Exhibit 10.01

EXECUTION VERSION

 

 

 

LETTER OF CREDIT AGREEMENT

 

 

 

WELLS FARGO RETAIL FINANCE II, LLC

The Lender

DELIA*S, INC.

THE LEAD APPLICANT

FOR:

DELIA*S, INC.

ALLOY MERCHANDISE, LLC

DELIA*S OPERATING COMPANY

DELIA*S RETAIL COMPANY

The Applicants

JUNE 26, 2009

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TABLE OF CONTENTS

 

         

Page

ARTICLE 1:        Definitions:    3

ARTICLE 2:        The L/C Facility:

   8

2.1

   Establishment of L/C Facility    8

2.2

   Advances in Excess of Availability (Over Advances)    9

2.3

   Lender’s Commitment    9

2.4

   The Loan Account    9

2.5

   Payment on the Loan Account    10

2.6

   Interest on Overdue Amounts    11

2.7

   Unused Line Fee    11

2.8

   Procedures For Issuance of L/C’s; Auto-Extension Letters of Credit    12

2.9

   Fees For L/C’s    15

2.10

   Concerning L/C’s    16

2.11

   Designation of Lead Applicant as Applicants’ Agent    17

2.12

   Optional Termination    18

2.13

   Assumption of L/Cs Under Existing Loan Agreement    18

ARTICLE 3:        Conditions Precedent:

   18

3.1

   Conditions Precedent to Effectiveness of this Agreement    18

3.2

   Conditions Precedent to Issuance of Each L/C    21

ARTICLE 4:        General Representations, Covenants and Warranties:

   21

4.1

   Payment and Performance of Liabilities    21

4.2

   Due Organization. Authorization. No Conflicts    21

4.3

   Line of Business    23

4.4

   Immediate Notice to Lender    23

4.5

   Officers’ Certificates    24

4.6

   Use of L/C Facility    24

4.7

   Cash Collateral Account    25

4.8

   Solvency    25

4.9

   Corporate Action    25

4.10

   Other Covenants    25

ARTICLE 5:        Events of Default:

   25

5.1

   Failure to Pay the Loan Account    25

5.2

   Failure To Make Other Payments    25

5.3

   Failure to Perform Covenant or Liability (No Grace Period)    26

5.4

   Failure to Perform Covenant or Liability (Grace Period)    26

5.5

   Misrepresentation    26

5.6

   Default Under Other Agreements    26

5.7

   Attachment. Judgment. Restraint of Business    26

5.8

   Business Failure    27

 

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5.9

   Bankruptcy    27

5.10

   Indictment - Forfeiture    27

5.11

   Challenge to Loan Documents    28

5.12

   Change in Control    28

ARTICLE 6:         Rights and Remedies Upon Default:

   28

6.1

   Acceleration and Setting Termination Date    28

6.2

   Rights and Remedies    28

ARTICLE 7:        Notices:

   29

7.1

   Notice Addresses    29

7.2

   Notice Given    30

ARTICLE 8:        Term:

   30

8.1

   Termination of L/C Facility    30

8.2

   Actions On Termination    31

ARTICLE 9:        General:

   31

9.1

   Publicity    31

9.2

   Successors and Assigns    31

9.3

   Severability    32

9.4

   Amendments. Course of Dealing    32

9.5

   Costs and Expenses of the Lender    33

9.6

   Copies and Facsimiles    33

9.7

   Massachusetts Law    34

9.8

   Consent to Jurisdiction    34

9.9

   Indemnification    35

9.10

   Rules of Construction    35

9.11

   Intent. It is intended that:    37

9.12

   Participations    37

9.13

   Confidentiality    38

9.14

   Right of Set-Off    38

9.15

   Pledges To Federal Reserve Banks    38

9.16

   Maximum Interest Rate    39

9.17

   Waivers    39

 

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LETTER OF CREDIT AGREEMENT   Wells Fargo Retail Finance II, LLC   THE LENDER

 

 

 

THIS LETTER OF CREDIT AGREEMENT, dated as of June 26, 2009, is made between
Wells Fargo Retail Finance II, LLC (the “Lender”), a Delaware limited liability
company with offices at One Boston Place - 19th Floor, Boston, Massachusetts
02108, and

dELiA*s, Inc., a Delaware corporation with its principal executive offices at 50
West 23rd Street, New York, New York 10010, as agent (in such capacity, the
“Lead Applicant”) for the following (individually, an “Applicant” and,
collectively, the “Applicants”):

dELiA*s, Inc., a Delaware corporation,

Alloy Merchandise, LLC, a Delaware limited liability company,

dELiA*s Operating Company, a Delaware corporation, and

dELiA*s Retail Company, a Delaware corporation,

each with its principal executive offices at 50 West 23rd Street New York, New
York 10010, in consideration of the mutual covenants herein contained and
benefits to be derived herefrom.

ARTICLE 1: DEFINITIONS:

As used herein, the following terms have the following meanings or are defined
in the section of this Agreement so indicated:

“Affiliate”: With respect to any two Persons, a relationship in which (i) one
holds, directly or indirectly, not less than Twenty Five Percent (25%) of the
capital stock, beneficial interests, partnership interests, or other equity
interests of the other; or (ii) one has, directly or indirectly, the right,
under ordinary circumstances, to vote for the election of a majority of the
directors (or other body or Person who has those powers customarily vested in a
board of directors of a corporation); or (iii) not less than Twenty Five Percent
(25%) of their respective ownership is directly or indirectly held by the same
third Person; or (iv) one directly or indirectly is under the common control of
the other by reason of direct or indirect power to direct or cause the direction
of management and policies of the other (through the ownership of voting
securities, by contract, or on any other basis).

“Applicable Law”: As to any Person: (i) All statutes, rules, regulations,
orders, or other requirements having the force of law and (ii) all (A) court
orders and injunctions, (B) arbitrator’s written decisions, and/or (C) similar
rulings which similar rulings are in writing, in each instance ((i) and (ii)) of
or by any federal, state, municipal, and other governmental authority, or court,
tribunal, panel, or other legislative or administrative body which has or claims
jurisdiction over such Person, or any property of such Person, or of any other
Person for whose conduct such Person would be responsible.

 

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“Applicant” and “Applicants”: As defined in the Preamble to this Agreement.

“Availability”: The result of the following:

 

  (i) The lesser of

 

  (A) The Credit Limit

or

 

  (B) 95.238% of the available balance in the Cash Collateral Account.

Minus

 

  (ii) The aggregate unpaid balance of the Loan Account.

Minus

 

  (iii) The aggregate undrawn Stated Amount of all then outstanding L/C’s.

“Bankruptcy Code”: Title 11, U.S.C., as amended from time to time.

“Business Day”: Any day other than (a) a Saturday or Sunday; (b) any day on
which banks in Boston, Massachusetts or in New York, New York, generally are not
open to the general public for the purpose of conducting commercial banking
business; or (c) a day on which the principal office of the Lender is not open
to the general public to conduct business.

“Cash Collateral Account”: All cash and cash equivalents deposited at Wells
Fargo Bank, N.A. for the account of any Applicant, which cash and cash
equivalents are under the sole and exclusive dominion and control of the Lender,
on terms and conditions satisfactory to the Lender.

“Change in Control”: The occurrence of any of the following:

 

  (a) More than half of the persons who were directors of the Lead Applicant on
the first day of any period consisting of Twelve (12) consecutive calendar
months (the first of which Twelve (12) month periods commencing with the first
day of the month following the Closing Date), cease to be directors of the Lead
Applicant for any reason other than (i) death or disability or (ii) replacement
by individuals whose nomination for election to the relevant board of directors
is approved, prior to such election, by a majority of the directors of the
relevant board of directors.

 

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  (b) Any failure of the Lead Applicant directly or indirectly to own,
beneficially and of record, 100% of the capital stock or share capital or
limited liability company interests of all of the Applicants.

“Closing Date”: June 26, 2009.

“Costs of Collection”: Includes, without limitation, all reasonable attorneys’
fees and reasonable out-of-pocket expenses incurred by each Credit Party,
including the fees and expenses of outside counsel, and all reasonable
out-of-pocket costs incurred by each Credit Party in the administration of the
Liabilities and/or the Loan Documents, including, without limitation, reasonable
costs and expenses associated with travel on behalf of such Credit Party, where
such costs and expenses are directly or indirectly related to or in respect of
such Credit Party’s administration and management of the Liabilities;
negotiation, documentation, and amendment of any Loan Document; or efforts to
preserve, protect, collect, or enforce any collateral, the Liabilities, and/or
the Lender’s Rights and Remedies and/or any of the rights and remedies of such
Credit Party against or in respect of any guarantor or other person liable in
respect of the Liabilities (whether or not suit is instituted in connection with
such efforts). The Costs of Collection are Liabilities, and at the Lender’s
option may bear interest at the then effective Prime Rate.

“Credit Limit”: $15,000,000.00.

“Credit Parties”: The Lender, Issuer and/or any of their respective Affiliates.

“Default”: Any occurrence, circumstance, or state of facts with respect to a
Applicant which (a) is an Event of Default; or (b) would become an Event of
Default if any requisite notice were given and/or any requisite period of time
were to run and such occurrence, circumstance, or state of facts were not cured
within any applicable grace period.

“Documentary L/C”: An L/C issued pursuant to this Agreement, the drawing under
which requires the delivery of bills of lading, airway bills or other similar
types of documents of title.

“End Date”: The date upon which all of the following conditions are satisfied:
(a) all payment Liabilities described in Section 8.2(a) have been paid in full;
(b) those arrangements concerning L/C’s and other financial accommodations which
are described in Section 8.2(b) have been made; and (c) all obligations of each
Credit Party to provide financial accommodations to the Applicants hereunder
shall have been irrevocably terminated.

“Events of Default”: As defined in Article 5:. An “Event of Default” shall be
deemed to have occurred and to be continuing unless and until that Event of
Default has been duly waived by the Lender or cured by the Applicants.

