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                                                                    EXHIBIT 10-4




                                 DEB SHOPS INC.

                             PREMIUM CONVERSION PLAN

                          Effective Date: April 1, 1993






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                                    PURPOSE

The Deb Shops Inc. Premium Conversion Plan ("Plan") is adopted by Deb Shops Inc.
effective April 1, 1993. The purpose of the Plan is to allow Employees of Deb
Shops Inc. and other Participating Employers, to choose between cash
compensation and health care coverage under medical plans(s) sponsored by Deb
Shops Inc. Deb Shops Inc. intends that the Plan qualify as a "cafeteria plan"
under section 125 of the Internal Revenue Code of 1986, as amended, and that the
Benefit Program that an Employee elects to receive under the Plan be eligible
for exclusion from the Employee's income for federal income tax purposes.

Although this Plan has been reduced to writing in order to comply with section
125 of the Code, the Plan shall also serve as an amendment to each of the health
plans described in Schedule A affected by its provisions in order to permit the
benefits of this Plan to be fully implemented.



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                               TABLE OF CONTENTS

   Section                                                                 Page

1           DEFINITIONS...................................................   1

2           PARTICIPATION IN THE PLAN.....................................   3

     2.1       Commencement of Participation..............................   3

     2.2       Procedure for and Effect of Participation .................   3

     2.3       Cessation of Participation.................................   3

     2.4       Recommencement of Participation............................   3

3           BENEFITS......................................................   4

     3.1       Benefit Credits............................................   4

     3.2       Election of Benefits.......................................   4

     3.3       Provision of Benefits......................................   4

     3.4       Employee Contributions.....................................   4

     3.5       Revocation and Modification of Benefit Election............   5

     3.6       Nondiscrimination..........................................   5

     3.7       Insurance Contracts........................................   5

     3.8       Premium Expense............................................   5

4           PLAN ADMINISTRATOR............................................   6

     4.1       Plan Administrator.........................................   6

     4.2       Named Fiduciary............................................   6

     4.3       Rules of Administration....................................   6

     4.4       Services to the Plan.......................................   6

     4.5       Funding Policy.............................................   6

     4.6       Claims Procedure...........................................   6

     4.7       Nondiscriminatory Operation................................   7

5           EMPLOYEE CONTRIBUTIONS........................................   8

     5.1       Funding....................................................   8

     5.2       Execution of Agreements....................................   8

     5.3       Amount of Compensation Reduction...........................   8

     5.4       Crediting of Compensation Reduction Amounts................   8

6           CONTINUATION OF COVERAGE......................................   9

     6.1       In General.................................................   9

     6.2       Continuation of Coverage...................................   9

     6.3       Type of Coverage...........................................   9

     6.4       Coverage Period............................................   9

     6.5       Contribution...............................................  10

     6.6       Notification by Qualified Beneficiary......................  11



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                               TABLE OF CONTENTS

   Section                                                               Page

     6.7       Notification to Qualified Beneficiary......................  11

     6.8       Definitions................................................  11

7           MISCELLANEOUS.................................................  13

     7.1       Amendment and Termination..................................  13

     7.2       Effect of Plan on Employment...............................  13

     7.3       Alienation of Benefits.....................................  I3

     7.4       Facility of Payment........................................  13

     7.5       Proof of Claim.............................................  13

     7.6       Status of Benefits.........................................  13

     7.7       Applicable Law.............................................  13

     7.8       Source of Benefits.........................................  13

     7.9       No Reversion to Employer...................................  14

     7.10      Severability...............................................  14

     7.11      Heirs and Assigns..........................................  14

     7.12      Headings and Captions......................................  14

     7.13      Information to be Furnished................................  14




<PAGE>



                                   SECTION 1

                                  DEFINITIONS

The words and phrases as used herein shall have the following meanings, unless a
different meaning is plainly required by the context, and pronouns shall be
interpreted so that the masculine pronoun shall include the feminine and the
singular shall include the plural.

   1.1  "Adoption Agreement" means the written agreement by which an Affiliated
        Company adopts this Plan.

