Exhibit 10.1

AMENDED AND RESTATED

CREDIT AGREEMENT

THIS AGREEMENT is entered into as of May 3, 2012, by and between WORLD OF
JEANS & TOPS, a California corporation (“Borrower”), and WELLS FARGO BANK,
NATIONAL ASSOCIATION (“Bank”).

RECITALS

Borrower and Bank are parties to that certain Credit Agreement dated as of
May 1, 2003 (as amended to the date hereof, the “Existing Credit Agreement”),
and Borrower and Bank desire to amend and restate the Existing Credit Agreement
on the terms set forth herein.

Borrower has requested that Bank extend or continue credit to Borrower as
described below, and Bank has agreed to provide such credit to Borrower on the
terms and conditions contained herein.

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Bank and Borrower hereby agree as follows:

ARTICLE I

CREDIT TERMS

SECTION 1.1. LINE OF CREDIT.

(a) Line of Credit. Subject to the terms and conditions of this Agreement, Bank
hereby agrees to make advances to Borrower from time to time up to and including
May 3, 2014, not to exceed at any time the aggregate principal amount of Twenty
Five Million Dollars ($25,000,000.00) (“Line of Credit”), the proceeds of which
shall be used to finance Borrower’s working capital requirements. Borrower’s
obligation to repay advances under the Line of Credit shall be evidenced by a
promissory note substantially in the form of Exhibit A attached hereto (“Line of
Credit Note”), all terms of which are incorporated herein by this reference.

(b) Letter of Credit Subfeature. As a subfeature under the Line of Credit, Bank
agrees from time to time during the term thereof to issue or cause an affiliate
to issue commercial and standby letters of credit for the account of Borrower
(each, a “Letter of Credit” and collectively, “Letters of Credit”); provided
however, that the aggregate undrawn amount of all outstanding Letters of Credit
shall not at any time exceed Fifteen Million Dollars ($15,000,000.00). The form
and substance of each Letter of Credit shall be subject to approval by Bank, in
its sole discretion. Each Letter of Credit shall be issued for a term not to
exceed three hundred sixty-five (365) days, as designated by Borrower; provided
however, that no Letter of Credit shall have an expiration date more than one
hundred twenty (120) days beyond the maturity date of the Line of Credit. The
undrawn amount of all Letters of Credit shall be reserved under the Line of
Credit and shall not be available for borrowings thereunder. Each Letter of
Credit shall be subject to the additional terms and conditions of the Letter of
Credit agreements, applications and any related documents required by Bank in
connection with the issuance thereof. Each drawing paid under a Letter of Credit
shall be deemed an advance under the Line of Credit and shall be repaid by
Borrower in accordance with the terms and conditions

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of this Agreement applicable to such advances; provided however, that if
advances under the Line of Credit are not available, for any reason, at the time
any drawing is paid, then Borrower shall immediately pay to Bank the full amount
drawn, together with interest thereon from the date such drawing is paid to the
date such amount is fully repaid by Borrower, at the rate of interest applicable
to advances under the Line of Credit. In such event Borrower agrees that Bank,
in its sole discretion, may debit any account maintained by Borrower with Bank
for the amount of any such drawing.

(c) Limitation on Borrowings. During any Formula Period, outstanding borrowings
under the Line of Credit shall not at any time exceed seventy five percent
(75%) of Borrower’s eligible inventory (exclusive of work in process and
inventory which is obsolete, unsalable or damaged), with the value determined on
a cost basis. The foregoing shall be determined by Bank upon receipt and review
of the collateral report required pursuant to Section 4.3(b) hereof and such
other documents and collateral information as Bank may from time to time
require. As used herein, “Formula Period” shall mean a period commencing from
the first day of the calendar month immediately following a calendar month in
which the average daily usage under the Line of Credit exceeds Fifteen Million
Dollars ($15,000,000.00) and continuing up to and including the last day of a
calendar quarter during which, in any month of such quarter, the average daily
usage under the Line of Credit is equal to or less than Fifteen Million Dollars
($15,000,000.00).

(d) Borrowing and Repayment. Borrower may from time to time during the term of
the Line of Credit borrow, partially or wholly repay its outstanding borrowings,
and reborrow, subject to all of the limitations, terms and conditions contained
herein or in the Line of Credit Note; provided however, that the total
outstanding borrowings under the Line of Credit shall not at any time exceed the
maximum principal amount available thereunder, as set forth above.

SECTION 1.2. INTEREST/FEES.

(a) Interest. The outstanding principal balance of each credit subject hereto
shall bear interest, and the amount of each drawing paid under any Letter of
Credit shall bear interest from the date such drawing is paid to the date such
amount is fully repaid by Borrower, at the rate of interest set forth in each
promissory note or other instrument or document executed in connection
therewith.

(b) Computation and Payment. Interest shall be computed on the basis of a
360-day year, actual days elapsed. Interest shall be payable at the times and
place set forth in each promissory note or other instrument or document required
hereby.

(c) Unused Commitment Fee. Borrower shall pay to Bank a fee equal to
ten-hundredths percent (0.10%) per annum (computed on the basis of a 360-day
year, actual days elapsed) on the average daily unused amount of the Line of
Credit, which fee shall be calculated on a calendar quarter basis by Bank and
shall be due and payable by Borrower in arrears on the last day of each
September, December, March and June.