 

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“Existing Loan Agreement”: That certain Second Amended and Restated Loan and
Security Agreement dated as of May 17, 2006, as amended, by and among dELiA*s,
Inc., for itself and as agent for the other borrowers party thereto, the
borrowers party thereto, and Wells Fargo Retail Finance II, LLC, as lender.

“Indemnified Person”: As defined in Section 9.9.

“Issuer”: Well Fargo Bank, N.A. or any other issuer of any L/C selected by the
Lender in its sole discretion.

“Lender’s Rights and Remedies”: As defined in Section 6.2.

“L/C”: Any letter of credit, the issuance of which is procured by the Lender for
the account of any Applicant and any acceptance made on account of such letter
of credit.

“L/C Disbursement”: Means any payment made under an L/C.

“L/C Facility”: As defined in Section 2.1.

“L/C Fee”: As defined in Section 2.9.

“Lead Applicant” As defined in the Preamble to this Agreement.

“Lender”: As defined in the Preamble to this Agreement.

“Liabilities”: means the due and punctual payment by the Applicant of (i) each
payment required to be made by any Applicant under this Agreement, when and as
due, including payments in respect of reimbursement of disbursements of any L/C
and interest thereon (including all interest that accrues after the commencement
of any case or proceeding by or against any Applicant under any federal or state
bankruptcy, insolvency, receivership or similar law, whether or not allowed in
such case or proceeding) and (ii) all other monetary obligations, including
fees, costs, expenses and indemnities, whether primary, secondary, direct,
contingent, fixed or otherwise, of the Applicants to each Credit Party under
this Agreement and the other Loan Documents.

“Loan Account”: As defined in Section 2.4.

“Loan Documents”: All of the following:

 

  (a) This Agreement and each other instrument or document from time to time
executed and/or delivered to a Credit Party in connection with the arrangements
contemplated hereby.

 

  (b) Each instrument or document from time to time executed and/or delivered in
connection with the issuance of any L/C.

 

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“Maturity Date”: The date that is the second anniversary of the Closing Date.

“Material Adverse Change”: Any event, fact, circumstance, change in, or effect,
on the business of the Applicants, when taken as a whole, which, individually or
in the aggregate or on a cumulative basis with any other circumstances, changes
in, or effects on, the Applicants or any collateral granted to the Lender,
constitutes any of the following:

 

  (a) A material adverse change in the business, operations, results of
operations, assets, liabilities, or condition (financial or otherwise) of the
Applicants (when taken as a whole), including, without limitation, a material
adverse change in the business, operations, results, assets, liabilities or
condition since the date of the latest financial information supplied pursuant
to this Agreement.

 

  (b) The material impairment of the Applicants’ ability to perform their
obligations under the Loan Documents or of the Lender’s ability to enforce the
Liabilities or to realize on the Cash Collateral Account.

 

  (c) A material adverse effect on the value of the Cash Collateral Account or
the amount which the Lender likely would receive (after giving consideration to
delays in payment and costs of enforcement).

 

  (d) A material impairment to the priority of the Lender’s lien on the Cash
Collateral Account.

“Material Adverse Effect”: A result, consequence, or outcome with respect to the
Applicants, taken as a whole, which constitutes a Material Adverse Change.

“Over Advance”: An issuance of any L/C, or the providing of another financial
accommodation, to the extent that, immediately after its having been made,
Availability is less than zero.

“Person”: Any natural person, and any corporation, limited liability company,
trust, partnership, joint venture, or other enterprise or entity.

“Prime Rate”: The rate per annum equal to the Prime Rate announced from time to
time by Wells Fargo Bank, N.A. (or any successor in interest to Wells Fargo
Bank, N.A.). In the event that said bank (or any such successor) ceases to
announce such a rate, “Prime Rate” shall refer to that rate or index announced
or published from time to time as the Lender, in good faith, designates as the
functional equivalent to said Prime Rate. Any change in “Prime Rate” shall be
effective, for purposes of the calculation of interest due hereunder, when such
change is made effective generally by the bank on whose rate or index “Prime
Rate” is being set.

“Requirements of Law”: As to any Person:

 

  (a) Applicable Law.

 

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  (b) That Person’s organizational documents.

 

  (c) That Person’s by-laws and/or other instruments which deal with corporate
or similar governance, as applicable.

“Solvent” and “Solvency”: With respect to any Person on a particular date, that
on such date (a) at fair valuation, all of the properties and assets of such
Person are greater than the sum of the debts, including contingent liabilities,
of such Person, (b) the present fair saleable value of the properties and assets
of such Person is not less than the amount that would be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person is able to realize upon its properties and assets and
pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (d) such Person
does not intend to, and does not believe that it will, incur debts beyond such
Person’s ability to pay as such debts mature, and (e) such Person is not engaged
in a business or a transaction, and is not about to engage in a business or
transaction, for which such Person’s properties and assets would constitute
unreasonably small capital after giving due consideration to the prevailing
practices in the industry in which such Person is engaged. The amount of all
guarantees at any time shall be computed as the amount that, in light of all the
facts and circumstances existing at the time, can reasonably be expected to
become an actual or matured liability.

“Standby L/C”: An L/C issued pursuant to this Agreement, the drawing under which
does not require the delivery of bills of lading, airway bills or other similar
types of documents of title, or which are customarily referred to as Standby
Letters of Credit.

“Stated Amount”: The maximum amount for which an L/C may be honored.

“Termination Date”: The earliest of (a) the Maturity Date; or (b) the occurrence
of any event described in Section 5.9, below; or (c) the Lender’s notice to the
Lead Applicant setting the Termination Date on account of the occurrence of any
Event of Default other than as described in Section 5.9, below; or (d) that date
of which not less than ninety (90) days irrevocable prior written notice is
provided by the Lead Applicant to the Lender pursuant to Section 2.12 hereof.

“UCC”: The Uniform Commercial Code as in effect from time to time in
Massachusetts.

“Unused Line Fee”: As defined in Section 2.7.

ARTICLE 2: THE L/C FACILITY:

 

  2.1 ESTABLISHMENT OF L/C FACILITY.

The Lender hereby establishes a letter of credit facility (the “L/C Facility”)
in the Applicants’ favor pursuant to which the Lender, subject to, and in
accordance with, this Agreement, shall cause L/Cs for the account of the
Applicants to be issued by the Issuer as provided herein.

 

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  2.2 ADVANCES IN EXCESS OF AVAILABILITY (OVER ADVANCES).

 

  (a) The Lender does not have any obligation to issue or cause to be issued any
L/C for the account of any Applicant where the result of the issuance is an Over
Advance.

 

  (b) The Lender’s providing of an Over Advance on any one occasion does not
affect the obligations of each Applicant hereunder (including each Applicant’s
obligation to immediately repay any amount which otherwise constitutes an Over
Advance) nor obligate the Lender to do so on any other occasion.

 

  2.3 LENDER’S COMMITMENT. Subject to the provisions of this Agreement, the
Lender shall cause the Issuer to issue L/Cs for the account of any of the
Applicants, in each instance if duly and timely requested by the Lead Applicant
as provided herein, provided that:

 

  (a) No Over Advance is then outstanding and none will result therefrom.

 

  (b) No Applicant is then in Default and none will thereby become in Default.

 

  2.4 THE LOAN ACCOUNT.

 

  (a) An account (“Loan Account”) shall be opened on the books of the Lender in
which a record shall be kept of all unpaid L/C Disbursements and fees, interest
and expenses that have accrued and/or become payable as set forth herein.

 

  (b) The Lender shall also keep a record of all interest, fees, service
charges, costs, expenses, and other debts owed to a Credit Party on account of
the Liabilities and of all credits against such amounts so owed.

 

  (c) The Lender shall provide the Lead Applicant, monthly, with a statement of
the Loan Account.

 

  (d) All credits against the Liabilities shall be conditional upon final
payment to the Lender of the items giving rise to such credits. The amount of
any item credited against the Liabilities which is charged back against the
Lender for any reason or is not so paid shall be a Liability and shall be added
to the Loan Account, whether or not the item so charged back or not so paid is
returned.

 

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  (e) Except as otherwise provided herein, all L/C Disbursements, fees, service
charges, costs, and expenses for which any Applicant is obligated hereunder are
payable on demand. In the event that the Lead Applicant prevails in any dispute
of the amount of any such fee, service charge, cost, or expense, the Lender
shall refund any interest which accrued on any amount paid over to that
Applicant in consequence of the resolution of such dispute.

 

  (f) In the determination of Availability, the Lender may deem fees, service
charges, accrued interest, and other payments which will be due and payable
between the date of such determination and the first day of the then next
succeeding month as having been advanced and recorded in the Loan Account
whether or not such amounts are then due and payable.

 

  (g) The Lender, without the request of the Lead Applicant, may charge to the
Loan Account any interest, fee, service charge, or other payment to which a
Credit Party is entitled from any Applicant pursuant hereto notwithstanding that
an Over Advance may result thereby. Such action on the part of the Lender shall
not constitute a waiver of the Lender’s rights and each Applicant’s obligations
under Section 2.5(c). Any amount which is added to the Loan Account as provided
in this Subsection (g) shall bear interest at the interest rate equal to the
Prime Rate plus 2% per annum. Upon charging the Loan Account as provided herein,
the Lender shall promptly notify the Lead Applicant thereof.

 

  (h) Any statement rendered by the Lender to the Lead Applicant concerning the
Liabilities shall be considered correct and accepted by each Applicant and shall
be conclusively binding upon each Applicant (absent an administrative or
mathematical error) unless the Lead Applicant provides the Lender with written
objection thereto within twenty (20) days from the mailing of such statement,
which written objection shall indicate, with reasonable particularity, the
reason for such objection. The Loan Account and the Lender’s books and records
concerning the financing arrangement contemplated herein and the Liabilities
shall be prima facie evidence and proof of the items described therein absent
manifest error.