   1.2  "Affi1iated Company" means:

        A.  any corporation which is a member of a controlled group of
            corporations with the Employer within the meaning of section 1563(a)
            of the Code, determined without regard to sections 1563(a)(4) and
            (e)(3)(C);

        B.  all trades or businesses under common control with the Employer
            within the meaning of section 414(c) of the Code;

        C.  all trades or businesses which are included with the Employer in an
            affiliated service group within the meaning of section 414(m) of the
            Code; or

        D.  any other entity required to be aggregated with the Employer
            pursuant to regulations under section 414(o) of the Code.

   1.3  "Beneficiary" means the person, persons or trust designated by written
        revocable designation filed with the Plan Administrator by the
        Participant to receive payments under this Plan, including the
        Participant and any dependents of a Participant.

   1.4  "Benefit Credits" means the amount set aside for a Benefit Program under
        Section 3.1 and credited to the Participant's Premium Conversion
        Account.

   1.5  "Benefit Program" means a health care coverage option, available from
        time to time under the Plan, as set forth in Schedule A hereto.

   1.6  "Code" means the Internal Revenue Code of 1986 as amended, and the same
        as may be amended from time to time.

   1.7  "Committee" means the ESP Committee established by the Employer.

   1.8  "Compensation Reduction Agreement" means a voluntary agreement whereby
        an Employee agrees to reduce his compensation for the forthcoming Plan
        Year (or, if the agreement becomes effective after the beginning of the
        Plan Year, for the balance of the Plan Year) for purposes of obtaining
        the Benefit Program offered by the Plan.

   1.9  "Effective Date" means April 1, 1993.


                                       1
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   1.10 "Eligible Employee" means any Employee who is regularly scheduled to
        work 30 or more hours per week for a Participating Employer.

   1.11 "Employee" means any person who is engaged in the conduct of the
        business of a Participating Employer, excluding independent contractors.

   1.12 "Employer." means Deb Shops Inc. and any other business organization
        which succeeds to its business and elects to continue this Plan.

   1.13 "Enrollment Period" means the calendar month preceding the beginning
        of any Plan Year.

   1.14 "Entry Date" means for salaried employees, Assistant Managers, and union
        employees the first day of the month coinciding with or following 90
        days of continuous employment as an Eligible Employee. For all other
        employees the Entry Date is the first day of the month coinciding with
        or following 180 days of continuous employment as an Eligible Employee.

   1.15 "ERISA' means the Employee Retirement Income Security Act of 1974, and
        the same as may be amended from time to time.

   1.16 Highly Compensated Employee" means any Employee defined as such in
        section 414(q) of the Code.

   1.17 "Key Employee" means any Employee defined as such in section 416(i)(1)
        of the Code.

   1.18 "Participant" means any Eligible Employee who has met the conditions for
        participation set forth in Section 2 and Section 1.10 above.

   1.19 "Participating Employer" means Deb Shops Inc. and any Affiliated
        Company which adopts this Plan with the consent of the Board. As of the
        Effective Date, the Employer is the only Participating Employer.

   1.20 "Plan" means the Deb Shops Inc. Premium Conversion Plan which is
        described herein and in any applicable Adoption Agreement, and which is
        intended to constitute a separate, written Plan for the exclusive
        benefit of Eligible Employees.

   1.21 "Plan Sponsor" means Deb Shops Inc.

   1.22 "Plan Year" means each twelve-month period commencing April 1 and ending
        on the subsequent March 31.

   1.23 "Premium Conversion Account" means the account established in each
        Participant's name as provided under Section 3.1 and which is used to
        record the allocation of Benefit Credits for the expenditure of the
        Benefit Program elected by a Participant.

   1.24 "Premium Expense" means the expense identified with the Benefit Program
        elected by a Participant in accordance with Section 3.2.

                                       2

<PAGE>

                                   SECTION 2

                           PARTICIPATION IN THE PLAN

   2.1  Commencement of Participation. Each Eligible Employee may elect to
        participate in the Plan as of the relevant Entry Date as set forth in
        Section 1.14.