(d) Letter of Credit Fees. Borrower shall pay to Bank (i) fees with respect to
each standby Letter of Credit equal to 1.50% per annum (computed on the basis of
a 360-day year,

 

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actual days elapsed) of the face amount thereof, which fees shall be due and
payable on each one-year anniversary of the issuance date of each such standby
Letter of Credit and (ii) such other fees upon the issuance of each Letter of
Credit, upon the payment or negotiation of each drawing under any Letter of
Credit and upon the occurrence of any other activity with respect to any Letter
of Credit (including without limitation, the transfer, amendment or cancellation
of any Letter of Credit) determined in accordance with Bank’s standard fees and
charges then in effect for such activity.

SECTION 1.3. COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect all
interest and fees due under the Line of Credit by charging Borrower’s deposit
account number 4945-012565 with Bank, or any other deposit account maintained by
Borrower with Bank, for the full amount thereof. Should there be insufficient
funds in any such deposit account to pay all such sums when due, the full amount
of such deficiency shall be immediately due and payable by Borrower.

SECTION 1.4. COLLATERAL.

As security for all indebtedness of Borrower to Bank subject hereto, Borrower
hereby grants to Bank security interests of first priority in all Borrower’s
accounts receivable and other rights to payment, general intangibles, inventory
and equipment.

All of the foregoing shall be evidenced by and subject to the terms of such
security agreements, financing statements, deeds of trust and other documents as
Bank shall reasonably require, all in form and substance satisfactory to Bank.
Borrower shall reimburse Bank immediately upon demand for all costs and expenses
incurred by Bank in connection with any of the foregoing security, including
without limitation, filing and recording fees and costs of appraisals, audits
and title insurance.

SECTION 1.5. GUARANTIES. The payment and performance of all indebtedness and
other obligations of Borrower to Bank hereunder and under the other Loan
Documents shall be guaranteed by Tilly’s, Inc., as evidenced by and subject to
the terms of guaranties in form and substance satisfactory to Bank and shall be
secured by a first priority lien in favor of Bank on the equity interests of the
Borrower owned by Tilly’s, Inc.

ARTICLE II

REPRESENTATIONS AND WARRANTIES

Borrower makes the following representations and warranties to Bank, which
representations and warranties shall survive the execution of this Agreement and
shall continue in full force and effect until the full and final payment, and
satisfaction and discharge, of all obligations of Borrower to Bank subject to
this Agreement.

SECTION 2.1. LEGAL STATUS. Borrower is a corporation, duly organized and
existing and in good standing under the laws of the State of California, and is
qualified or licensed to do business (and is in good standing as a foreign
corporation, if applicable) in all jurisdictions in which such qualification or
licensing is required or in which the failure to so qualify or to be so licensed
could have a material adverse effect on Borrower.

 

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SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement and each promissory
note, guarantee, security agreement, pledge agreement, contract, instrument and
other document required hereby or at any time hereafter delivered to Bank in
connection herewith (collectively, the “Loan Documents”) have been duly
authorized, and upon their execution and delivery in accordance with the
provisions hereof will constitute legal, valid and binding agreements and
obligations of Borrower or the party which executes the same, enforceable in
accordance with their respective terms.

SECTION 2.3. NO VIOLATION. The execution, delivery and performance by Borrower
of each of the Loan Documents do not violate any provision of any law or
regulation, or contravene any provision of the Articles of Incorporation or
By-Laws of Borrower, or result in any breach of or default under any contract,
obligation, indenture or other instrument to which Borrower is a party or by
which Borrower may be bound.

SECTION 2.4. LITIGATION. There are no pending, or to the best of Borrower’s
knowledge threatened, actions, claims, investigations, suits or proceedings by
or before any governmental authority, arbitrator, court or administrative agency
which could have a material adverse effect on the financial condition or
operation of Borrower other than those disclosed by Borrower to Bank in writing
prior to the date hereof.

SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial statement of
Borrower dated January 28, 2012, a true copy of which has been delivered by
Borrower to Bank prior to the date hereof, (a) is complete and correct and
presents fairly the financial condition of Borrower, (b) discloses all
liabilities of Borrower that are required to be reflected or reserved against
under generally accepted accounting principles, whether liquidated or
unliquidated, fixed or contingent, and (c) has been prepared in accordance with
generally accepted accounting principles consistently applied. Since the date of
such financial statement there has been no material adverse change in the
financial condition of Borrower, nor has Borrower mortgaged, pledged, granted a
security interest in or otherwise encumbered any of its assets or properties
except in favor of Bank or as otherwise permitted by Bank in writing.

SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any pending
assessments or adjustments of its income tax payable with respect to any year.

SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture, contract or
instrument to which Borrower is a party or by which Borrower may be bound that
requires the subordination in right of payment of any of Borrower’s obligations
subject to this Agreement to any other obligation of Borrower.

SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses, and will hereafter
possess, all permits, consents, approvals, franchises and licenses required and
rights to all trademarks, trade names, patents, and fictitious names, if any,
necessary to enable it to conduct the business in which it is now engaged in
compliance with applicable law.

