanding principal
balance of such Indebtedness;" 

        (p)   Schedule 9.9(h)
is hereby amended by: 

        (i)    replacing
item 1 thereof with the following "1. Promissory Note in favor of Nevada Receivable Factoring, Inc. in the principal amount of $120,815,000 (such Note
to be cancelled in the event of consolidation)"; and 

        (ii)   replacing
item 2 thereof with the following "2. Promissory Note in favor of Lernco, Inc. in the principal amount of $35,063,959". 

        (q)   Section 9.10(a)(ii) of
the Loan Agreement is hereby amended to read as follows: 

"(ii)  the
Ableco Loan unless (A) repaid from proceeds of a refinancing thereof permitted under the terms of this Agreement, (B) repaid from proceeds of Collateral or
insurance required to be remitted to the Ableco Agent pursuant to the terms of the Ableco Loan Intercreditor Agreement, (C) repaid from the net cash proceeds received by Borrowers from an IPO
or other issuance or sale of, or capital contribution in respect of, any capital stock or other equity securities of NY&Co after the date hereof, or (D) with respect to any other principal
payment thereof (1) at all times during the thirty (30) day period immediately prior to such payment and after giving effect to such payment, Borrowers have
Excess Availability plus Qualified Cash of no less than $40,000,000, (2) Borrowers' EBITDA for the twelve-month period most recently ended is $55,000,000 or more and (3) both before and
after giving effect to such payment, no Default or Event of Default exists or would occur, and" 

        (r)   Section 9.11(c)
of the Loan Agreement is hereby amended and restated to read in its entirety as follows: 

        "(c)   Borrowers
may pay (directly or indirectly) dividends to NY&Co to the extent required to permit NY&Co to repurchase Capital Stock consisting of common or
preferred stock held by employees pursuant to any employee stock ownership plan thereof upon the termination, retirement or death of any such employee in accordance with the provisions of such plan,  provided, that,
 as to any such repurchase, each of the following conditions is satisfied: (A) as of the date of the payment for such repurchase
and after giving effect thereto, no Default or Event of Default shall exist or have occurred and be continuing, (B) such repurchase shall be paid with funds legally available therefor,
(C) such repurchase shall not violate any law or regulation or the terms of any indenture, agreement or undertaking to which Lerner is a party or by which Lerner or its properties are bound,
and (D) the amount of all payments for such repurchases in any calendar year shall not exceed $5,000,000 in the aggregate for both Borrowers; provided,
however, that the foregoing amount may be increased by an additional amount not to exceed $10,000,000 if Borrowers have Excess Availability plus Qualified Cash of at least
$40,000,000 after giving effect to such payments;" 

        (s)   Section 9.11(d)
of the Loan Agreement is hereby amended and restated to read in its entirety as follows: 

        "(d)   Borrowers
may pay dividends (directly or indirectly) to NY&Co for annual management fees and cost reimbursement payable to Bear Stearns Merchant Manager
II, 

5

 

LLC,
pursuant to the terms of the Advisory Services Agreement dated as of November 27, 2002 (the "Advisory Agreement"), as in effect on the date
of the Original Loan Agreement, so long as (i) no Event of Default has occurred and is continuing or would result therefrom and (ii) such fees do not exceed (A) an aggregate
annual amount of up to the greater of $750,000 or two and one-half percent (2.5%) of the EBITDA for the fiscal year to which such fees relate or (B) $4,000,000 in the aggregate with
respect to fees payable pursuant to Section 3(e) of the Advisory Agreement upon the consummation of an IPO." 

        (t)    Section 9.11(i) of
the Loan Agreement is hereby amended and restated to read in its entirety as follows: 

        "(i)    upon
receipt of all cash proceeds of the Ableco Loan, Borrowers may pay dividends (directly or indirectly) to NY&Co for the redemption of its preferred
stock held by the Persons and/or entities listed on Schedule 9.11(i) hereto (except as otherwise indicated on such  Schedule 9.11(i)) and the
payment of transaction fees and expenses in connection therewith, in an amount not to exceed, in the aggregate for all
such dividends made pursuant to this Section 9.11(i), $80,000,000; and" 

        (u)   Schedule 9.11(i) attached
to this Amendment is hereby added to the Loan Agreement as Schedule 9.11(i) thereto. 