   2.2  Procedure for and Effect of Participation. An Eligible Employee may
        become a Participant in the Plan by executing a Compensation Reduction
        Agreement under which the Employee agrees to reduce his Compensation for
        the forthcoming Plan Year (or, if such Compensation Reduction Agreement
        becomes effective after the beginning of the Plan Year, for the balance
        of the Plan Year). The Compensation Reduction Agreement shall be
        governed by Section 5 hereof. By becoming a Participant, each individual
        shall for all purposes be deemed conclusively to have consented to the
        provisions of the Plan and all amendments thereto.

   2.3  Cessation of Participation. A Participant will cease to be a Participant
        as of the earliest of:

        A.  the date on which the Plan terminates;

        B.  the date on which he ceases to be an Eligible Employee;

        C.  the date on which he revokes his election and elects not to
            participate in a Benefit Program, on account of and consistent with
            a change in family status in accordance with Section 3.5; or

        D.  the date on which he fails to make a contribution in accordance with
            Section 3.4

        Notwithstanding the foregoing, a former Eligible Employee who is absent
        by reason of sickness, disability, or other authorized leave of absence
        may continue as a Participant for so long as such authorized absence
        continues in accordance with such rules and regulations as the
        Participating Employer may direct.

   2.4  Recommencement of Participation. A former active Participant who revokes
        his election at the time of his termination and is rehired may
        recommence participation in the Plan upon resatisfying the eligibility
        requirements, disregarding his prior employment. However, any former
        active Participant shall be prohibited from making any change from his
        prior election in the Plan Year for which his revocation of election was
        effective, except as provided in Section 3.5.

                                       3

<PAGE>

                                    SECTION 3

                                    BENEFITS

   3.1  Benefit Credits. Upon proper election by a Participant in accordance
        with Section 3.2 herein, there shall be credited to each Participant's
        Premium Conversion Account any Benefit Credits that correspond to the
        Participant's Compensation Reduction Agreement determined in accordance
        with Section 5 hereof. Such Benefit Credits shall not exceed the Premium
        Expense of the Benefit Program elected, set forth in Schedule A attached
        hereto, as it may, be revised by the Employer from time to time. The
        Participant's Benefit Credits shall be credited as and when such sum is
        redirected from the Participant's compensation pursuant to the
        Compensation Reduction Agreement then in effect. The Benefit Credits
        shall be used to pay all or part of the Premium Expense of the Benefit
        Program that the Participant has designated pursuant to Section 3.2. The
        Premium Expense paid on behalf of any Participant shall be a charge to
        the balance of his Premium Conversion Account.

   3.2  Election of Benefits. Each Eligible Employee shall submit to the
        Employer, before the close of the Enrollment Period for each Plan Year,
        a written statement identifying the Benefit Program to be provided by
        the Employer to or on behalf of the Eligible Employee. Each election
        under this Section 3.2 may be modified by the Employer to the extent
        required to enable the Plan, and payments hereunder, to satisfy the
        requirements of section 125 of the Code. If an Eligible Employee
        separates from service with a Participating Employer during a period in
        which he is covered under a Benefit Program, the Employer may terminate
        the remaining portion of Benefit Program coverage provided by the Plan.
        If an Eligible Employee fails to submit a written statement identifying
        the Benefit Program to be provided by the Employer, Section 5.2 will
        apply.

   3.3  Provision of Benefits. The Participating Employer shall provide the
        Benefit Program the Participant has elected under the Plan. The benefits
        provided thereunder shall be subject further to the provisions of any
        plan, contract, or other arrangement setting forth the further terms and
        conditions of the Benefit Program, and the terms of each Participating
        Employer's plan, contract or other arrangement, under which benefits
        provided are incorporated by reference in this Plan.

   3.4  Employee Contributions. If a Participant does not have sufficient
        Benefit Credits to pay for the Benefit Program elected, the
        Participating Employer is authorized to withhold the additional amounts
        from a Participant's pay on a post-tax basis to the extent required for
        said Benefit Program.