SECTION 2.9. ER1SA. Borrower is in compliance in all material respects with all
applicable provisions of the Employee Retirement Income Security Act of 1974, as
amended or recodified from time to time (“ERISA”); Borrower has not violated any
provision of any defined

 

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employee pension benefit plan (as defined in ERISA) maintained or contributed to
by Borrower (each, a “Plan”); no Reportable Event as defined in ERISA has
occurred and is continuing with respect to any Plan initiated by Borrower;
Borrower has met its minimum funding requirements under ERISA with respect to
each Plan; and each Plan will be able to fulfill its benefit obligations as they
come due in accordance with the Plan documents and under generally accepted
accounting principles.

SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in default on any obligation
for borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation.

SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to Bank in
writing prior to the date hereof, Borrower is in compliance in all material
respects with all applicable federal or state environmental, hazardous waste,
health and safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower’s operations and/or properties,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, and the Federal Toxic Substances Control Act, as any of the same may be
amended, modified or supplemented from time to time. None of the operations of
Borrower is the subject of any federal or state investigation evaluating whether
any remedial action involving a material expenditure is needed to respond to a
release of any toxic or hazardous waste or substance into the environment.
Borrower has no material contingent liability in connection with any release of
any toxic or hazardous waste or substance into the environment.

ARTICLE III

CONDITIONS

SECTION 3.1. CONDITIONS OF EXTENSION OF CREDIT. The obligation of Bank to extend
or continue to extend any credit contemplated by this Agreement is subject to
the fulfillment to Bank’s satisfaction of all of the following conditions:

(a) Approval of Bank Counsel. All legal matters incidental to the extension of
credit by Bank shall be satisfactory to Bank’s counsel.

(b) Documentation. Bank shall have received, in form and substance satisfactory
to Bank, each of the following, duly executed:

 

  (i) This Agreement and each promissory note or other instrument or document
required hereby.

 

  (ii) Corporate Resolution: Borrowing.

 

  (iii) Certificate of Incumbency.

 

  (iv) Continuing Security Agreement: Rights to Payment and Inventory.

 

  (v) Security Agreement: Equipment.

 

  (vi) Disbursement Order.

 

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  (vii) A Continuing Guaranty and a Pledge Agreement executed by Tilly’s, Inc.,
together with a secretary’s certificate, board resolutions, and such other
documents relating to Tilly’s, Inc. as required by Bank.

 

  (viii) Such other documents as Bank may require under any other Section of
this Agreement.

(c) Financial Condition. There shall have been no material adverse change, as
determined by Bank, in the financial condition or business of Borrower, nor any
material decline, as determined by Bank, in the market value of any collateral
required hereunder or a substantial or material portion of the assets of
Borrower.

(d) Insurance. Borrower shall have delivered to Bank evidence of insurance
coverage on all Borrower’s property, in form, substance, amounts, covering risks
and issued by companies satisfactory to Bank, and where required by Bank, with
loss payable endorsements in favor of Bank.

SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of Bank to
make each extension of credit requested by Borrower hereunder shall be subject
to the fulfillment to Bank’s satisfaction of each of the following conditions:

(a) Compliance. The representations and warranties contained herein and in each
of the other Loan Documents shall be true on and as of the date of the signing
of this Agreement and on the date of each extension of credit by Bank pursuant
hereto, with the same effect as though such representations and warranties had
been made on and as of each such date, and on each such date, (i) no material
adverse change in the business, assets, operations, prospects or condition
(financial or otherwise) of the Borrower, the ability of the Borrower to perform
any of its obligations under this Agreement or under any of the other Loan
Documents, or the rights of or benefits available to the Bank under this
Agreement or any of the other Loan Documents shall have occurred, and (ii) no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.

(b) Documentation. Bank shall have received all additional documents which may
be required in connection with such extension of credit.

(c) Additional Letter of Credit Documentation. Prior to the issuance of each
Letter of Credit, Bank shall have received a Letter of Credit Agreement,
properly completed and duly executed by Borrower.

ARTICLE IV

AFFIRMATIVE COVENANTS

Borrower covenants that so long as Bank remains committed to extend credit to
Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding, and until payment in full of all obligations of Borrower
subject hereto, Borrower shall, unless Bank otherwise consents in writing:

 

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SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest, fees or
other liabilities due under any of the Loan Documents at the times and place and
in the manner specified therein, and immediately upon demand by Bank, the amount
by which the outstanding principal balance of any credit subject hereto at any
time exceeds any limitation on borrowings applicable thereto.

SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Bank, at any reasonable time, to inspect, audit
and examine such books and records, to make copies of the same, and to inspect
the properties of Borrower.

SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the following, in form
and detail satisfactory to Bank:

(a) not later than 90 days after and as of the end of each fiscal year, audited
consolidated and consolidating financial statements of Tilly’s, Inc., prepared
by an independent certified public accountant acceptable to Bank, to include
consolidated and consolidating balance sheet, income statement and statement of
cash flow, management report, and auditor’s report, together with all supporting
schedules and footnotes;

(b) commencing with the fiscal quarter ending July 28, 2012, not later than 45
days after and as of the end of each fiscal quarter, consolidated and
consolidating financial statements of Tilly’s, Inc., prepared by Tilly’s, Inc.,
to include a balance sheet and income statement, and with respect to each fiscal
quarter ending prior to July 28, 2012, quarterly financial statements of
Borrower, prepared by Borrower, to include a balance sheet and income statement;

