EXHIBIT 10.26
 
                                SECOND AMENDMENT
                                     TO THE
                          MERCHANT SERVICES AGREEMENT
 
    This Second Amendment to the Merchant Services Agreement ("Second
Amendment)" is dated as of October   , 1998, by and between HURLEY STATE BANK
("Bank") and THE CHILDREN'S PLACE RETAIL STORES, INC. ("Company").
 
    WHEREAS, Bank and Company have entered into the Merchant Services Agreement
dated as of December 12, 1994, as amended and supplemented ("Merchant Services
Agreement"); and
 
    WHEREAS, Bank and Company desire to amend certain provisions of the Merchant
Services Agreement.
 
    NOW, THEREFORE, in consideration of the foregoing premises and mutual
covenants hereinafter set forth, Bank and Company agree as follows:
 
    1.  The Merchant Fee of 3.91% will remain in effect until February 1, 2000.
       Thereafter the Merchant Fee will be subject to change.
 
    2.  In addition to the other fees provided for in Article III of the
       Merchant Services Agreement, Bank will charge and Company agrees to pay
       an Open Active Account Fee.
 
    (a) OPEN ACTIVE ACCOUNT FEE. Company shall pay an Open Active Account Fee
       for each calendar month. Subject to the cap set forth in the following
       sentence, the amount of the Open Active Account Fee for each calendar
       month will be the product of (i) the number of Accounts that have a debit
       or credit balance at any time during the month ("Open Active Accounts")
       and (ii) the applicable per Account fee, which will be determined
       according to the following schedule and will be based on the calendar
       year-to-date average active Account balance, as calculated by Bank.
 


YEAR-TO-DATE AVERAGE
   ACTIVE ACCOUNT
       BALANCE          PER ACCOUNT FEE
- ---------------------  -----------------
                    
   $161.00 or more         $       0
   $151.00-$160.99         $     .06
   $141.00-$150.99         $     .12
   $131.00-$140.99         $     .18
  Less than $131.00        $     .25

 
    The Open Active Account Fee payable by Company for each calendar month will
be no more than an amount equal to 2.22% of the net amount of Card Sales made by
Company during such calendar month ("Current Net Sales"). Bank will calculate
the amount of the Open Active Account Fee on or about the last day of each
calendar month and will collect the Open Active Account Fee each month in
accordance with paragraph 3.1(d) of the Merchant Services Agreement. Until
February 1, 2000, the sum of the Merchant Fee and Open Active Account Fee
payable by Company for each calendar month will be no more than 6.13% of the net
amount of Current Net Sales. The amount of the Open Active Account Fee will be
subject to change on or after February 1, 2000.
 
    3.  This agreement shall remain in effect until February 1, 2000 ("Initial
       Term"), and thereafter shall automatically renew for additional one (1)
       year periods (each a "Term") unless either party provides written notice
       of termination to the other party at least one hundred twenty (120) days
       prior to end of the Initial Term or subsequent Terms.
 
    4.  This Second Amendment will be effective as of September 1, 1998.
 
    5.  Any capitalized terms used herein and not otherwise defined will have
       the meanings given to them in the Merchant Services Agreement. Except as
       provided in this Second Amendment, or

       as necessary and appropriate to give meaning to the terms and conditions
       of this Second Amendment, the terms and conditions of the Merchant
       Services Agreement will remain in full force and effect. In the event of
       any conflict between the terms of the Merchant Services Agreement and
       this Second Amendment, this Second Amendment will govern.
 
    IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment.
 


THE CHILDREN'S PLACE RETAIL STORES, INC.      HURLEY STATE BANK
                                           
 
By: /s/ STANLEY B. SILVER                     By: /s/ DON BERMAN
                                              ---------------------------------------
- ------------------------------------------    Name: Don Berman
   Name: Stanley B. Silver                    Title: Executive Vice President
   Title: President                           Date: 2/12/99
   Date: 2/12/99