        Participants are required to increase or decrease their payments under
        the terms of the Plan and as required by the Plan Administrator, if
        there is an increase or decrease in the premium payments required by an
        independent, third party provider in order to maintain a Benefit
        Program.

        Notwithstanding the foregoing, a Benefit Program shall cease to be
        provided to a Participant if said Participant fails to make a
        contribution required under the terms of the Plan.

                                       4

<PAGE>



   3.5  Revocation and Modification of Benefit Election. Once an Eligible
        Employee has elected Benefits under the Plan and the Plan Year has
        begun, he may not modify or revoke his election of Benefits, except on
        account of, and consistent with, a change in family status such as
        marriage, divorce, or death of a spouse or child, birth or adoption of a
        child, or a significant change in the health coverage of a Participant
        or his spouse attributable to his spouse's employment.

        Before the Plan Year has begun, a Participant may modify or revoke his
        designation of Benefits to the extent that the Employer may provide. Any
        new election under this Section 3.5 shall be effective at such time as
        the Employer shall prescribe, but not later than the first pay period
        beginning after the modified election form is completed and returned to
        the Employer.

        Notwithstanding the preceding paragraph, a Participant may modify his
        election to a Benefit Program which provides benefits through the
        Participating Employer's health plan or an HMO option sponsored by a
        Participating Employer other than during this Plan's Enrollment Period,
        if such an election is due either to the relocation of the Participant
        outside of the HMO's service area, or the HMO's cessation of service due
        to its insolvency.

        If an election results in a changed Premium Expense, then such change
        may be reflected in that Participant's Compensation Reduction Agreement
        under this Plan. The Participant must complete and submit to the Plan
        Administrator a new Compensation Reduction Agreement reflecting his
        revised election within 31 days of the election in order for the changed
        Premium Expense to take effect under this Plan.

   3.6  Nondiscrimination. Contributions and benefits under the Plan shall not
        discriminate in favor of Highly Compensated Employees; nor shall the
        aggregate cost of the Benefit Programs provided to Key Employees exceed
        25% of the aggregate of such cost for the Benefit Programs provided to
        all Employees under the Plan. The Employer may limit or deny any
        Employee's Compensation Reduction Agreement to the extent necessary to
        avoid any such discrimination.

   3.7  Insurance Contracts. Any dividends or retroactive rates or other refunds
        which may become payable under any insurance, health care service
        contracts or Benefit Programs due to actuarial error in rate calculation
        shall be the exclusive property of and shall be retained by a
        Participating Employer.

   3.8  Premium Expense. The Premium Expense of each Benefit Program shall be
        determined in a uniform manner by the Participating Employer subject to
        approval by the Employer. Such premium expenses are subject to change at
        the discretion of the Employer for any future Plan Year for current
        Participants, and at any time for new Participants.

                                       5

<PAGE>



                                   SECTION 4

                               PLAN ADMINISTRATOR

   4.1  Plan Administrator. The Employer shall be the Plan Administrator for
        purposes of ERISA.

   4.2  Named Fiduciary. The Employer shall be the named fiduciary responsible
        for administration of the Plan. The Employer may, however, delegate
        any of its powers or duties under the Plan in writing to any person or
        entity. The delegate shall become the fiduciary for only that part of
        the administration which has been delegated by the Employer and any
        references to the Employer shall instead apply to the delegate.

        However, if the Employer assigns any of the Employer's responsibility to
        an Employee, it will not be considered a delegation of Employer
        responsibility but rather how the Employer internally has assigned
        responsibility.

   4.3  Rules of Administration. The Plan Administrator shall adopt such rules
        for administration of the Plan as it considers desirable, provided they
        do not conflict with the Plan; and may construe the Plan, correct
        defects, supply omissions and reconcile inconsistencies to the extent
        necessary to effectuate the Plan, and such action shall be conclusive.
        Records of administration of the Plan shall be kept by the Plan
        Administrator, and Participants and their Beneficiaries may examine
        records pertaining directly to themselves.

   4.4  Services to the Plan. The Plan Administrator may contract for legal,
        actuarial, investment advisory, medical accounting, clerical and other
        services to carry out the Plan. The costs of such services and other
        administrative expenses shall be paid by the Employer, unless paid by
        the Plan.