 

  2.5 PAYMENT ON THE LOAN ACCOUNT.

 

  (a)

Upon receipt from the beneficiary of any L/C of any notice of a drawing under
any Standby L/C, the Lender or Issuer shall notify the Lead Applicant thereof;
provided, however, that any failure to give or delay in giving such notice shall
not relieve the Applicants of their obligation to reimburse the Lender for the
benefit of the Issuer an amount equal to such L/C Disbursement. Not later than
11:00 a.m. on the date of any payment by the Issuer under a Standby L/C and the
receipt of the notice to the Lead Applicant referred to above (or, if such
notice is

 

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received after 11:00 a.m., not later than 11:00 a.m. the immediately succeeding
Business Day), the Applicants shall reimburse the Issuer through the Lender in
an amount equal to the amount of such drawing. In the event that the Applicants
have not reimbursed the Issuer within the time periods set forth above, the
Lender shall have the right to withdraw funds from the Cash Collateral Account
and apply such funds to pay such reimbursement and to any other overdue
Liabilities.

 

  (b) Not later than 2:00 p.m. on the date of any payment by the Issuer under a
Documentary L/C, the Applicants shall reimburse the Issuer through the Lender in
an amount equal to the amount of such drawing. In the event that the Applicants
have not reimbursed the Issuer within the time period set forth above, the
Lender shall have the right to withdraw funds from the Cash Collateral Account
and apply such funds to pay such reimbursement and to any other overdue
Liabilities.

 

  (c) The Applicants, without notice or demand from the Lender, shall pay the
Lender that amount, from time to time, which is necessary so that there is no
Over Advance outstanding.

 

  (d) The Applicants shall repay that amount described in Section 8.2(a) on the
Termination Date.

 

  (e) The Applicants on demand shall pay all interest, fees and cost and
expenses due pursuant to this Agreement.

 

  2.6 INTEREST ON OVERDUE AMOUNTS. If the Issuing Bank shall make any L/C
Disbursement, then, unless the Applicants shall reimburse the Lender on behalf
of the Issuing Bank in full on the date such reimbursement is due, the unpaid
amount thereof shall bear interest, for each day from and including the date
such reimbursement is due but excluding the date that the Applicant reimburses
the Lender therefor, at the rate per annum equal to the Prime Rate plus 2.00%.
Interest shall be calculated on the basis of a 360 day year and actual days
elapsed.

 

  2.7 UNUSED LINE FEE. In addition to any other fee to be paid by the
Applicants, the Applicants shall pay the Lender an unused line fee (the “Unused
Line Fee”) of 0.75% per annum of the average daily difference, during the month
just ended (or relevant period with respect to the payment being made on the
Termination Date), between the Credit Limit and the aggregate undrawn Stated
Amount of L/Cs outstanding during the relevant period. The Unused Line Fee shall
be paid in arrears, on the first day of each month after the execution of this
Agreement and on the Termination Date.

 

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  2.8 PROCEDURES FOR ISSUANCE OF L/C’S; AUTO-EXTENSION LETTERS OF CREDIT.

 

  (a) Each L/C shall be issued or amended, as the case may be, upon the request
of the Lead Applicant delivered to the Issuer (with a copy to the Lender) in the
form of an L/C application, appropriately completed and signed by a responsible
officer of the Lead Applicant. Such application must be received by the Issuer
and the Lender not later than 11:00 a.m. at least two Business Days (or such
other date and time as the Lender and the Issuer may agree in a particular
instance in their sole discretion) prior to the proposed issuance date or date
of amendment, as the case may be. In the case of a request for an initial
issuance of an L/C, such application shall specify in form and detail
satisfactory to the Lender and the Issuer: (A) the proposed issuance date of the
requested L/C (which shall be a Business Day); (B) the amount thereof; (C) the
expiry date thereof; (D) the name and address of the beneficiary thereof;
(E) the documents to be presented by such beneficiary in case of any drawing
thereunder; (F) the full text of any certificate to be presented by such
beneficiary in case of any drawing thereunder; and (G) such other matters as the
Lender or the Issuer may reasonably require. In the case of a request for an
amendment of any outstanding L/C, such application shall specify in form and
detail satisfactory to the Lender and the Issuer (A) the L/C to be amended;
(B) the proposed date of amendment thereof (which shall be a Business Day);
(C) the nature of the proposed amendment; and (D) such other matters as the
Lender or the Issuer may reasonably require. Additionally, the Lead Applicant
shall furnish to the Issuer and the Lender such other documents and information
pertaining to such requested L/C issuance or amendment, as the Issuer or the
Lender may reasonably require.

 

  (b) Unless one or more applicable conditions contained in Article 3 shall not
then be satisfied and the Issuer has received written notice thereof from the
Lender or any Applicant, at least one Business Day prior to the requested date
of issuance or amendment of the applicable L/C, then, subject to the terms and
conditions hereof, the Lender shall cause the Issuer, on the requested date, to
issue an L/C for the account of the applicable Applicant or enter into the
applicable amendment, as the case may be, in each case in accordance with the
Issuer’s usual and customary business practices.

 

  (c) The Lender will cause the issuance of any L/C so requested by the Lead
Applicant, provided that, at the time that the request is made, no Applicant is
in Default and no Material Adverse Change has occurred or would occur, and if so
issued:

 

  (i) The aggregate Stated Amount of all L/C’s then outstanding does not exceed
the Credit Limit.

 

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  (ii) Except as provided in clause (g) below, the expiry of the L/C is not
later than the earlier of Thirty (30) days prior to the Maturity Date or the
following:

 

  (A) In the case of Standby L/Cs: One (1) year from initial issuance (without
regard to any evergreen feature).

 

  (B) In the case of Documentary L/Cs: Ninety (90) days from issuance.

 

  (iii) An Over Advance will not result from the issuance of the subject L/C.

 

  (iv) The Cash Collateral Account is funded in an amount equal to no less than
105% of the Credit Limit.

 

  (d) No L/C shall be issued without the prior consent of the Lender if:

 

  (i) any order, judgment or decree of any governmental authority or arbitrator
shall by its terms purport to enjoin or restrain the Issuer from issuing such
L/C, or any law applicable to the Issuer or any request or directive (whether or
not having the force of law) from any governmental authority with jurisdiction
over the Issuer shall prohibit, or request that the Issuer refrain from, the
issuance of letters of credit generally or such L/C in particular or shall
impose upon the Issuer with respect to such L/C any restriction, reserve or
capital requirement (for which the Issuer is not otherwise compensated
hereunder) not in effect on the Closing Date, or shall impose upon the Issuer
any unreimbursed loss, cost or expense which was not applicable on the Closing
Date and which the Issuer in good faith deems material to it;

 

  (ii) the issuance of such L/C would violate one or more policies of the Issuer
applicable to letters of credit generally; or

 

  (iii) such L/C is to be denominated in a currency other than Dollars.

 

  (e) The Applicants shall not permit any L/C to be amended if (A) the Issuer
would not be permitted at such time to issue such L/C in its amended form under
the terms hereof or (B) the beneficiary of such L/C does not accept the proposed
amendment to such L/C.

 

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  (f) The Issuer shall act on behalf of the Lender with respect to any L/C’s
issued by it and the documents associated therewith, and the Issuer shall have
all of the benefits and immunities provided to the Lender in Article 9 with
respect to any acts taken or omissions suffered by the Issuer in connection with
L/C’s issued by it or proposed to be issued by it and documents pertaining to
such L/C’s.

 

  (g) If the Lead Applicant so requests in any applicable L/C application, the
Lender may, in its sole and absolute discretion, cause the Issuer to issue a
Standby L/C that has automatic extension provisions (each, an “Auto-Extension
L/C”); provided that any such Auto-Extension L/C must permit the Issuer to
prevent any such extension at least once in each twelve-month period (commencing
with the date of issuance of such Standby L/C) by giving prior notice to the
beneficiary thereof, with a copy of such notice given to the Lead Applicant, not
later than a day (the “Non-Extension Notice Date”) in each such twelve-month
period to be agreed upon at the time such Standby L/C is issued. Unless
otherwise directed by the Lender or the Issuer, the Lead Applicant shall not be
required to make a specific request to the Lender or the Issuer for any such
extension. Once an Auto-Extension L/C has been issued, the Lender shall be
deemed to have authorized (but may not require) the Issuer to permit the
extension of such Standby L/C at any time to an expiry date not later than the
Termination Date; provided, however, that the Lender shall instruct the Issuer
not to permit any such extension if (A) the Lender has determined that it would
not be permitted, or would have no obligation, at such time to cause the Issuer
to issue such Standby L/C in its revised form (as extended) under the terms
hereof, or (B) the Issuer has received notice (which may be by telephone or in
writing) on or before the day that is five Business Days before the
Non-Extension Notice Date (1) from the Lender that the Lender has elected not to
permit such extension or (2) from the Lender or the Lead Applicant that one or
more of the applicable conditions specified in Section 3.2 is not then
satisfied, and in each such case directing the Issuer not to permit such
extension.

 

  (h) There shall not be any recourse to, nor liability of, the Lender on
account of

 

  (i) Any delay or refusal by an Issuer to issue an L/C;

 

  (ii) Any action or inaction of an Issuer on account of or in respect of, any
L/C.

 

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  2.9 FEES FOR L/C’S.

 

  (a) The Applicants shall pay to the Lender a fee (each, an “L/C Fee”), on
account of outstanding L/C’s, the issuance of which had been procured by the
Lender, monthly in arrears, and on the Termination Date and on the End Date,
equal to 2.00% per annum of the average daily Stated Amount of the of L/Cs
outstanding during the subject month.

 

  (b) In addition to (but without duplication of) the fee to be paid as provided
in Subsection (a), above, the Applicants shall pay to the Lender (or to the
Issuer, if so requested by Lender), on demand, all issuance, processing,
negotiation, amendment, and administrative fees and other amounts then generally
charged by the Issuer on account of, or in respect to, any L/C.