(c) not later than 45 days after and as of the end of each fiscal quarter, a
store profit and loss statement, prepared by Borrower, to include all revenues
and expenses on an individual store basis for all of the Borrower’s then
operating retail clothing store locations;

(d) contemporaneously with each delivery of annual and quarterly consolidated
financial statements required hereby, a certificate of the president or chief
financial officer of Borrower that said financial statements are accurate, that
there exists no Event of Default nor any condition, act, or event which with the
giving of notice or the passage of time or both would constitute an Event of
Default, and setting forth in reasonable detail calculations of the financial
covenants set forth in Section 4.9 hereof;

(e) not later than 90 days after commencement of each fiscal year of Tilly’s,
Inc., projections for such fiscal year and for each quarter thereof including
forecasted consolidated balance sheets and statements of income, together with
an explanation of the assumptions on which such forecasts are based;

(f) promptly upon request by Bank, copies of audit reports, management letters
or recommendations submitted to the board of directors (or any committee
thereof) of Tilly’s, Inc. or the Borrower by independent accountants in
connection with the accounts or books of such companies or any audit thereof;

 

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(g) promptly after the same become available, copies of each annual report,
proxy or financial statement or other report or communication sent to the
stockholders of Tilly’s, Inc., and copies of all annual, regular, periodic and
special reports and registration statements which Tilly’s, Inc. or Borrower may
file or be required to file with the U.S. Securities and Exchange Commission and
not otherwise required to be delivered to Bank pursuant to this Agreement;

(h) from time to time such other information as Bank may reasonably request.

Documents required to be delivered pursuant to Section 4.3(a), 4.3(b) and 4.3(g)
(to the extent any such documents are included in materials otherwise filed with
the U.S. Securities and Exchange Commission) may be delivered electronically and
if so delivered, shall be deemed to have been delivered on the date (i) on which
Tilly’s, Inc. posts such documents, or provides a link thereto on the website of
Tilly’s, Inc. on the Internet at the website address www.tillys.com or another
website address provided by the Borrower in a written notice to Bank or (ii) on
which such documents are posted on a publicly available website maintained by or
on behalf of the U.S. Securities and Exchange Commission for access to documents
filed in the EDGAR database; provided that the Borrower shall notify Bank (by
telecopier or electronic mail) of the posting of any such documents and, if
requested by Bank, provide to Bank by electronic mail electronic versions (i.e.,
soft copies) of such documents.

SECTION 4.4. COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower’s continued
existence and with the requirements of all laws, rules, regulations and orders
of any governmental authority applicable to Borrower and/or its business.

SECTION 4.5. INSURANCE. Maintain and keep in force insurance of the types and in
amounts customarily carried in lines of business similar to that of Borrower,
including but not limited to fire, extended coverage, public liability, flood,
property damage and workers’ compensation, with all such insurance carried with
companies and in amounts satisfactory to Bank, and deliver to Bank from time to
time at Bank’s request schedules setting forth all insurance then in effect.

SECTION 4.6. FACILITIES. Keep all properties useful or necessary to Borrower’s
business in good repair and condition, and from time to time make necessary
repairs, renewals and replacements thereto so that such properties shall be
fully and efficiently preserved and maintained.

SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due any and all
indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation federal and state income taxes and state and local
property taxes and assessments, except such (a) as Borrower may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which Borrower
has made provision, to Bank’s satisfaction, for eventual payment thereof in the
event Borrower is obligated to make such payment.

SECTION 4.8. LITIGATION. Promptly give notice in writing to Bank of any
litigation pending or threatened against Borrower (i) affecting Tilly’s, Inc.,
Borrower or any of their

 

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respective subsidiaries which, individually or in the aggregate, could
reasonably be expected to have a material adverse effect on Borrower or such
entity or involve a monetary claim in excess of $1,000,000, (ii) affecting or
with respect to this Agreement, any other Loan Document or any security interest
or lien created thereunder or (iii) involving an environmental claim or
potential liability under environmental laws in excess of $500,000.

SECTION 4.9. FINANCIAL CONDITION. Maintain Borrower as a consolidated subsidiary
of Tilly’s, Inc. for accounting purposes, and maintain Borrower’s financial
condition as follows using generally accepted accounting principles consistently
applied and used consistently with prior practices (except to the extent
modified by the definitions herein):

(a) Current Ratio not at any time less than 1.25 to 1.00, determined as of the
end of each fiscal quarter, with “Current Ratio” defined as total current assets
of Tilly’s, Inc. and its consolidated subsidiaries divided by total current
liabilities.

(b) Net Profit Before Tax of Tilly’s, Inc. and its consolidated subsidiaries not
less than $1.00, excluding a non-cash expense of up to a maximum of
$2,000,000.00 for the write-off of impaired fixed assets as per the requirements
of Accounting Standard Classification Topic ASC 360 for the cumulative rolling
four-quarter period being measured, determined as of the end of each fiscal
quarter on a cumulative rolling four-quarter basis.

(c) Total Funded Debt to EBITDAR of Tilly’s, Inc. and its consolidated
subsidiaries not greater than 4.00 to 1.00 as of each quarter end, determined on
a rolling four-quarter basis, with “Funded Debt” defined as the sum of (i) all
obligations for borrowed money, (ii) capital leases, and (iii) annual rent
expense from all operating leases multiplied by eight (8) and “EBITDAR” defined
as the sum of net income, interest expense, taxes, depreciation, amortization
and annual rent expense.