   4.5  Funding Policy. The Plan Administrator shall annually review and
        determine the funding policy of the Plan, with the advice of such
        experts as the Plan Administrator deems appropriate.

   4.6  Claims. Procedure.

        A.  To receive benefits under the Plan, a Participant must submit a
            written claim for benefits to the Plan Administrator. For purposes
            of the claims procedure, the Employer has assigned the Office
            Manager of Deb Shops Inc. to be the Plan Administrator.

            The Plan Administrator will review the claim and will advise the
            Participant of any Benefit to which he is entitled. If a Participant
            believes he has not been reimbursed in accordance with the Plan or
            has not been advised of his Benefits, he may submit a written
            request to the Plan Administrator to provide either an explanation
            of how Benefits are reimbursed or further information of his
            Benefits. The Plan Administrator must respond to such a request
            within a reasonable time.

            Additionally, the Plan Administrator will provide to every claimant,
            who is denied a claim for Benefits, a written notice stating in a
            format determined to be understood by the claimant:

                                       6

<PAGE>

            (i)    the specific reason or reasons for the denial;

            (ii)   specific reference to pertinent Plan provisions on which the
                   denial is based;

            (iii)  a description of any additional material or information
                   necessary for the claimant to perfect the claim; and

            (iv)   an explanation of the claim review procedure set forth in
                   paragraph B., below.

        B.  Within 60 days of receipt by a claimant of a notice denying a claim
            under paragraph A., the claimant or his duly authorized
            representative may request in writing a full and fair review of the
            claim by the Plan Administrator, or by an appeals committee
            appointed by the Employer for that purpose ("Committee"). The Plan
            Administrator may extend the 60-day period where the nature of the
            benefit involved or other attendant circumstances make such
            extension appropriate. In connection with such review, the claimant
            or his duly authorized representative may review pertinent documents
            and may submit issues and comments in writing. The Plan
            Administrator or Committee shall make a decision promptly, and not
            later than 60 days after the Plan Administrator's receipt of a
            request for review, unless special circumstances (such as the need
            to hold a hearing, if the Committee deems one necessary) require an
            extension of time for processing. In that case a decision shall be
            rendered as soon as possible, but not later than 120 days after
            receipt of a request for review. The decision on review shall be in
            writing and shall include specific reasons for the decision, written
            in a manner calculated to be understood by the claimant, and
            specific references to the pertinent Plan provisions on which the
            decision is based.

   4.7  Nondiscriminatory Operation. All rules, decisions and designations by
        the Employer and the Plan Administrator or Committee under the Plan
        shall be made in a nondiscriminatory manner, and persons similarly
        situated shall be treated alike.

                                       7

<PAGE>



                                   SECTION 5

                             EMPLOYEE CONTRIBUTIONS

   5.1  Funding. The benefits provided herein shall be paid by the Plan
        Administrator; provided, however, that the payments under the Plan shall
        be limited to those amounts by which Participant designates to reduce
        his compensation pursuant to his Compensation Reduction Agreement.

   5.2  Execution of Agreements. All Compensation Reduction Agreements entered
        into by Participants in the Plan shall be executed before the close of
        the Enrollment Period for the Plan Year for which such Compensation
        Reduction Agreements will be effective or, in the case of Participants
        who were not eligible to participate in the Plan at the beginning of the
        Plan Year, before the first day of the pay period after the date on
        which they become eligible to participate in the Plan. Each Compensation
        Reduction Agreement shall remain effective throughout the Plan Year
        unless revoked or suspended by reason of any Participant's ceasing to be
        an Eligible Employee or by reason of a family status change pursuant to
        Section 3.5. Any Participant who fails to execute an appropriate
        Compensation Reduction Agreement during the Enrollment Period shall be
        deemed to have maintained his prior year's election. Any newly Eligible
        Employee who fails to execute an appropriate Compensation Reduction
        Agreement at the time of commencement of participation in the Plan
        shall be deemed to have elected cash compensation to the extent
        permissible.