 

  (c) If any change in Applicable Law after the date of this Agreement shall
either:

 

  (i) impose, modify or deem applicable any reserve, special deposit or similar
requirements against letters of credit heretofore or hereafter issued by any
Issuer or with respect to which the Lender or any Issuer has an obligation to
lend to fund drawings under any L/C; or

 

  (ii) impose on any Issuer any other condition or requirements relating to any
such letters of credit;

and the result of any event referred to in Paragraphs (i) or (ii), above, shall
be to increase the cost to the Lender or to any Issuer of issuing or maintaining
any L/C (which increase in cost shall be the result of such Issuer’s reasonable
allocation among the Lender’s or Issuer’s letter of credit customers of the
aggregate of such cost increases resulting from such events), then, subject to
Subsection (d), upon demand by the Lender and delivery by the Lender to the Lead
Applicant of a certificate of an officer of the Lender or the subject Issuer
describing such change in Applicable Law or interpretation thereof, its effect
on the Lender or such Issuer, and the basis for determining such increased costs
and their allocation, the Applicants shall immediately pay to the Lender, from
time to time as specified by the Lender, such amounts as shall be sufficient to
compensate the Lender or the subject Issuer for such increased cost. The
Lender’s or any Issuer’s determination of costs incurred under Paragraphs (i) or
(ii), above, and the allocation, if any, of such costs among the Applicants and
other similarly situated letter of credit customers of the Lender or such
Issuer, if done in good faith and made on an equitable basis and in accordance
with such officer’s certificate, shall be conclusive and binding on the
Applicants.

 

  (d) The Applicants shall be required to compensate the Lender pursuant to
Subsection (c)

 

  (i) only if the Lender provides the Lead Applicant with notice thereof within
ninety (90) days after the Lender has received actual notice of the occurrence
of the relevant circumstances which gives rise to the Applicants’ obligation to
do so; and

 

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  (ii) only to the extent that the Lender imposes a like such compensation
obligation on other of its customers who are similarly situated to the
Applicants in respect of any increased costs described in Subsection (c).

 

  2.10 CONCERNING L/C’S.

 

  (a) None of the Issuer, the Issuer’s correspondents, the Lender, or any
advising, negotiating, or paying bank with respect to any L/C shall be
responsible in any way for:

 

  (i) The performance by any beneficiary under any L/C of that beneficiary’s
obligations to any Applicant.

 

  (ii) The form, sufficiency, correctness or genuineness of, or authority of any
person signing, falsification of, or the legal effect of, any documents called
for under any L/C if (with respect to the foregoing) such documents on their
face appear to be in order.

 

  (b) The Issuer may honor, as complying with the terms of any L/C and of any
drawing thereunder, any drafts or other documents otherwise in order, but signed
or issued by an administrator, executor, conservator, trustee in bankruptcy,
debtor in possession, assignee for the benefit of creditors, liquidator,
receiver, or other legal representative of the party authorized under such L/C
to draw or issue such drafts or other documents.

 

  (c) Unless otherwise agreed to, in the particular instance, each Applicant
hereby authorizes any Issuer to:

 

  (i) Select an advising bank, if any.

 

  (ii) Select a paying bank, if any.

 

  (iii) Select a negotiating bank.

 

  (d) All directions, correspondence, and funds transfers relating to any L/C
are at the risk of the Applicants. The Issuer shall have discharged the Issuer’s
obligations under any L/C which, or the drawing under which, includes payment
instructions, by the initiation of the method of payment called for in, and in
accordance with, such instructions (or by any other commercially reasonable and
comparable method). Neither the Lender nor the Issuer shall have any
responsibility for any inaccuracy, interruption, error, or delay in transmission
or delivery by post, telegraph or cable, or for any inaccuracy of translation.

 

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  (e) The Lender’s and the Issuer’s rights, powers, privileges and immunities
specified in or arising under this Agreement are in addition to any heretofore
or at any time hereafter otherwise created or arising, whether by statute or
rule of law or contract.

 

  (f) Except to the extent otherwise expressly provided hereunder or agreed to
in writing by the Issuer and the Lead Applicant, documentary L/C’s will be
governed by the Uniform Customs and Practice for Documentary Credits,
International Chamber of Commerce, Publication No. 600, and standby L/C’s will
be governed by International Standby Practices ISP98 (adopted by the
International Chamber of Commerce on April 6, 1998) or the UCP 600 and any
respective subsequent revisions thereof.

 

  (g) The obligations of the Applicants under this Agreement with respect to
L/C’s are absolute, unconditional, and irrevocable and shall be performed
strictly in accordance with the terms hereof under all circumstances, whatsoever
including, without limitation, the following:

 

  (i) Any lack of validity or enforceability or restriction, restraint, or stay
in the enforcement of this Agreement, any L/C, or any other agreement or
instrument relating thereto.

 

  (ii) Any Applicant’s consent to any amendment or waiver of, or consent to the
departure from, any L/C.

 

  (iii) The existence of any claim, set-off, defense, or other right which any
Applicant may have at any time against the beneficiary of any L/C.

 

  (iv) Any good faith honoring of a drawing under any L/C, which drawing
possibly could have been dishonored based upon a strict construction of the
terms of the L/C.

 

  2.11 DESIGNATION OF LEAD APPLICANT AS APPLICANTS’ AGENT.

 

  (a) Each Applicant hereby irrevocably designates and appoints the Lead
Applicant as that Applicant’s agent to request the issuance of L/Cs for the
account of any Applicant. As the disclosed principal for its agent, each
Applicant shall be obligated to each Credit Party on account of such L/Cs as if
such were caused to be issued by the Lender upon the request of that Applicant,
notwithstanding the manner by which L/Cs are recorded on the books and records
of the Lead Applicant or any other Applicant.

 

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  (b) Each Applicant recognizes that L/Cs to be issued hereunder are on better
terms than it otherwise could obtain on and for its own account and that is one
of the reasons for its joining in the letter of credit facility contemplated
herein with all other Applicants. Consequently, each Applicant hereby assumes
and agrees to discharge all Liabilities of each of the other Applicants as if
that Applicant so assuming and agreeing was each of the other Applicants.

 

  (c) The Lead Applicant shall act as a conduit for each Applicant (including
itself, as an “Applicant”) on whose behalf the Lead Applicant has requested the
issuance of an L/C.

 

  2.12 OPTIONAL TERMINATION.

 

  (a) Upon at least ninety (90) days prior written notice to the Lender, which
notice shall specify the desired date of termination, the Lead Applicant may
permanently terminate the commitment of the Lender to extend other financial
accommodations hereunder.

 

  (b) At the effective time of such early termination, the Applicants shall
comply with the provisions of Section 8.2 hereof.

 

  2.13 ASSUMPTION OF L/CS UNDER EXISTING LOAN AGREEMENT. On the Closing Date,
each of the “L/Cs” (as such term is defined in the Existing Loan Agreement)
outstanding under the Existing Loan Agreement on the Closing Date shall, for
purposes of this Agreement, be included as (and deemed to be) L/Cs issued
hereunder.

ARTICLE 3: CONDITIONS PRECEDENT:

 

  3.1 CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT.

As a condition to the effectiveness of this Agreement, each of the documents
respectively described in clauses (a) through and including (c) below (each in
form and substance reasonably satisfactory to the Lender) shall have been
delivered to the Lender, and the conditions respectively described in clauses
(d) through and including (l) below shall have been satisfied:

 

  (a) Corporate Due Diligence.

 

  (i) Certificates of corporate good standing for each Applicant, respectively
issued by the Secretary of State for the state in which that Applicant is
incorporated.

 

  (ii) Certificates of due qualification, in good standing, issued by the
Secretary(ies) of State of each State in which the nature of a Applicant’s
business conducted or assets owned could reasonably be expected to require such
qualification.

 

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  (iii) Certificates of each Applicant’s Secretary of the due adoption,
continued effectiveness, and setting forth the texts of, each corporate
resolution adopted in connection with the establishment of the letter of credit
arrangement contemplated by the Loan Documents and attesting to the true
signatures of each Person authorized as a signatory to any of the Loan
Documents.

 

  (b) Opinion. An opinion of counsel to the Applicants in form and substance
reasonably satisfactory to the Lender.

 

  (c) Officers’ Certificates. Certificates executed by the Chief Executive
Officer, Chief Operating Officer or Chief Financial Officer of the Lead
Applicant which state that

 

  (i) Such officer, acting on behalf of the Applicants, has reviewed each of the
Loan Documents and has had the benefit of independent counsel of the Lead
Applicant’s selection in connection with the review and negotiation of the Loan
Documents. In particular, and without limiting the generality of such review,
the following provisions of the Loan Documents have been brought to the
attention of the undersigned by such counsel:

 

  (A) The waiver of the right to a trial by jury in connection with
controversies arising out of the loan arrangement contemplated by the Loan
Documents.

 

  (B) The designation of, and submission to the exclusive jurisdiction and venue
of, certain courts.

 

  (C) Various other waivers and indemnifications included therein.

 

  (D) The circumstances under which the Liabilities could be accelerated and the
grace periods available with respect to certain Events of Default.

 

  (ii)

The representations and warranties made by the Applicants to the Lender in the
Loan Documents are true and complete in all material respects as of the date of
such certificate (other than any representations and warranties that
specifically relate to an earlier date, in which case such representations and
warranties shall be true and complete in all material respects on and as of such
earlier date), and that no Default has

 

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occurred and is then continuing which is or which, solely with the giving of
notice or passage of time (or both), would be an Event of Default.

 

  (d) Additional Documents. Satisfaction of Conditions. The execution of such
additional instruments and documents and the satisfaction of such additional
conditions respective as the Lender or its counsel reasonably may require or
request.

 

  (e) Cash Collateral Account. The Applicants shall have deposited no less than
$15,750,000.00 into the Cash Collateral Account.

 

  (f) Representations and Warranties. Each of the representations and warranties
made by or on behalf of each Applicant in this Agreement or in any of the other
Loan Documents or in any other report, statement, document, or paper provided by
or on behalf of each Applicant shall be true and complete in all material
respects as of the date as of which such representation or warranty was made
(other than any representations and warranties that specifically relate to an
earlier date, in which case such representations and warranties shall be true
and complete in all material respects on and as of such earlier date).

 

  (g) No Applicant In Default. No Applicant is in Default.

 

  (h) Payment of Fees and Expenses. All fees due on or by the Closing Date and
all costs and expenses incurred by the Lender, including attorneys’ fees and
expenses, in connection with the establishment of the letter of credit facility
contemplated hereby shall have been paid in full.