SECTION 4.10. NOTICE TO BANK. Promptly (but in no event more than five (5) days
after the occurrence of each such event or matter) give written notice to Bank
in reasonable detail of: (a) the occurrence of any Event of Default, or any
condition, event or act which with the giving of notice or the passage of time
or both would constitute an Event of Default; (b) any change in the name or the
organizational structure of Borrower; (c) the occurrence and nature of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any material uninsured or partially uninsured loss through liability or property
damage, or through fire, theft or any other cause affecting Borrower’s property.

ARTICLE V

NEGATIVE COVENANTS

Borrower further covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank’s prior written
consent:

 

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SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any credit extended
hereunder except for the purposes stated in Article I hereof.

SECTION 5.2. CAPITAL EXPENDITURES. Make any additional investment in fixed
assets in any fiscal year in excess of an aggregate of $50,000,000.00.

SECTION 5.3. OTHER INDEBTEDNESS. Create, incur, assume or permit to exist any
indebtedness or liabilities resulting from borrowings, loans or advances,
whether secured or unsecured, matured or unmatured, liquidated or unliquidated,
joint or several, except (a) the liabilities of Borrower to Bank, (b) additional
debt in an amount not to exceed $1,500,000.00 in the aggregate, (c) debt
evidenced by those certain promissory notes dated on or about the date hereof in
an aggregate principal amount not to exceed $90,000,000, issued by Borrower in
favor of certain stockholders of Borrower the terms of which have been approved
by Bank so long as (i) such notes have been repaid in full and cancelled by not
later than 14 days after the date thereof and (ii) no Event of Default as
defined herein, and no condition, event or act which with the giving of notice
or the passage of time or both would constitute such an Event of Default, shall
exist at the time of such repayment or shall result therefrom, (d) any other
liabilities of Borrower existing as of, and disclosed to Bank prior to, the date
hereof, and (e) capital lease obligations relating to the Borrower’s
distribution and corporate headquarters facility.

SECTION 5.4. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or
consolidate with any other entity (except for mergers in connection with
acquisitions expressly permitted under Section 5.6 in which the Borrower is the
survivor); make any substantial change in the nature of Borrower’s business as
conducted as of the date hereof; nor sell, lease, transfer or otherwise dispose
of all or a substantial or material portion of Borrower’s assets except in the
ordinary course of its business.

SECTION 5.5. GUARANTIES. Guarantee or become liable in any way as surety,
endorser (other than as endorser of negotiable instruments for deposit or
collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower as security for,
any liabilities or obligations of any other person or entity, except any of the
foregoing in favor of Bank.

SECTION 5.6. LOANS, ADVANCES, INVESTMENTS, ACQUISITIONS. Make any loans or
advances to or investments in any person or entity, or acquire any other person
or entity or all or substantially all of the assets of any other person or
entity or any business unit thereof, except (i) loans and advances made to
employees or shareholders of the Borrower, (ii) any of the foregoing existing as
of, and disclosed to Bank prior to, the date hereof, and (iii) acquisitions that
meet all of the following criteria: (a) the persons or assets to be acquired are
in the same or substantially similar lines of business as the Borrower, (b) the
board of directors or equivalent governing body of the other parties to each
such acquisition have approved or consented to the acquisition, (c) immediately
before and after giving effect to each such proposed acquisition, no Event of
Default shall have occurred and be continuing, (d) Borrower shall be in pro
forma compliance with the financial covenants set forth in Section 4.9 hereof
after giving effect to each such acquisition, (e) the aggregate total
consideration paid in connection with all such acquisitions made during the term
of this Agreement shall not exceed $25,000,000, (f) Borrower shall have adequate
cash on hand from its operations to pay the purchase price and other

 

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consideration to be paid in connection with each such acquisition, and, in any
case, no proceeds of the loans made under this Agreement shall be used to pay
the consideration for any such acquisition, and (g) prior to the consummation of
any such acquisition, Borrower shall have delivered to Bank documentation of
each of the foregoing in form and substance reasonably acceptable to Bank. In
addition (and notwithstanding the foregoing) Borrower shall not form, create or
acquire any subsidiaries.

SECTION 5.7. DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or
distribution, either in cash, stock or any other property on Borrower’s stock
now or hereafter outstanding, nor redeem, retire, repurchase or otherwise
acquire any shares of any class of Borrower’s stock now or hereafter
outstanding, other than (i) distributions to Tilly’s, Inc. in an amount in any
fiscal year not to exceed the amount required to discharge the consolidated tax
liability of Tilly’s, Inc. and the Borrower payable during such fiscal year, and
(ii) payments permitted under Section 5.3(c) hereof to the extent such payments
constitute a dividend or distribution.

SECTION 5.8. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist a
security interest in, or lien upon, all or any portion of Borrower’s assets now
owned or hereafter acquired, except any of the foregoing in favor of Bank or
which is existing as of, and disclosed to Bank in writing prior to, the date
hereof.

SECTION 5.9. TRANSACTIONS WITH AFFILIATES. Enter into any transaction of any
kind with any shareholder or affiliate of the Borrower or Tilly’s, Inc., whether
or not in the ordinary course of business, other than on fair and reasonable
terms substantially as favorable to Borrower as would be obtained by Borrower in
a comparable arm’s length transaction with a person other than an affiliate,
except that the foregoing shall not prohibit (i) tax distributions permitted by
Section 5.7 hereof or (ii) payment of reasonable and customary fees for, and
reimbursement of out-of-pocket expenses incurred by, members of the board of
directors of Borrower or Tilly’s, Inc.