        (v)   Section 9.16
of the Loan Agreement is hereby amended and restated to read in its entirety as follows: 

        "9.16   Limitation of Restrictions Affecting Subsidiaries.  No Borrower shall, directly or
indirectly, create or otherwise cause or suffer to exist any encumbrance or restriction which prohibits or limits the ability of any Subsidiary of any Borrower to (a) pay dividends or make
other distributions or pay any Indebtedness owed to such Borrower or any of its Subsidiaries; (b) make loans or advances to such Borrower or any of its Subsidiaries, (c) transfer any of
its properties or assets to such Borrower or any of its Subsidiaries; or (d) create, incur, assume or suffer to exist any lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, other than encumbrances and restrictions arising under (i) applicable law, (ii) this Agreement, (iii) customary provisions restricting subletting or assignment
of any lease governing a leasehold interest of such Borrower or any of its Subsidiaries, (iv) customary restrictions on dispositions of real property interests found in reciprocal easement
agreements of such Borrower or any of its Subsidiaries, (v) any agreement relating to Indebtedness incurred by a Subsidiary of such Borrower prior to the date on which such Subsidiary was
acquired by such Borrower and outstanding on such acquisition date that is permitted under the terms of this Agreement, (vi) the extension or continuation of contractual obligations in
existence on the date of the Original Loan Agreement, (vii) the Ableco Loan Documentation and (viii) any agreement relating to a refinancing of Indebtedness permitted under the terms of
this Agreement; provided, that, any such encumbrances or restrictions contained in such extension or continuation are no less favorable to Agent and
Lenders than those encumbrances and restrictions under or pursuant to the contractual obligations so extended or continued." 

        (w)  Section 10.1(e)
of the Loan Agreement is hereby amended to read: 

        "(e)   except
as permitted by Section 9.7, any Borrower or any Obligor dissolves or any Borrower suspends or discontinues doing business;" 

        (x)   Section 10.1(q)
of the Loan Agreement is hereby amended to read "[Reserved].". 

        (y)   Section 10.2(d)(v) of
the Loan Agreement is hereby amended by replacing the words "Purchased Assets" contained therein with the words "Transferred Assets". 

6

 

        (z)   Section 11.3(a)(iv)(D)
of the Loan Agreement is hereby amended to read "[Reserved].". 

        (aa) The
following is hereby added to the Loan Agreement as Section 14.10: 

        "14.10     Effect of Ableco Loan Intercreditor Agreement.  So long as the Ableco Loan Intercreditor
Agreement remains in effect, no Borrower, Guarantor or Obligor shall have any liability to Agent or any Lender for failing to carry out any action required under the terms of this Agreement if such
action is expressly prohibited under the terms of the Ableco Loan Intercreditor Agreement." 

        (bb) The
first adjustment item listed on Schedule 1.60(a) to the Loan Agreement is hereby amended and restated to read as follows: 

        "Plus:
One-time expenses incurred in connection with the closing of this Agreement and the transactions contemplated to occur on the Closing Date and the consummation of the
Ableco Loan financing and the transactions contemplated to occur in connection therewith, in an amount not to exceed $9,000,000 in the aggregate" 

        2.    NY&Co Name Change; Amendment to Guaranties.    

        (a)   Notwithstanding
the provisions of Section 9(a)(ii)(A) of the Guaranty by NY&Co in favor of Agent which requires that Agent receive no less than thirty
(30) days prior written notice of any change in NY&Co's name, Agent agrees that NY&Co may, prior to the expiration of thirty (30) days after the date hereof, change its name to "New
York & Company, Inc." so long as the other provisions of Section 9(a)(ii) of such Guaranty are complied with. 

        (b)   Section 9.9(g)
of each Guaranty is hereby amended by deleting the "and" at the end of subsection (vi) thereof, replacing the "." at the end of subsection
(vii) thereof with "; and" and adding the following subsection (viii) thereto: 

        "(viii)
to the extent subject to the Ableco Loan Intercreditor Agreement, the liens and security interests of (A) the Ableco Agent in the Collateral securing the Ableco Loan or
(B) of any other lender or agent party to any refinancing of the Ableco Loan permitted under the terms of the Loan Agreement which liens and security interests secure such refinancing
Indebtedness." 

        3.    Effectiveness of this Amendment.    Agent must have received the following items, each in form and content
acceptable to Agent, and be satisfied that the following conditions have been met, before this Agreement is effective: 

        (a)   this
Amendment and the attached Acknowledgement by Guarantors, each fully executed in a sufficient number of counterparts for distribution to all parties; 

        (b)   for
the ratable benefit of the Revolving Loan Lenders, a non-refundable accommodation fee in the amount of One Hundred Thousand Dollars ($100,000), which fee
is fully-earned as of, and due and payable on the date hereof; 

        (c)   the
Ableco Loan Documentation; 

        (d)   the
Ableco Loan Intercreditor Agreement, duly executed or acknowledged by each party thereto; 

        (e)   no
Default or Event of Default shall exist; 

        (f)    the
representations and warranties set forth herein and in the Loan Agreement must be true and correct; 

7

 

        (g)   all
other documents and legal matters in connection with the transactions contemplated by this Amendment shall have been delivered or executed or recorded and shall be
in form and substance satisfactory to Agent. 