 

  (i) Due Diligence. The Lender and its counsel shall have completed their due
diligence, including legal due diligence and the review of the Applicants’
business plan, the results of which are satisfactory to the Lender.

 

  (j) Credit Approval. The Lender shall have received all internal approvals
required by it to enter into this Agreement and to provide the financial
accommodations contemplated thereby.

 

  (k) Payoff Letter. The Lender shall have received a payoff letter in respect
of the Existing Loan Agreement.

 

  (l) Benefit of Conditions Precedent. The conditions set forth in this
Article 3 are for the sole benefit of the Lender and may be waived by the Lender
in whole or in part without prejudice to the Lender.

No document shall be deemed delivered to the Lender until received and accepted
by the Lender at its offices in Boston, Massachusetts. Under no circumstances
shall this Agreement take effect until executed and accepted by the Lender at
said offices.

 

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  3.2 CONDITIONS PRECEDENT TO ISSUANCE OF EACH L/C.

As a condition to the issuance of any L/C under this Agreement, in addition to
the condition precedent set forth in Section 3.1 above, each of the conditions
respectively described in clauses (a) through and including (d) below shall have
been satisfied:

 

  (a) Each of the representations and warranties made by or on behalf of each
Applicant in this Agreement or in any of the other Loan Documents or in any
other report, statement, document, or paper provided by or on behalf of each
Applicant shall be true and complete in all material respects as of the date of
such issuance (other than any representations and warranties that specifically
relate to an earlier date, in which case such representations and warranties
shall be true and complete in all material respects on and as of such earlier
date).

 

  (b) No Default shall exist, or would result from such proposed L/C or from the
application of the proceeds thereof.

 

  (c) The Lender shall have received a request for an L/C in accordance with the
requirements hereof.

 

  (d) No event or circumstance which could reasonably be expected to result in a
Material Adverse Change shall have occurred.

ARTICLE 4: GENERAL REPRESENTATIONS, COVENANTS AND WARRANTIES:

To induce the Lender to establish the letter of credit facility contemplated
herein, the Applicants, in addition to all other representations, warranties,
and covenants made by any Applicant in any other Loan Document, make those
representations, warranties, and covenants included in this Agreement.

 

  4.1 PAYMENT AND PERFORMANCE OF LIABILITIES. The Applicants shall pay each
payment Liability in accordance with its respective terms, and shall promptly,
punctually, and faithfully perform each other Liability.

 

  4.2 DUE ORGANIZATION. AUTHORIZATION. NO CONFLICTS.

 

  (a) Each Applicant presently is and hereafter shall remain in good standing as
a corporation or limited liability company, as applicable, under the laws of the
State in which it is organized, as set forth in the Preamble to this Agreement
and is and shall hereafter remain duly qualified and in good standing in every
other State in which, by reason of the nature or location of each Applicant’s
assets or operation of each Applicant’s business, such qualification may be
necessary, except where the failure to so qualify could not reasonably be
expected to have a Material Adverse Effect.

 

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  (b) As of the date hereof, each Applicant’s respective organizational
identification number assigned to it by the State of its incorporation and its
respective federal employer identification number is stated on EXHIBIT 4.2,
annexed hereto.

 

  (c) Except as permitted pursuant to Section 4.9 hereof, no Applicant shall
change its State of organization, any organizational identification number
assigned to that Applicant by that State, or that Applicant’s federal taxpayer
identification number.

 

  (d) As of the date hereof, each entity in which the Lead Applicant or any
other Applicant owns, either directly or indirectly, an equity interest and that
constitutes an Affiliate (other than an Applicant) is listed on EXHIBIT 4.2. The
Lead Applicant shall provide the Lender with prior written notice of any such
entity ceasing to be an Affiliate or that hereafter becomes an entity of the
type contemplated by this clause (d).

 

  (e) Each Applicant has all requisite power and authority to execute and
deliver all Loan Documents to which that Applicant is a party and has and will
hereafter retain all requisite power to perform all Liabilities.

 

  (f) The execution and delivery by each Applicant of each Loan Document to
which it is a party; each Applicant’s consummation of the transactions
contemplated by such Loan Documents; each Applicant’s performance under those of
the Loan Documents to which it is a party; and the L/C issuances hereunder:

 

  (i) Have been duly authorized by all necessary action.

 

  (ii) Do not, and will not, contravene in any material respect any provision of
any Requirement of Law or obligation of that Applicant, other than any such
contravention that would not reasonably be expected to have a Material Adverse
Effect.

 

  (g) The Loan Documents have been duly executed and delivered by each Applicant
and are the legal, valid and binding obligations of each Applicant, enforceable
against each Applicant in accordance with their respective terms, except as such
enforcement may be limited by (x) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws which affect the rights of
creditors generally, (y) general principles of equity (regardless of whether
such enforceability is considered in a proceeding in equity or at law), and
(z) implied covenants of good faith and fair dealing.

 

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  4.3 LINE OF BUSINESS. No Applicant shall engage in any business other than the
business in which it is currently engaged or a business reasonably related
thereto.

 

  4.4 IMMEDIATE NOTICE TO LENDER.

 

  (a) The Lead Applicant shall provide the Lender with written notice promptly
upon the occurrence of any of the following events, which written notice shall
be with reasonable particularity as to the facts and circumstances in respect of
which such notice is being given:

 

  (i) Any change in the Lead Applicant’s President, chief executive officer,
chief operating officer, and chief financial officer (without regard to the
title(s) actually given to the Persons discharging the duties customarily
discharged by officers with those titles).

 

  (ii) Any ceasing of any Applicant’s making of material payment, in the
ordinary course, to its creditors (other than its ceasing of making of such
payments on account of a de minimis dispute which is diligently being pursued by
such Applicant).

 

  (iii) Any failure by any Applicant to pay rent at any of that Applicant’s
locations, which failure continues for more than five (5) days following the
last day on which such rent was payable (after giving effect to any applicable
grace period) with more than a de minimis adverse effect to that Applicant.

 

  (iv) Any material adverse change in the business, operations, or financial
affairs of any Applicant.

 

  (v) Any Applicant’s becoming in Default.

 

  (vi) Any intention on the part of any Applicant to discharge that Applicant’s
present independent accountants or any withdrawal or resignation by such
independent accountants from their acting in such capacity.

 

  (vii) Any litigation which, if determined adversely to any Applicant and after
giving effect to any applicable insurance coverage could reasonably be expected
to have a Material Adverse Effect on the financial condition of that Applicant.

 

  (viii) The material reduction by any of Applicant’s material vendors in the
amount of trade credit or terms provided by such vendor to Applicant on the date
of execution hereof.

 

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  (b) The Lead Applicant shall:

 

  (i) Provide the Lender, when so distributed, with copies of any materials
distributed to the shareholders of the Lead Applicant (qua such shareholders).

 

  (ii) Provide the Lender:

 

  (A) When filed (by e-mail alert, if available), copies of all material filings
with the Securities and Exchange Commission (including any filing on forms 10-K,
10-Q, or 8-K).

 

  (B) When received, copies of all material correspondence from the Securities
and Exchange Commission other than routine non-substantive general
communications from the SEC.

 

  (iii) Provide the Lender, promptly following receipt by any Applicant, with a
copy of any management letter or similar communications from any accountant of
any Applicant.

 

  (iv) Provide the Lender, within 20 days of the end of each fiscal month, with
a consolidated balance sheet as of the end of such fiscal month and consolidated
statements of income, operations, shareholders’ equity and cash flow for such
fiscal month, and for the portion of the Lead Applicant’s fiscal year then
ended, setting forth in each case in comparative form the figures for (A) the
corresponding fiscal month of the previous fiscal year, and (B) the
corresponding portion of the previous fiscal year, all in reasonable detail.

 

  4.5 OFFICERS’ CERTIFICATES. The Lead Applicant shall cause one of the Lead
Applicant’s Chief Executive Officer, Chief Financial Officer or Chief Operating
Officer, in each instance, to certify in writing within 20 days of the end of
each fiscal month either that (i) no Applicant is in Default, (ii) if such an
event has occurred, its nature (in reasonable detail) and the steps (if any)
being taken or contemplated by the applicable Applicants to be taken on account
thereof, and (iii) the financial statements provided in accordance with
Section 4.4(b)(iv) fairly present the financial condition of the Applicants.

 

  4.6 USE OF L/C FACILITY. The L/C Facility will be used by the Applicants only
in connection with the acquisition of inventory from suppliers, to provide
Standby L/Cs to various factors, landlords, insurance providers and other
parties for business purposes, and for other general corporate purposes.

 

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  4.7 CASH COLLATERAL ACCOUNT. At all times, the Cash Collateral Account shall
contain funds in an amount equal to no less than 105% of the Credit Limit,
provided, however, following an L/C Disbursement and the Lender’s associated
withdrawal, if any, of funds from the Cash Collateral Account pursuant to
Section 2.5(a) or Section 6.2, the Applicants shall within one Business Day
cause sufficient amounts to be deposited in the Cash Collateral Account such
that the amount on deposit is not less than 105% of the Credit Limit.

 

  4.8 SOLVENCY. After giving effect to the transactions contemplated by this
Agreement, and before and after giving effect to any L/C issuance, the
Applicants, on a consolidated basis, are Solvent. No transfer of property has
been or will be made by any Applicant and no obligation has been or will be
incurred by any Applicant in connection with the transactions contemplated by
this Agreement or the other Loan Documents with the intent to hinder, delay, or
defraud either present or future creditors of any Applicant.

 

  4.9 CORPORATE ACTION. No Applicant shall:

 

  (a) Merge or consolidate or be merged or consolidated with or into any other
corporation or other entity unless such Applicant is the surviving entity.

 

  (b) Consolidate any of that Applicant’s operations with those of any other
Person other than of another Applicant.

 

  4.10 OTHER COVENANTS. No Applicant shall indirectly do or cause to be done any
act which, if done directly by that Applicant, would breach any covenant
contained in this Agreement.