   5.3  Amount of Compensation Reduction. The compensation reduction amount
        shall be specified by the Participant in the Compensation Reduction
        Agreement. The compensation reduction amount shall be designated on a
        per pay basis. In no event shall the designated compensation reduction
        exceed the Premium Expense of the benefit selected by the Participant
        pursuant to Section 3.2 hereof.

   5.4  Crediting of Compensation Reduction Amounts. All compensation reduction
        amounts shall be applied to reduce the Participant's compensation for
        each pay period in as nearly equal amounts as the Employer deems
        practicable, except as the Employer shall otherwise determine. The
        compensation reduction amount shall be credited to the Participant's
        Benefit Credits as of the end of the pay period to which such amount is
        attributable; provided, however, that no person's compensation for any
        pay period shall be reduced by reason of a Compensation Reduction
        Agreement, nor shall any Benefit Credits be credited by reason of such
        agreement, if such person is not an Eligible Employee or Participant on
        the date as of which such compensation is otherwise payable.

                                       8

<PAGE>

                                   SECTION 6

                            CONTINUATION OF COVERAGE

   6.1  In General. The following provisions shall apply to Benefits provided to
        Eligible Employees and their Dependents under the Plan, but only to the
        extent that the Benefits selected pertain to health care and medical
        coverage. This coverage shall be continued pursuant to the provisions of
        the Consolidated Omnibus Budget Reconciliation Act of 1985 (P.L. 99-272)
        Title X (COBRA).

   6.2  Continuation of Coverage. Subject to Section 6.1 above, a Qualified
        Beneficiary who would lose coverage under this Plan as a result of a
        Qualifying Event is entitled to elect continuation coverage within the
        election period under this Plan. Coverage under this provision is on a
        contributory basis. No evidence of good health will be required.

        Except as otherwise specified in an election, any election by a
        Qualified Beneficiary who is a covered Employee or spouse of the covered
        Employee will be deemed to include an election for continuation coverage
        under this provision on behalf of any other Qualified Beneficiary who
        would lose coverage by reason of a Qualifying Event.

        If this Plan provides a choice among the types of coverage under this
        Plan, each Qualified Beneficiary is entitled to make a separate
        selection among such types of coverage (i.e. single, family, etc.).

   6.3  Type of Coverage. Continuation coverage under this provision is coverage
        which is identical to:

        A.  the coverage provided under this Plan to similarly situated
            Beneficiaries with respect to whom a Qualifying Event has not
            occurred as of the time coverage is being provided; and

        B.  who have elected the same coverage as was elected by the Qualified
            Beneficiary.

        If coverage under this Plan is modified for any group of similarly
        situated Beneficiaries, the coverage shall also be modified in the same
        manner for all Qualified Beneficiaries under this Plan in connection
        with such group.

   6.4  Coverage Period. The coverage under this provision will extend for at
        least the period beginning on the date of a qualifying event and ending
        not earlier than the earliest of the following:

        A.  in the case of a terminated Employee (except for gross misconduct)
            or a covered Employee whose hours have been reduced, except as
            provided in B. and C. below, and his covered Dependents, the date
            which is 18 months after the Qualifying Event;

        B.  in the case of a Qualified Beneficiary disabled at the time of the
            covered Employee's termination (except for gross misconduct) the
            date which is 29 months after the Qualifying Event, provided the
            Qualified Beneficiary provides the Plan Administrator with

                                       9

<PAGE>

            notice of Social Security disability determination within 60 days of
            the disability determination and within 18 months of the Qualifying
            Event;

        C.  in the case of a Qualifying Event which occurs during the 18 months
            after the date that a covered Employee is terminated (except for
            gross misconduct) or the date that a covered Employee's hours are
            reduced, for the covered Dependents, the date which is 36 months
            after the date that a covered Employee is terminated (except for
            gross misconduct), or the date that a covered Employee's hours are
            reduced;