ARTICLE VI

EVENTS OF DEFAULT

SECTION 6.1. The occurrence of any of the following shall constitute an “Event
of Default” under this Agreement:

(a) Borrower shall fail to pay when due any principal, interest, fees or other
amounts payable under any of the Loan Documents.

(b) Any financial statement or certificate furnished to Bank in connection with,
or any representation or warranty made by Borrower or any other party under this
Agreement or any other Loan Document shall prove to be incorrect, false or
misleading in any material respect when furnished or made.

(c) Any default in the performance of or compliance with any obligation,
agreement or other provision contained herein or in any other Loan Document
(other than those specifically described as an “Event of Default” in this
Section 6.1), and with respect to any such default which by its nature can be
cured, such default shall continue for a period of twenty (20) days

 

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after the earlier of (i) an officer of Borrower becoming aware of such default
or (ii) receipt by Borrower of notice from Bank of such default’s occurrence.

(d) Any default in the payment or performance of any obligation, or any defined
event of default, under the terms of any contract or instrument (other than any
of the Loan Documents) pursuant to which Borrower, any guarantor hereunder or
any general partner or joint venturer in Borrower if a partnership or joint
venture (with each such guarantor, general partner and/or joint venturer
referred to herein as a “Third Party Obligor”) has incurred (i) any debt or
other liability to Bank or (ii) any debt or other liability to any other person
or entity in an individual principal amount of $500,000 or more or with an
aggregate principal amount of $1,000,000 or more.

(e) Borrower or any Third Party Obligor shall become insolvent, or shall suffer
or consent to or apply for the appointment of a receiver, trustee, custodian or
liquidator of itself or any of its property, or shall generally fail to pay its
debts as they become due, or shall make a general assignment for the benefit of
creditors; Borrower or any Third Party Obligor shall file a voluntary petition
in bankruptcy, or seeking reorganization, in order to effect a plan or other
arrangement with creditors or any other relief under the Bankruptcy Reform Act,
Title 11 of the United States Code, as amended or recodified from time to time
(“Bankruptcy Code”), or under any state or federal law granting relief to
debtors, whether now or hereafter in effect; or Borrower or any Third Party
Obligor shall file an answer admitting the jurisdiction of the court and the
material allegations of any involuntary petition; or Borrower or any Third Party
Obligor shall be adjudicated a bankrupt, or an order for relief shall be entered
against Borrower or any Third Party Obligor by any court of competent
jurisdiction under the Bankruptcy Code or any other applicable state or federal
law relating to bankruptcy, reorganization or other relief for debtors.

(f) The filing of a notice of judgment lien against Borrower or any Third Party
Obligor; or the recording of any abstract of judgment against Borrower or any
Third Party Obligor in any county in which Borrower or such Third Party Obligor
has an interest in real property; or the service of a notice of levy and/or of a
writ of attachment or execution, or other like process, against the assets of
Borrower or any Third Party Obligor; or the entry of a judgment against Borrower
or any Third Party Obligor; or any involuntary petition or proceeding pursuant
to the Bankruptcy Code or any other applicable state or federal law relating to
bankruptcy, reorganization or other relief for debtors is filed or commenced
against Borrower or any Third Party Obligor.

(g) There shall exist or occur any event or condition that Bank in good faith
believes impairs, or is substantially to impair, the prospect of payment or
performance by Borrower, any Third Party Obligor, or the general partner of
either if such entity is a partnership, of its obligations under any of the Loan
Documents.

(h) The death or incapacity of Borrower or any Third Party Obligor if an
individual; the dissolution or liquidation of Borrower or any Third Party
Obligor if a corporation, partnership, joint venture or other type of entity; or
Borrower or any such Third Party Obligor, or any of its directors, stockholders
or members shall take action seeking to effect the dissolution or liquidation of
Borrower or such Third Party Obligor.

 

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(i) Any Loan Document, at any time after its execution and delivery for any
reason other than satisfaction in full of all the Obligations, ceases to be in
full force and effect; or any Loan Party contests in any manner the validity or
enforceability of any Loan Document; or any Loan Party denies that it has any
further liability or obligation under any Loan Document or purports to revoke,
terminate or rescind any Loan Document.

(j) Tilly’s, Inc. shall cease to own and control 100% of the issued and
outstanding capital stock of the Borrower, or, as to Tilly’s, Inc., (i) any
“person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934) other than Hezy Shaked and Tialit Levine (and
their respective heirs and executors, and trusts as to which they are settlors
or trustees or other trusts to which such trusts are settlors) shall become the
“beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Securities
Exchange Act of 1934), directly or indirectly, of 25% or more of the equity
interests of Tilly’s, Inc. entitled to vote for members of the board of
directors of Tilly’s, Inc. on a fully-diluted basis or (ii) during any period of
12 consecutive months, a majority of the members of the board of directors of
Tilly’s, Inc. cease to be composed of individuals who either were members of
such board on the first day of such period or whose election or nomination to
such board was approved by individuals who at the time of such election or
nomination constituted at least a majority of such board (excluding, in each
case, any individual whose initial nomination for or assumption of office as a
member of such board occurred as a result of a solicitation of proxies or
consents that was not made by or on behalf of the board of directors).