ARTICLE 5: EVENTS OF DEFAULT:

The occurrence of any event described in this Article 5: shall constitute an
“Event of Default” herein. Upon the occurrence of any Event of Default described
in Section 5.9, any and all Liabilities shall become due and payable without any
further act on the part of the Lender. Upon the occurrence of any other Event of
Default, the Lender may declare any and all Liabilities immediately due and
payable. The occurrence of any Event of Default shall also constitute, without
notice or demand, a default under all other agreements between the Lender and
any Applicant and instruments and papers heretofore, now, or hereafter given the
Lender by any Applicant.

 

  5.1 FAILURE TO PAY THE LOAN ACCOUNT. The failure by any Applicant to pay when
due any amounts due under the Loan Account, including any L/C Disbursements.

 

  5.2 FAILURE TO MAKE OTHER PAYMENTS. The failure by any Applicant to pay when
due (or upon demand, if payable on demand), after the expiration of any
applicable grace period, any payment Liability other than any payment liability
on account of amounts due under the Loan Account, and such failure shall
continue unremedied for more than five (5) days after written notice thereof
from the Lender.

 

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  5.3 FAILURE TO PERFORM COVENANT OR LIABILITY (NO GRACE PERIOD). The failure by
any Applicant to promptly, punctually, faithfully and timely perform, discharge,
or comply in all material respects with any covenant or Liability included in
Article 5 hereof.

 

  5.4 FAILURE TO PERFORM COVENANT OR LIABILITY (GRACE PERIOD). The failure by
any Applicant to pay or perform in all material respects any covenant or
Liability not described in Section 5.1, 5.2 or 5.3 hereof within twenty
(20) days following the earlier of any Applicant’s knowledge of a breach or
nonpayment of any such covenant or Liability or of its receipt of written notice
from the Lender of the breach or nonpayment of such covenant or Liability.

 

  5.5 MISREPRESENTATION. Any representation or warranty at any time made (or
deemed made) by any Applicant to the Lender under or pursuant to any Loan
Document was not true or complete in all material respects when given.

 

  5.6 DEFAULT UNDER OTHER AGREEMENTS. The occurrence of any breach of any
covenant or Liability imposed by, or of any default under, any agreement
(including any Loan Document other than this Agreement) between the Lender and
any Applicant or instrument given by any Applicant to the Lender and the expiry,
without cure, of any applicable grace period (notwithstanding that the Lender
may not have exercised all or any of its rights on account of such breach or
default) unless such breach or default has been remedied in all material
respects within twenty (20) days after written notice thereof from the Lender.

 

  5.7 ATTACHMENT. JUDGMENT. RESTRAINT OF BUSINESS.

 

  (a) The service of process upon the Lender seeking to attach, by trustee,
mesne, or other process, any funds of any Applicant on deposit with, or assets
of any Applicant in the possession of, the Lender, including the Cash Collateral
Account, which attachment is not stayed within thirty (30) days after service
thereof.

 

  (b) The entry of any judgment in excess of $1,000,000.00 against any
Applicant, which judgment is not satisfied (if a money judgment) or appealed
from (with execution or similar process stayed) within thirty (30) days of its
entry.

 

  (c) The entry of any order or the imposition of any other process having the
force of law, the effect of which is to restrain in any material way the conduct
by any Applicant of its business in the ordinary course, which order is not
appealed from (with execution or similar process stayed) within fifteen
(15) days of its entry.

 

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  5.8 BUSINESS FAILURE. Any act by, against, or relating to any Applicant, or
its property or assets, which act constitutes the determination, by any
Applicant, to initiate a program of partial self-liquidation or a program of
total self-liquidation; application for, consent to, or sufferance of the
appointment of a receiver, trustee, or other person, pursuant to court action or
otherwise, over all, or any part, of any Applicant’s property; the granting of
any trust mortgage or execution of an assignment for the benefit generally of
the creditors of any Applicant, or the occurrence of any other voluntary or
involuntary liquidation or extension of debt agreement for any Applicant; the
offering by or entering into by any Applicant of any composition, extension, or
any other arrangement seeking relief from or extension of the debts of any
Applicant; or the initiation of any judicial or non-judicial proceeding or
agreement by, against, or including any Applicant which seeks or intends to
accomplish a reorganization or arrangement with creditors; and/or the initiation
by or on behalf of any Applicant of the liquidation or winding up of all or any
part of any Applicant’s business or operations.

 

  5.9 BANKRUPTCY. The failure by any Applicant to generally pay the debts of
that Applicant as they mature; adjudication of bankruptcy or insolvency relative
to any Applicant; the entry of an order for relief or similar order with respect
to any Applicant in any proceeding pursuant to the Bankruptcy Code or any other
federal bankruptcy law; the filing of any complaint, application, or petition by
any Applicant initiating any matter in which any Applicant is or may be granted
any relief from the debts of that Applicant pursuant to the Bankruptcy Code or
any other insolvency statute or procedure; the filing of any complaint,
application, or petition against any Applicant initiating any matter in which
that Applicant is or may be granted any relief from the debts of that Applicant
pursuant to the Bankruptcy Code or any other insolvency statute or procedure,
which complaint, application, or petition is not timely contested in good faith
by that Applicant by appropriate proceedings or, if so contested, is not
dismissed within thirty (30) days of when filed.

 

  5.10 INDICTMENT - FORFEITURE. The criminal conviction of any Applicant under
any Applicable Law where the relief, penalties, or remedies sought or available
include the forfeiture of any material property of any Applicant and/or the
imposition of any stay or other order, the effect of which could be to restrain
in any material way the conduct by any Applicant of its business in the ordinary
course.

 

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  5.11 CHALLENGE TO LOAN DOCUMENTS.

 

  (a) Any challenge by or on behalf of any Applicant to the validity of any Loan
Document or the applicability or enforceability of any Loan Document strictly in
accordance with the subject Loan Document’s terms or which seeks to void, avoid,
limit, or otherwise adversely affect any security interest created by or in any
Loan Document or any payment made pursuant thereto.

 

  (b) Any determination by any court or any other judicial or government
authority that any Loan Document is not enforceable strictly in accordance with
the subject Loan Document’s terms or which voids, avoids, limits, or otherwise
adversely affects any security interest created by any Loan Document or any
payment made pursuant thereto.

 

  5.12 CHANGE IN CONTROL. Any Change in Control.

ARTICLE 6: RIGHTS AND REMEDIES UPON DEFAULT:

 

  6.1 ACCELERATION AND SETTING TERMINATION DATE. Upon the occurrence and during
the continuance of any Event of Default as described in Section 5.9, all
Liabilities of the Applicants to the Credit Parties shall be immediately due and
payable. Upon the occurrence and during the continuance of any Event of Default
other than as described in Section 5.9, the Lender may, upon written notice to
the Lead Applicant, declare all Liabilities of the Applicants to the Credit
Parties to be immediately due and payable, set the Termination Date, and may
exercise all of the Lender’s Rights and Remedies as the Lender from time to time
thereafter determines as appropriate.

 

  6.2

RIGHTS AND REMEDIES. In case any one or more of the Events of Default shall have
occurred and be continuing, the Lender may proceed to protect and enforce its
rights and remedies under this Agreement or any of the other Loan Documents by
suit in equity, action at law or other appropriate proceeding, whether for the
specific performance of any covenant or agreement contained in this Agreement
and the other Loan Documents or any instrument pursuant to which the Liabilities
are evidence, and proceed to enforce the payment thereof or any other legal or
equitable right of the Lender. In the case that any one or more Events of
Default shall have occurred and be continuing, the Lender may apply any and all
amounts in the Cash Collateral Account to the Liabilities. No remedy herein is
intended to be exclusive of any other remedy and each and every remedy shall be
cumulative and shall be in addition to every other remedy hereunder or now or
hereafter existing at law or in equity or by statute or any other provision of
law. The rights, remedies, powers, privileges, and discretions of the Lender
hereunder (herein, the “Lender’s Rights and Remedies”) shall be cumulative and
not exclusive of any rights or remedies which it would otherwise have. No delay
or omission by the Lender in exercising or enforcing any of the Lender’s Rights
and Remedies shall operate as, or constitute, a waiver

 

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thereof. No waiver by the Lender of any Event of Default or of any default under
any other agreement shall operate as a waiver of any other default hereunder or
under any other agreement. No single or partial exercise of any of the Lender’s
Rights or Remedies, and no express or implied agreement or transaction of
whatever nature entered into between the Lender and any person, at any time,
shall preclude the other or further exercise of the Lender’s Rights and
Remedies. No waiver by the Lender of any of the Lender’s Rights and Remedies on
any one occasion shall be deemed a waiver on any subsequent occasion, nor shall
it be deemed a continuing waiver. The Lender’s Rights and Remedies may be
exercised at such time or times and in such order of preference as the Lender
may determine. The Lender’s Rights and Remedies may be exercised without resort
or regard to any other source of satisfaction of the Liabilities.

ARTICLE 7: NOTICES:

 

  7.1 NOTICE ADDRESSES. All notices, demands, and other communications made in
respect of any Loan Document (other than a request for the issuance of an L/C)
shall be made to the following addresses, each of which may be changed upon
seven (7) days written notice to all others given by certified mail, return
receipt requested:

 

If to the Lender:

Wells Fargo Retail Finance II, LLC

One Boston Place - 18th Floor

Boston, Massachusetts 02108

Attention:    Michele Ayou    Vice President Fax:    617-523-4032 With a copy
to:

Riemer & Braunstein LLP

Three Center Plaza

Boston, Massachusetts 02108

Attention:    Marjorie S. Crider Fax:    617-880-3456 If to the Lead Applicant
And All Applicants: dELiA*s, Inc.

50 West 23rd Street

New York, New York 10010

Attention:    Marc G. Schuback Fax:    212-590-6310

 

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With a copy to:

 

Troutman Sanders LLP

The Chrysler Building

405 Lexington Avenue

New York, NY 10174

Attention:

   William D. Freedman Fax:    212-704-5935

 

  7.2 NOTICE GIVEN.

 

  (a) Except as otherwise specifically provided herein, notices shall be deemed
made and correspondence received, as follows (all times being local to the place
of delivery or receipt):

 

  (i) By registered mail: the sooner of when actually received or Three (3) days
following deposit in the United States mail, postage prepaid.