        D.  in the case of a termination (except for gross misconduct) or
            reduction in hours of a covered Employee and that Employee's
            subsequent entitlement to Medicare while continuation coverage is
            in force, for the covered dependents, the date which is 36 months
            from the date of the initial Qualifying Event;

        E.  in the case of any Qualifying Event except as described in A., B.
            and C. above, the date which is 36 months after the date of the
            qualifying event;

        F.  the date on which the Employer ceases to provide any group health
            plan coverage to any Employee;

        G.  the date on which the Qualified Beneficiary fails to make timely
            payment of the required contribution pursuant to this provision;

        H.  the date on which the Qualified Beneficiary first becomes, after the
            date of the election, covered under any other group health plan as
            an Employee or Dependent, or otherwise becomes entitled to benefits
            under Title XVIII of the Social Security Act (Medicare). However, if
            the other group health plan has a preexisting condition limitation,
            coverage under the Plan will not cease while such preexisting
            condition limitation under the other group plan remains in effect.
            In no instance will coverage continue beyond the coverage period set
            forth in this Section 6.4.

   6.5  Contribution.

        A.  A Qualified Beneficiary shall only be entitled to continuation
            coverage provided such Qualified Beneficiary pays the applicable
            premium required by Employer in full and in advance, except as
            provided in B. below. Such premium shall not exceed the
            requirements of applicable federal law. A Qualified Beneficiary may
            elect to pay such premium in monthly installments.

        B.  Except as provided in C. below, the payment of any premium shall be
            considered to be timely if made within 30 days after the date due,
            or within such longer period of time as applies to or under this
            Plan.

        C.  Notwithstanding A. and B. above if an election is made after a
            Qualifying Event during the election period, this Plan will permit
            payment of the required premium for continuation coverage during the
            period preceding the election to be made within 45 days of the date
            of the election and will require payment no later than the 46th day
            from the date of the election.

                                       10

<PAGE>

   6.6  Notification by Qualified Beneficiary. Each covered Employee or
        Qualified Beneficiary must notify the Plan Administrator of the
        occurrence of a divorce or legal separation of the covered Employee from
        such covered Employee's spouse, and/or the covered Employee's dependent
        child ceasing to be a Dependent child under the terms of this Plan
        within 60 days after the date of such occurrence. This 60-day time limit
        shall only apply to those occurrences as described in this paragraph
        which occur after the date of the enactment of the Tax Reform Act of
        1986.

   6.7  Notification to Qualified Beneficiary.

        A.  The Plan Administrator shall provide written notice to each covered
            Employee and spouse of such covered Employee of his right to
            continuation coverage under this provision as required by federal
            law.

        B.  The Plan Administrator shall notify any Qualified Beneficiary of the
            right to elect continuation coverage under this provision as
            required by federal law. If the Qualifying Event is the divorce or
            legal separation of the covered Employee from the covered Employee's
            spouse or a dependent child ceasing to be a Dependent child under
            the terms of this Plan, the Plan Administrator shall only be
            required to notify a Qualified Beneficiary of his right to elect
            continuation coverage if the covered Employee or the Qualified
            Beneficiary notifies the Plan Administrator of such Qualifying Event
            occurring after the date of the enactment of the Tax Reform Act of
            1986 within 60 days after the date of such Qualifying Event.

        C.  Notification of the requirements of this provision to the spouse of
            a covered Employee shall be treated as notification to all other
            Qualified Beneficiaries residing with such spouse at the time
            notification is made.

   6.8  Definitions. The terms used in the text of this Section 6 are defined
        as follows:

        A.  "Dependents" means an individual who meets the definition of
            dependent under the Participating Employer health plan covering the
            Qualified Beneficiary.

            No person shall be considered a Dependent of more than one Employee.

            If both an Employee and an Employee's spouse are employed by
            Employer dependent children may be covered by either spouse, but not
            by both.

        B.  "Election Period" means the 60-day period during which a Qualified
            Beneficiary who would lose coverage as a result of a Qualifying
            Event may elect continuation coverage. This 60-day period begins not
            later than the date of termination of coverage as a result of a
            Qualifying Event and ends not earlier than 60 days after the later
            of such date of termination of coverage or the receipt of notice of
            the right to elect continuation coverage under this Plan.