(k) Tilly’s, Inc. shall (i) engage in any business other than (A) entering into
and performing its obligations under, and in accordance with, the Loan Documents
to which it is a party, (B) owning the capital stock of Borrower and (C) issuing
its own capital stock or options to acquire such capital stock, (ii) incur any
indebtedness other than (A) its guarantee of the obligations of Borrower
hereunder in favor of Bank and (B) its guarantee of the indebtedness or
liabilities of Borrower permitted under Section 5.3 hereof and of Borrower’s
obligations under real property leases entered into by Borrower in the ordinary
course of business, or (iii) own any assets other than the capital stock of
Borrower and cash and cash equivalents.

SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default: (a) all
indebtedness of Borrower under each of the Loan Documents, any term thereof to
the contrary notwithstanding, shall at Bank’s option and without notice become
immediately due and payable without presentment, demand, protest or notice of
dishonor, all of which are hereby expressly waived by each Borrower; (b) the
obligation, if any, of Bank to extend any further credit under any of the Loan
Documents shall immediately cease and terminate; and (c) Bank shall have all
rights, powers and remedies available under each of the Loan Documents, or
accorded by law, including without limitation the right to resort to any or all
security for any credit subject hereto and to exercise any or all of the rights
of a beneficiary or secured party pursuant to applicable law. All rights, powers
and remedies of Bank may be exercised at any time by Bank and from time to time
after the occurrence of an Event of Default, are cumulative and not exclusive,
and shall be in addition to any other rights, powers or remedies provided by law
or equity.

ARTICLE VII

MISCELLANEOUS

 

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SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default under any of the Loan Documents must be
in writing and shall be effective only to the extent set forth in such writing.

SECTION 7.2. NOTICES. All notices, requests and demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:

 

  BORROWER:    WORLD OF JEANS & TOPS      10 Whatney      Irvine, CA 92618|     
With a copy to:      Legal Department      10 Whatney      Irvine, CA 92618  
BANK:    WELLS FARGO BANK, NATIONAL ASSOCIATION      Orange Coast Regional
Commercial Banking Office      2030 Main Street, Suite 900      Irvine, CA 92614

or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.

SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS’ FEES. Borrower shall pay to Bank
immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys’ fees (to include outside
counsel fees and all allocated costs of Bank’s in-house counsel), expended or
incurred by Bank in connection with (a) the negotiation and preparation of this
Agreement and the other Loan Documents, Bank’s continued administration hereof
and thereof, and the preparation of any amendments and waivers hereto and
thereto, (b) the enforcement of Bank’s rights and/or the collection of any
amounts which become due to Bank under any of the Loan Documents, and (c) the
prosecution or defense of any action in any way related to any of the Loan
Documents, including without limitation, any action for declaratory relief,
whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and including any of the foregoing incurred in connection with any
bankruptcy proceeding (including without limitation, any adversary proceeding,
contested matter or motion brought by Bank or any other person) relating to any
Borrower or any other person or entity.

 

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SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Bank’s prior
written consent. Bank reserves the right to sell, assign, transfer, negotiate or
grant participations in all or any part of, or any interest in, Bank’s rights
and benefits under each of the Loan Documents. In connection therewith, Bank may
disclose all documents and information which Bank now has or may hereafter
acquire relating to any credit subject hereto, Borrower or its business, or any
collateral required hereunder.

SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other Loan
Documents constitute the entire agreement between Borrower and Bank with respect
to each credit subject hereto and supersede all prior negotiations,
communications, discussions and correspondence concerning the subject matter
hereof. This Agreement may be amended or modified only in writing signed by each
party hereto.

SECTION 7.6. NO THIRD PARTY BENEFICIARIES, This Agreement is made and entered
into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.

SECTION 7.7. TIME. Time is of the essence of each and every provision of this
Agreement and each other of the Loan Documents.

SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.

SECTION 7.9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be an
original, and all of which when taken together shall constitute one and the same
Agreement.

SECTION 7.10. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California.

SECTION 7.11. ARBITRATION.

(a) Arbitration. The parties hereto agree, upon demand by any party, to submit
to binding arbitration all claims, disputes and controversies between or among
them (and their respective employees, officers, directors, attorneys, and other
agents), whether in tort, contract or otherwise arising out of or relating to in
any way (i) the loan and related Loan Documents which are the subject of this
Agreement and its negotiation, execution, collateralization, administration,
repayment, modification, extension, substitution, formation, inducement,
enforcement, default or termination; or (ii) requests for additional credit.

 

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(b) Governing Rules. Any arbitration proceeding will (i) proceed in a location
in California selected by the American Arbitration Association (“AAA”); (ii) be
governed by the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the documents
between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
AAA’s commercial dispute resolution procedures, unless the claim or counterclaim
is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and
costs in which case the arbitration shall be conducted in accordance with the
AAA’s optional procedures for large, complex commercial disputes (the commercial
dispute resolution procedures or the optional procedures for large, complex
commercial disputes to be referred to, as applicable, as the “Rules”). If there
is any inconsistency between the terms hereof and the Rules, the terms and
procedures set forth herein shall control. Any party who fails or refuses to
submit to arbitration following a demand by any other party shall bear all costs
and expenses incurred by such other party in compelling arbitration of any
dispute. Nothing contained herein shall be deemed to be a waiver by any party
that is a bank of the protections afforded to it under 12 U.S.C. §91 or any
similar applicable state law.