 

  (ii) By recognized overnight express delivery: the Business Day following the
day when sent.

 

  (iii) By Hand: If delivered on a Business Day after 9:00 AM and no later than
Three (3) hours prior to the close of customary business hours of the recipient,
when delivered. Otherwise, at the opening of the then next Business Day.

 

  (iv) By Facsimile transmission (which must include a header on which the party
sending such transmission is indicated): If sent on a Business Day after 9:00 AM
and no later than Three (3) hours prior to the close of customary business hours
of the recipient, one (1) hour after being sent. Otherwise, at the opening of
the then next Business Day.

 

  (b) Rejection or refusal to accept delivery and inability to deliver because
of a changed address or Facsimile Number for which no due notice was given shall
each be deemed receipt of the notice sent.

ARTICLE 8: TERM:

 

  8.1 TERMINATION OF L/C FACILITY.

The L/C Facility shall remain in effect until the Termination Date.

 

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  8.2 ACTIONS ON TERMINATION.

 

  (a) On the Termination Date, the Applicants shall pay the Lender (whether or
not then due), in immediately available funds, all then outstanding Liabilities
including, without limitation, the following:

 

  (i) The entire balance of the Loan Account

 

  (ii) Any accrued and unpaid Unused Line Fee.

 

  (iii) All unreimbursed costs and expenses of the Lender or any Issuer for
which any Applicant is responsible.

 

  (b) On the Termination Date, the Applicants also shall make such arrangements
concerning any L/C’s then outstanding as are reasonably satisfactory to the
Lender.

 

  (c) Until such payment (Subsection (a)) and arrangements concerning L/C’s
(Subsection (b)), all provisions of this Agreement, other than those included in
Article 2: which place any obligation on the Lender to make any financial
accommodations to any Applicant, shall remain in full force and effect until all
Liabilities shall have been paid in full.

 

  (d) On the Termination Date, the Applicant shall make such arrangements with
respect to any other continuing Liabilities (such as the Applicant’s continuing
Liability to pay the Lender for increased costs under Section 2.9(c) and
continuing indemnification Liability set forth in Section 9.9 concerning matters
or circumstances actually known to the Lender as of the Termination Date which
would reasonably be expected to result in any loss, cost, damage or expense) as
are reasonably satisfactory to the Lender, such as by the establishment and
funding of cash collateral reserve accounts in such amounts as the Lender, in
its sole and exclusive discretion, reasonably may determine.

ARTICLE 9: GENERAL:

 

  9.1 PUBLICITY. The Lender may issue a “tombstone” notice of the establishment
of the credit facility contemplated by this Agreement and, subject to prior
review by the Applicant in each instance, may make reference to each Applicant
(and may utilize any logo or other distinctive symbol associated with each
Applicant) in connection with any advertising, promotion, or marketing
(including the inclusion of a “case study” of the financing contemplated hereby)
undertaken by the Lender.

 

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  9.2 SUCCESSORS AND ASSIGNS.

 

  (a) This Agreement shall be binding upon the Applicants and their respective
representatives, successors, and assigns and shall enure to the benefit of the
Lender and its successors and assigns, provided, however, no trustee or other
fiduciary appointed with respect to any Applicant shall have any rights
hereunder.

 

  (b) In the event that the Lender assigns or transfers its rights under this
Agreement, the assignee shall thereupon succeed to and become vested with all
rights, powers, privileges, and duties of the Lender hereunder and the Lender
shall thereupon be discharged and relieved from its duties and obligations
hereunder.

 

  (c) In the event that the Lender assigns or transfers its rights under this
Agreement to an assignee which is not an Affiliate of the Lender or a Person
controlling, controlled by, or under common control with the Lender (other than
in connection with a programmed disposition, by the Lender, of all or a material
part of its portfolio of working capital loans), then the Lead Applicant, by
irrevocable written notice to such assignee given no later than one hundred
eighty (180) days after receipt of notice of such assignment may set the
Termination Date as a date which is no more than forty five (45) days after (and
counting) the date of such notice.

 

  9.3 SEVERABILITY. Any determination that any provision of this Agreement or
any application thereof is invalid, illegal, or unenforceable in any respect in
any instance shall not affect the validity, legality, or enforceability of such
provision in any other instance, or the validity, legality, or enforceability of
any other provision of this Agreement.

 

  9.4 AMENDMENTS. COURSE OF DEALING.

 

  (a) This Agreement and the other Loan Documents incorporate all discussions
and negotiations between each Applicant and the Lender, either express or
implied, concerning the matters included herein and in such other instruments,
any custom, usage, or course of dealings to the contrary notwithstanding. No
such discussions, negotiations, custom, usage, or course of dealings shall
limit, modify, or otherwise affect the provisions thereof. No failure by the
Lender to give notice to the Lead Applicant of any Applicant’s having failed to
observe and comply with any warranty or covenant included in any Loan Document
shall constitute a waiver of such warranty or covenant or the amendment of the
subject Loan Document.

 

  (b)

Each Applicant may undertake any action otherwise prohibited hereby, and may
omit to take any action otherwise required hereby, upon and with the express
prior written consent of the Lender. No consent,

 

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modification, amendment, or waiver of any provision of any Loan Document shall
be effective unless executed in writing by or on behalf of the party to be
charged with such modification, amendment, or waiver (and if such party is the
Lender then by a duly authorized officer thereof). Any modification, amendment,
or waiver provided by the Lender shall be in reliance upon all representations
and warranties theretofore made to the Lender by or on behalf of the Applicants
(and any guarantor, endorser, or surety of the Liabilities) and consequently may
be rescinded in the event that any of such representations or warranties was not
true and complete in all material respects when given.

 

  9.5 COSTS AND EXPENSES OF THE LENDER.

 

  (a) The Applicants shall pay the following:

 

  (i) The reasonable costs, expenses, and disbursements (including attorneys’
reasonable fees and expenses of the Lender’s outside counsel) which are incurred
by the Lender in connection with the preparation, negotiation, execution, and
delivery of this Agreement and of the other Loan Documents as part of the
establishment of the credit facility contemplated hereby.

 

  (ii) From time to time on demand all Costs of Collection and all reasonable
costs, expenses, and disbursements not described in Paragraph (i) which may be
incurred in connection with or in respect to the letter of credit facility
contemplated hereby or which otherwise are incurred with respect to the
Liabilities (except as otherwise provided herein to the contrary).

 

  (b) Each Applicant authorizes the Lender to pay all such fees and expenses
and, in the Lender’s discretion, to add such fees and expenses to the Loan
Account.

 

  (c) The undertaking on the part of each Applicant in this Section 9.5 shall
survive payment of the Liabilities and/or any termination, release, or discharge
executed by the Lender in favor of any Applicant, other than a termination,
release, or discharge which makes specific reference to this Section 9.5.

 

  9.6

COPIES AND FACSIMILES. Each Loan Document and all documents and papers which
relate thereto which have been or may be hereinafter furnished by or to the
Lender may be reproduced by the Lender by any photographic, microfilm,
xerographic, digital imaging, or other process, and the Lender may destroy any
document so reproduced. Any such reproduction shall be admissible in evidence as
the original itself in any judicial or administrative proceeding (whether

 

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or not the original is in existence and whether or not such reproduction was
made in the regular course of business). Any facsimile which bears proof of
transmission shall be binding on the party which or on whose behalf such
transmission was initiated and likewise shall be so admissible in evidence as if
the original of such facsimile had been delivered to the party which or on whose
behalf such transmission was received.

 

  9.7 MASSACHUSETTS LAW. This Agreement and all rights and obligations
hereunder, including matters of construction, validity, and performance, shall
be governed by the law of The Commonwealth of Massachusetts.

 

  9.8 CONSENT TO JURISDICTION.

 

  (a) The Lender and each Applicant agree that any legal action, proceeding,
case, or controversy against any Applicant with respect to any Loan Document may
be brought in the Superior Court of Suffolk County Massachusetts or in the
United States District Court, District of Massachusetts, sitting in Boston,
Massachusetts, as the Lender may elect in the Lender’s sole discretion. By
execution and delivery of this Agreement, the Lender and each Applicant, for
itself and in respect of its property, accepts, submits, and consents generally
and unconditionally, to the jurisdiction of the aforesaid courts.

 

  (b) The Lender and each Applicant WAIVE personal service of any and all
process upon it, and irrevocably consents to the service of process out of any
of the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by certified mail, postage prepaid, to the Lead Applicant at the
Lead Applicant’s address for notices as specified herein, such service to become
effective five (5) Business Days after such mailing.

 

  (c) The Lender and each Applicant WAIVE any objection based on forum non
conveniens and any objection to venue of any action or proceeding instituted
under any of the Loan Documents and consents to the granting of such legal or
equitable remedy as is deemed appropriate by the Court.

 

  (d) The Lender and each Applicant agree that any action commenced by the
Lender or by any Applicant asserting any claim arising under or in connection
with this Agreement or any other Loan Document shall be brought solely in the
Superior Court of Suffolk County Massachusetts or in the United States District
Court, District of Massachusetts, sitting in Boston, Massachusetts, and that
such Courts shall have exclusive jurisdiction with respect to any such action.

 

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  9.9 INDEMNIFICATION. Each Applicant shall indemnify, defend, and hold the
Lender and any of their respective employees, officers, or agents (each, an
“Indemnified Person”) harmless of and from any claim brought or threatened
against any Indemnified Person by any Applicant, any guarantor or endorser of
the Liabilities, or any other Person (as well as from attorneys’ reasonable
fees, expenses, and disbursements in connection therewith) on account of the
Indemnified Person’s relationship with the Applicants or of any other guarantor
or endorser of the Liabilities, including all costs, expenses, liabilities, and
damages as may be suffered by any Indemnified Person in connection with (x) any
collateral granted to the Lender; (y) the occurrence of any Event of Default; or
(z) the exercise of any rights or remedies under any of the Loan Documents (each
of claims which may be defended, compromised, settled, or pursued by the
Indemnified Person with counsel of the Lender’s selection, but at the expense of
the Applicants) other than any claim as to which a final determination is made
in a judicial proceeding by a court of competent jurisdiction (in which the
Lender or other Indemnified Person, as the case may be, has been given an
opportunity to be heard), which determination includes a specific finding that
the Indemnified Person seeking indemnification had acted in a grossly negligent
manner, in actual bad faith or in willful misconduct. This indemnification shall
survive payment of the Liabilities and/or any termination, release, or discharge
executed by the Lender in favor of the Applicants, other than a termination,
release, or discharge duly executed on behalf of the Lender which makes specific
reference to this Section 9.9.

