THIRD MODIFICATION TO LOAN AND SECURITY AGREEMENT

Exhibit 10.42

THIRD MODIFICATION TO LOAN AND SECURITY AGREEMENT

This Third Modification to Loan and Security Agreement (this “Modification”) is entered into by and between CYGNE DESIGNS, INC., a Delaware corporation (“Borrower”) and COMERICA BANK, (“Bank”), whose Western Market Headquarters is located at 000 Xxxx Xxxxx Xxxxx Xxxxxx, Xxx Xxxx, Xxxxxxxxxx as of December 20, 2007.

RECITALS

This Modification is entered into upon the basis of the following facts and understandings of the parties, which facts and understandings are acknowledged by the parties to be true and accurate:

Bank and Borrower previously entered into a Loan and Security Agreement (Accounts and Inventory) dated July 30, 2007, as modified by that certain First Modification to Loan and Security Agreement dated as of August 27, 2007, and as further modified by that certain Second Modification to Loan and Security Agreement dated as of November 7, 2007. The Loan and Security Agreement as so modified, and as such may be otherwise modified, amended, restated, supplemented, revised or replaced from time to time prior to the date hereof shall collectively be referred to herein as the “Agreement”.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as set forth below.

AGREEMENT

1. Incorporation by Reference. The Recitals and the documents referred to therein are incorporated herein by this reference. Except as otherwise noted, the terms not defined herein shall have the meaning set forth in the Agreement.

2. Modification to the Agreement. Subject to the satisfaction of the conditions precedent as set forth in Section 3 hereof, the Agreement is hereby modified as set forth below.

(a) Section 6.17e. of the Agreement is hereby deleted in its entirety and is replaced with the following:

“6.17e. a ratio of Debt (excluding Subordinated Debt and deferred tax liabilities) - to - Tangible Effective Net Worth of not more than 2.50:1.00.”

3. Legal Effect.

(a) Except as specifically set forth in this Modification, all of the terms and conditions of the Agreement remain in full force and effect. Except as expressly set forth herein, the execution, delivery, and performance of this Modification shall not operate as a waiver of, or as an amendment of, any right, power, or remedy of Bank under the Agreement, as in effect prior to the date hereof. Borrower ratifies and reaffirms the continuing effectiveness of all promissory notes, guaranties, security agreements, mortgages, deeds of trust, environmental agreements, and all other instruments, documents and agreements entered into in connection with the Agreement.

(b) Borrower represents and warrants that the Representations and Warranties contained in the Agreement are true and correct as of the date of this Modification, and that no Event of Default has occurred and is continuing.

(c) The effectiveness of this Modification and each of the documents, instruments and agreements entered into in connection with this Modification, including without limit any replacement promissory note entered into in connection herewith, is conditioned upon receipt by Bank of this Modification and any other documents which Bank may require to carry out the terms hereof.

Green bagged 1/25/08

4. Miscellaneous Provisions.

(a) This is an integrated Modification and supersedes all prior negotiations and agreements regarding the subject matter hereof. All amendments hereto must be in writing and signed by the parties.

(b) This Modification may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.

IN WITNESS WHEREOF, the parties have agreed as of the date first set forth above.

COMERICA BANK						CYGNE DESIGNS, INC.,
						a Delaware corporation
By:		/s/ Xxxxxxx Xxxxxxx				By:		/s/ Xxxxxxx Xxxxxx
Name:		Xxxxxxx Xxxxxxx				Name:		Xxxxxxx Xxxxxx
Title:		Vice President – Western Market				Title:		CEO

2