        4.    Representations and Warranties.    Each Borrower represents and warrants as follows: 

        (a)    Authority.    Each Borrower has the requisite corporate power and authority to execute and deliver this
Amendment, and to perform its obligations hereunder and under the Financing Agreements (as amended or modified hereby) to which it is a party. The execution, delivery and performance by each Borrower
of this Amendment have been duly approved by all necessary corporate action and no other corporate proceedings are necessary to consummate such transactions. 

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

        (c)    Due Execution.    The execution, delivery and performance of this Amendment are within the power of each
Borrower, have been duly authorized by all necessary corporate action, have received all necessary governmental approval, if any, and do not contravene any law or any contractual restrictions binding
on any Borrower. 

        5.    Choice of Law.    The validity of this Amendment, its construction, interpretation and enforcement, the rights
of the parties hereunder, shall be governed by the internal laws of the State of New York but excluding any principles of conflicts of law or other rule of law that would cause the application of the
law of any jurisdiction other than the laws of the State of New York. 

        6.    Counterparts.    This Amendment may be executed in any number of counterparts and by different parties and
separate counterparts, each of which when so executed and delivered, shall be deemed an original, and all of which, when taken together, shall constitute one and the same instrument. Delivery of an
executed counterpart of a signature page to this Amendment by telefacsimile shall be effective as delivery of a manually executed counterpart of this Amendment. 

        7.    Reference to and Effect on the Financing Agreements.    

        (a)   Upon
and after the effectiveness of this Amendment, each reference in the Loan Agreement to "this Agreement", "hereunder", "hereof" or words of like import referring to
the Loan Agreement, and each reference in the other Financing Agreements to "the Loan Agreement", "thereof" or words of like import referring to the Loan Agreement, shall mean and be a reference to
the Loan Agreement as modified and amended hereby. 

        (b)   Except
as specifically amended above, the Loan Agreement and all other Financing Agreements, are and shall continue to be in full force and effect and are hereby in all
respects ratified and confirmed and shall constitute the legal, valid, binding and enforceable obligations of Borrowers to Agent, Documentation Agent and the Lenders. 

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

        (d)   To
the extent that any terms and conditions in any of the Financing Agreements shall contradict or be in conflict with any terms or conditions of the Loan Agreement,
after giving effect to this Amendment, such terms and conditions are hereby deemed modified or amended 

8

 

accordingly
to reflect the terms and conditions of the Loan Agreement as modified or amended hereby. 

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

        9.    Integration.    This Amendment, together with the other Financing Agreements, incorporates all negotiations of
the parties hereto with respect to the subject matter hereof and is the final expression and agreement of the parties hereto with respect to the subject matter hereof. 

        10.    Severability.    In case any provision in this Amendment shall be invalid, illegal or unenforceable, such
provision shall be severable from the remainder of this Amendment and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 

        11.    Ratification of Term Loan Assignment.    The parties hereto hereby ratify the prior assignments of portions of
Ableco's interests in and rights to the Term Loan (under the terms of the Loan Agreement) to certain of its Affiliates, notwithstanding that such Persons may not have constituted Eligible Transferees
under the terms of the Loan Agreement prior to giving effect to this Amendment. 

9

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

	 	 	LERNER NEW YORK, INC., a Delaware corporation
	

 	
 	

By:	
 	

/s/  RONALD RISTAU      

	 	 	Name:	 	    

	 	 	Title:	 	    

	

 	
 	
LERNCO, INC.,

a Delaware corporation
	

 	
 	

By:	
 	

/s/  RONALD RISTAU      

	 	 	Name:	 	    

	 	 	Title:	 	    

	 	 	CONGRESS FINANCIAL CORPORATION,

a Delaware corporation

as Agent and as a Lender
	 	 	By:	 	/s/  JOHN WILLIAMEE, JR.      

	 	 	Name:	 	John Williamee, Jr.