 

  9.10 RULES OF CONSTRUCTION. The following rules of construction shall be
applied in the interpretation, construction, and enforcement of this Agreement
and of the other Loan Documents:

 

  (a) Unless otherwise specifically provided for herein, interest and any fee or
charge which is stated as a per annum percentage shall be calculated based on a
360 day year and actual days elapsed.

 

  (b) Words in the singular include the plural and words in the plural include
the singular.

 

  (c) Unless otherwise specifically provided for herein or in a specific Loan
Document (and then only to the extent so provided), as between the parties
hereto or to any Loan Document, the definitions of the following terms, as
included in the UCC, are deemed to be as follows for purposes of the performance
of obligations arising under or in respect of any Loan Document:

 

  (i) “Authenticate” means “signed”.

 

  (ii) “Record” means written information in a tangible form.

 

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  (d) Titles, headings (indicated by being underlined or shown in SMALL
CAPITALS) and any Table of Contents are solely for convenience of reference; do
not constitute a part of the instrument in which included; and do not affect
such instrument’s meaning, construction, or effect.

 

  (e) The words “includes” and “including” are not limiting.

 

  (f) Text which follows the words “including, without limitation” (or similar
words) is illustrative and not limitational.

 

  (g) Text which is shown in italics (except for parenthesized italicized text),
shown in bold, shown IN ALL CAPITAL LETTERS, or in any combination of the
foregoing, shall be deemed to be conspicuous.

 

  (h) The words “may not” are prohibitive and not permissive.

 

  (i) Any reference to a Person’s “knowledge” (or words of similar import) are
to such Person’s knowledge assuming that such Person has undertaken reasonable
and diligent investigation with respect to the subject of such “knowledge”
(whether or not such investigation has actually been undertaken).

 

  (j) Terms which are defined in one section of any Loan Document are used with
such definition throughout the instrument in which so defined.

 

  (k) The term “Dollars” and the symbol “$” each refers to United States
Dollars.

 

  (l) Unless limited by reference to a particular Section or provision, any
reference to “herein”, “hereof”, or “within” is to the entire Loan Document in
which such reference is made.

 

  (m) References to “this Agreement” or to any other Loan Document is to the
subject instrument as amended to the date on which application of such reference
is being made.

 

  (n) Except as otherwise specifically provided, all references to time are to
Boston time.

 

  (o) In the determination of any notice, grace, or other period of time
prescribed or allowed hereunder:

 

  (i) Unless otherwise provided (I) the day of the act, event, or default from
which the designated period of time begins to run shall not be included and the
last day of the period so computed shall be included unless such last day is not
a Business Day, in which event the last day of the relevant period shall be the
then next Business Day and (II) the period so computed shall end at 5:00 PM on
the relevant Business Day.

 

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  (ii) The word “from” means “from and including”.

 

  (iii) The words “to” and “until” each mean “to, but excluding”.

 

  (iv) The word “through” means “to and including”.

 

  (p) The Loan Documents shall be construed and interpreted in a harmonious
manner and in keeping with the intentions set forth in Section 9.11 hereof,
provided, however, in the event of any inconsistency between the provisions of
this Agreement and any other Loan Document, the provisions of this Agreement
shall govern and control.

 

  9.11 INTENT. IT IS INTENDED THAT:

 

  (a) This Agreement take effect as a sealed instrument.

 

  (b) Reserved.

 

  (c) Reserved.

 

  (d) Except as otherwise specifically provided herein, all reasonable costs,
expenses, and disbursements incurred by the Lender in connection with the
Lender’s relationship(s) with any Applicant shall be borne by the Applicants.

 

  (e) Unless otherwise explicitly provided herein, the Lender’s consent to any
action of any Applicant which is prohibited unless such consent is given may be
given or refused by the Lender in its sole discretion.

 

  9.12 PARTICIPATIONS: The Lender may sell participations in the Lender’s
interests herein to one or more financial institutions; provided, however, that
(i) the Lender’s obligations under this Agreement (including, without
limitation, its commitment hereunder) shall remain unchanged, (ii) the Lender
shall remain solely responsible to the other parties hereto for the performance
of such obligations, (iii) the Lender shall remain the holder of any note for
all purposes of this Agreement, (iv) the Applicants and the Lender shall
continue to deal solely and directly with each other in connection with the
Lender’s rights and obligations under this Agreement and (v) no participant
under any such participation shall have any right to approve any amendment or
waiver of any provision of any Loan Document, or any consent to any departure by
or on behalf of any Applicant therefrom.

 

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  9.13 CONFIDENTIALITY. The Lender agrees that, except with the prior consent of
the Lead Applicant, it will not disclose any confidential information with
respect to the Applicants which is now or in the future furnished pursuant to
this Agreement or any other Loan Document, provided, however, that the Lender
may disclose any such information as follows:

 

  (a) To the following:

 

  (i) To its employees, Affiliates, advisors or counsel to the extent that they
should have a need to know such confidential information, in which case the
Lender shall be responsible to the Applicants for the failure of any of them to
comply with the confidentiality provisions contained herein.

 

  (ii) To any prospective or actual transferee or participant in connection with
any contemplated transfer or participation of this Agreement, the Liabilities,
or any interest therein by the Lender, which transfer or participation is
permitted by the terms of this Agreement and which transferee or participant
agrees to be bound by this Section 9.14.

 

  (b) As has become generally available to the public.

 

  (c) As may be required or appropriate in any report, statement or testimony
submitted to any municipal, state, or federal regulatory body having or claiming
to have jurisdiction over the Lender.

 

  (d) As may be required or appropriate in respect to any summons or subpoena or
in connection with any litigation.

 

  (e) In order to comply with Applicable Law.

 

  9.14 RIGHT OF SET-OFF. Any and all deposits or other sums at any time credited
by or due to any Applicant from the Lender or from any Affiliate of any of the
foregoing, and any cash, securities, instruments or other property of any
Applicant in the possession of any of the foregoing, whether for safekeeping or
otherwise (regardless of the reason such Person had received the same) shall at
all times constitute security for all Liabilities and for any and all
obligations of each Applicant to the Lender or such Affiliate and may be applied
or set off against the Liabilities and against such obligations at any time,
whether or not other collateral is then available to the Lender.

 

  9.15 PLEDGES TO FEDERAL RESERVE BANKS. Nothing included in this Agreement
shall prevent or limit the Lender, to the extent that the Lender is subject to
any of the twelve Federal Reserve Banks organized under §4 of the Federal
Reserve Act (12 U.S.C. §341), from pledging all or any portion of that Lender’s
interest and rights under this Agreement, provided, however, neither such pledge
nor the enforcement thereof shall release the Lender from any of its obligations
hereunder or under any of the Loan Documents.

 

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  9.16 MAXIMUM INTEREST RATE. Regardless of any provision of any Loan Document,
the Lender shall never be entitled to contract for, charge, receive, collect, or
apply as interest on any Liability, any amount in excess of the maximum rate
imposed by Applicable Law. Any payment which is made which, if treated as
interest on a Liability would result in such interest’s exceeding such maximum
rate shall be held, to the extent of such excess, as additional collateral for
the Liabilities as if such excess were collateral.

 

  9.17 WAIVERS.

 

  (a) Each Applicant (and all guarantors, endorsers, and sureties of the
Liabilities) make each of the waivers included in Subsection (b), below, to the
full extent permitted by Applicable Law and knowingly, voluntarily, and
intentionally, and understands that the Lender, in establishing the facilities
contemplated hereby and in providing loans and other financial accommodations to
or for the account of the Applicants as provided herein, whether now or in the
future, is relying on such waivers.

 

  (b) EACH APPLICANT RESPECTIVELY WAIVES THE FOLLOWING:

 

  (i) Except as otherwise specifically required hereby, notice of non-payment,
demand, presentment, protest and all forms of demand and notice.

 

  (ii) Except as otherwise specifically required hereby, the right to notice
and/or hearing prior to the Lender’s exercising of the Lender’s rights upon
default.

 

  (iii) THE RIGHT TO A JURY IN ANY TRIAL OF ANY CASE OR CONTROVERSY IN WHICH THE
LENDER IS OR BECOMES A PARTY (WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY
OR AGAINST THE LENDER OR IN WHICH THE LENDER IS JOINED AS A PARTY LITIGANT),
WHICH CASE OR CONTROVERSY ARISES OUT OF OR IS IN RESPECT OF, ANY RELATIONSHIP
AMONGST OR BETWEEN ANY APPLICANT OR ANY OTHER PERSON AND THE LENDER LIKEWISE
WAIVES THE RIGHT TO A JURY IN ANY TRIAL OF ANY SUCH CASE OR CONTROVERSY).

 

  (iv) Any defense, counterclaim, set-off, recoupment, or other basis on which
the amount of any Liability, as stated on the books and records of the Lender,
could be reduced or claimed to be paid otherwise than in accordance with the
tenor of and written terms of such Liability.

 

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  (v) Any claim to consequential, special, or punitive damages.

 

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dELiA*s, INC. (“Lead Applicant”) By:  

/s/ David J. Dick

Print Name:   David J. Dick

Title:   Chief Financial Officer and Treasurer dELiA*s , INC.

ALLOY MERCHANDISE, LLC,

dELiA*s OPERATING COMPANY

dELiA*s RETAIL COMPANY (“Applicants”):

By:  

/s/ David J. Dick

Print Name:   David J. Dick

Title:   Chief Financial Officer and Treasurer WELLS FARGO RETAIL FINANCE II,
LLC (“Lender”)

By:  

/s/ Michele L. Ayou

Print Name:   Michele L. Ayou

Title:   Vice President

 

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