(c) No Waiver of Provisional Remedies, Self-Help and Foreclosure. The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions detailed in sections (i), (ii) and (iii) of this paragraph.

(d) Arbitrator Qualifications and Powers. Any arbitration proceeding in which
the amount in controversy is $5,000,000.00 or less will be decided by a single
arbitrator selected according to the Rules, and who shall not render an award of
greater than $5,000,000.00. Any dispute in which the amount in controversy
exceeds $5,000,000.00 shall be decided by majority vote of a panel of three
arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will be a neutral
attorney licensed in the State of California or a neutral retired judge of the
state or federal judiciary of California, in either case with a minimum of ten
years experience in the substantive law applicable to the subject matter of the
dispute to be arbitrated. The arbitrator will determine whether or not an issue
is arbitratable and will give effect to the statutes of limitation in
determining any claim. In any arbitration proceeding the arbitrator will decide
(by documents only or with a hearing at the arbitrator’s discretion) any
pre-hearing motions which are similar to motions to dismiss for failure to state
a claim or motions for summary adjudication. The arbitrator shall resolve all
disputes in accordance with the substantive law of California and may grant any
remedy or relief that a court of such state could order or grant within the
scope hereof and such ancillary relief as is necessary to make effective any
award. The arbitrator shall also have the power to award recovery of all costs
and fees, to impose sanctions and to take such other action as the arbitrator
deems necessary to the same extent a judge could pursuant to the Federal Rules
of Civil Procedure, the California Rules of Civil Procedure or other applicable
law. Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction. The institution

 

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and maintenance of an action for judicial relief or pursuit of a provisional or
ancillary remedy shall not constitute a waiver of the right of any party,
including the plaintiff, to submit the controversy or claim to arbitration if
any other party contests such action for judicial relief.

(e) Discovery. In any arbitration proceeding discovery will be permitted in
accordance with the Rules. All discovery shall be expressly limited to matters
directly relevant to the dispute being arbitrated and must be completed no later
than 20 days before the hearing date and within 180 days of the filing of the
dispute with the AAA. Any requests for an extension of the discovery periods, or
any discovery disputes, will be subject to final determination by the arbitrator
upon a showing that the request for discovery is essential for the party’s
presentation and that no alternative means for obtaining information is
available.

(f) Class Proceedings and Consolidations. The resolution of any dispute arising
pursuant to the terms of this Agreement shall be determined by a separate
arbitration proceeding and such dispute shall not be consolidated with other
disputes or included in any class proceeding.

(g) Payment Of Arbitration Costs And Fees. The arbitrator shall award all costs
and expenses of the arbitration proceeding.

(h) Real Property Collateral; Judicial Reference. Notwithstanding anything
herein to the contrary, no dispute shall be submitted to arbitration if the
dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action rule statute of
California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such dispute is not submitted to arbitration, the dispute shall be referred to a
referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with said Section 638. A referee with the
qualifications required herein for arbitrators shall be selected pursuant to the
AAA’s selection procedures. Judgment upon the decision rendered by a referee
shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and 645.

(i) Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators
and the parties shall take all action required to conclude any arbitration
proceeding within 180 days of the filing of the dispute with the AAA. No
arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between the parties
potentially applies to a dispute, the arbitration provision most directly
related to the Loan Documents or the subject matter of the dispute shall
control. This arbitration provision shall survive termination, amendment or
expiration of any of the Loan Documents or any relationship between the parties.

 

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(j) Small Claims Court. Notwithstanding anything herein to the contrary, each
party retains the right to pursue in Small Claims Court any dispute within that
court’s jurisdiction. Further, this arbitration provision shall apply only to
disputes in which either party seeks to recover an amount of money (excluding
attorneys’ fees and costs) that exceeds the jurisdictional limit of the Small
Claims Court.

SECTION 7.12. NO NOVATION OR IMPAIRMENT OF SECURITY INTERESTS. This Agreement
shall not cause a novation, payment and reborrowing, or termination of any of
the indebtedness or obligations of Borrower under the Existing Credit Agreement
or other loan documents executed in connection therewith (collectively, the
“Existing Loan Documents”), nor shall it extinguish, discharge, terminate or
impair Borrower’s indebtedness or obligations or Bank’s rights or remedies under
the Existing Credit Agreement and the other Existing Loan Documents; provided,
however, that all such indebtedness, obligations, rights and remedies shall be
on the terms and conditions of, and as set forth in, this Agreement and the Loan
Documents. In addition, this Agreement shall not release, limit or impair in any
way the priority of any security interests and liens held by Bank against any
assets of Borrower arising under the Existing Credit Agreement or the other
Existing Loan Documents.

[signatures follow]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day and year first written above.

 

WORLD OF JEANS & TOPS     WELLS FARGO BANK, NATIONAL ASOCIATION By:   /s/ Bill
Langsdorf     By:   /s/ Mark Magdaleno   Name: Bill Langsdorf       Name: Mark
Magdaleno  

Title: Senior Vice President and Chief

          Financial Officer

      Title: Vice President

Signature Page to Amended and Restated Credit Agreement