	 	 	Title:	 	Vice President

	 	 	THE CIT GROUP/BUSINESS CREDIT, INC.,

a New York corporation,

as Documentation Agent and as a Lender
	 	 	By:	 	/s/  MANUEL R. ROGERS      

	 	 	Name:	 	Manuel R. Rogers

	 	 	Title:	 	Vice President

	 	 	LASALLE RETAIL FINANCE,

a division of LaSalle Business Credit, Inc.,

as agent for Standard Federal Bank, National

Association,

as a Lender
	 	 	By:	 	/s/  CRAIG G. NUTBROWN      

	 	 	Name:	 	Craig G. Nutbrown

	 	 	Title:	 	Vice President

	 	 	ABLECO FINANCE LLC,

on its behalf and on behalf

of its assignees as Lenders
	 	 	By:	 	    [illegible]

	 	 	Name:	 	    

	 	 	Title:	 	    

 
 

ACKNOWLEDGEMENT BY GUARANTORS
  
  Dated as of May 19, 2004    
    

        Each of the undersigned, being a Guarantor (each a "Guarantor" and collectively, the
"Guarantors") under their respective Amended and Restated Guaranty and Security Agreements, each dated as of March 16, 2004, made in favor of
Agent (as amended, modified or supplemented, each a "Guaranty" and collectively, the "Guaranties"),
hereby (a) acknowledges and agrees to the foregoing First Amendment to Amended and Restated Loan and Security Agreement (the "Amendment"),
(b) agrees to the amendment to each Guaranty set forth in Section 2(b) of the Amendment, and (c) confirms and agrees that its Guaranty is and shall continue to be, in full force
and effect and is hereby ratified and confirmed in all respects except that, (x) upon the effectiveness of, and on and after the date of the Amendment, each reference in such Guaranty to the
Loan Agreement (as defined in the Amendment), "thereunder", "thereof" or words of like import referring to the "Loan Agreement", shall mean and be a reference to the Loan Agreement as amended or
modified by the Amendment and (y) Section 9.9(g) of each Guaranty shall be amended as set forth in Section 2(b) of the Amendment. Although Agent has informed Guarantors of the
amendments to the Loan Agreement as set forth above, and Guarantors have acknowledged the same, each Guarantor understands and agrees that none of Agent, Documentation Agent or any Lender has any duty
under the Loan Agreement, the Guaranties or any other agreement with any Guarantor to so notify any Guarantor or to seek such an acknowledgement, and nothing contained herein is intended to or shall
create such a duty as to any advances or transaction hereafter. 

	 	 	NY & CO. GROUP, INC.,

a Delaware corporation
	

 	
 	

By:	
 	

/s/  RONALD RISTAU      

	 	 	Name:	 	    

	 	 	Title:	 	    

	

 	
 	
LERNER NEW YORK HOLDING, INC.,

a Delaware corporation
	

 	
 	

By:	
 	

/s/  RONALD RISTAU      

	 	 	Name:	 	    

	 	 	Title:	 	    

	

 	
 	
NEVADA RECEIVABLE FACTORING, INC.,

a Nevada corporation
	

 	
 	

By:	
 	

/s/  RONALD RISTAU      

	 	 	Name:	 	    

	 	 	Title:	 	    

	

 	
 	
ASSOCIATED LERNER SHOPS OF AMERICA, INC.,

a New York corporation
	

 	
 	

By:	
 	

/s/  RONALD RISTAU      

	 	 	Name:	 	    

	 	 	Title:	 	    

	

 	
 	
LERNER NEW YORK GC, LLC,

an Ohio limited liability company
	

 	
 	

By:	
 	

/s/  RONALD RISTAU      

	 	 	Name:	 	    

	 	 	Title:	 	    

 
 

Schedule 9.11(i)
  
  NY & Co. Group, Inc. Preferred Stock Holders    
    

	BSMB/NYCG LLC1	 	 
	

Richard Crystal	
 	

 
	

Ronald Ristau	
 	

 
	

Steve Newman	
 	

 
	

Kevin Finnegan	
 	

 
	

Charlotte Neuville	
 	

 
	

Sandra Brooslin	
 	

 
	

Matt Gluckson	
 	

 
	

Stuart Fishman	
 	

 
	

Steve Ellis	
 	

 
	

Patty Lane	
 	

 
	

Randy Krevat	
 	

 
	

John DeWolf III	
 	

 
	

Robert Madore	
 	

 

	1
	BSMB/NYCG
LLC will retain one share of Preferred Stock. 

QuickLinks

FIRST AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

RECITALS

AGREEMENT

ACKNOWLEDGEMENT BY GUARANTORS Dated as of May 19, 2004

Schedule 9.11(i) NY & Co. Group, Inc. Preferred Stock Holders

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