        C.  "Medicare" means the Health Insurance for the Aged and Disabled Act,
            Title XVIII of Public Law 89-97, Social Security, as amended.

                                       11

<PAGE>

        D.  "Qualified Beneficiary" means an individual who, on the day before
            the Qualifying Event for a covered Employee, is a Beneficiary under
            this Plan as the spouse or Dependent child of the covered Employee.
            In the case of the termination of a covered Employee (except by
            reason of such covered Employee's gross misconduct) or the reduction
            in hours of the covered Employee's employment, the term Qualified
            Beneficiary includes the covered Employee.

            Exception - the term Qualified Beneficiary does not include an
            individual whose status as a covered Employee is attributable to a
            period in which such individual is a nonresident alien who
            received no earned income from the employer which constituted income
            from sources within the United States (within the meaning of Code
            section 911(d)(2) and section 861(a)(3)). If an individual is not a
            Qualified Beneficiary pursuant to this paragraph, a spouse or
            Dependent child of such individual shall not be considered a
            Qualified Beneficiary by virtue of the relationship to such
            individual.

        E.  "Qualifying Event" means with respect to a covered Employee, any of
            the following events which, but for the continuation coverage under
            this provision, would result in the loss of coverage of a Qualified
            Beneficiary:

            (i)    the death of the covered Employee;

            (ii)   the termination (except by reason of such covered Employee's
                   gross misconduct) or reduction in hours of the covered
                   Employee's employment;

            (iii)  the divorce or legal separation of the covered Employee from
                   such covered Employee's spouse;

            (iv)   the entitlement to benefits of the covered Employee under
                   Title XVIII of the Social Security Act (Medicare);

            (v)    a dependent child ceasing to be a Dependent child under the
                   terms of this Plan;

            (vi)   the Employer's filing for Chapter 11 reorganization as it
                   would affect retiree coverage.

        F.  "University/College" means an accredited institution listed in the
            current publication of accredited institutions of higher education.

                                       12

<PAGE>



                                   SECTION 7

                                 MISCELLANEOUS

   7.1  Amendment and Termination. The Employer may amend or terminate this Plan
        at any time by action of the Committee. The Employer may amend this Plan
        retroactively to enable the Plan to qualify as a cafeteria plan under
        section 125 of the Code. No amendment shall deprive any Participant or
        Beneficiary of any benefit to which he or she is entitled under this
        Plan with respect to contributions previously made; and no amendment
        shall provide for the use of funds or assets other than for the benefit
        of Employees and their Beneficiaries, except as may be specifically
        authorized by statute or regulation.

   7.2  Effect of Plan on Employment. The Plan shall not be deemed to
        constitute a contract of employment between the Participating Employer
        and any Participant or to be consideration or an inducement for the
        employment of any Participant or Employee. Nothing contained in this
        Plan shall be deemed to give any Participant or Employee the right to be
        retained in the service of the Participating Employer or to interfere
        with the right of the Participating Employer to discharge any
        Participant or Employee at any time regardless of the effect which such
        discharge will have upon him or her as a Participant of this Plan.

   7.3  Alienation of Benefits No benefit under this Plan may be voluntarily or
        involuntarily assigned or alienated.

   7.4  Facility of Payment. If the Employer deems any person incapable of
        receiving benefits to which he is entitled by reason of not having
        reached the age of majority, illness, infirmity, or other incapacity, it
        may direct that payment be made directly for the benefit of such person
        or to any person selected by a Participating Employer to disburse it,
        whose receipt shall be a complete acquittance therefor. Such payments
        shall, to the extent thereof, discharge all liability of the
        Participating Employer.

   7.5  Proof of Claim. As a condition of receiving benefits under the Plan, any
        person may be required to submit whatever proof the Plan Administrator
        may require either directly to the Plan Administrator or to any person
        delegated by it.

   7.6  Status of Benefits. The Employer believes that this Plan is in
        compliance with section 125 of the Code and that it provides certain
        benefits to Employees which are tax free pursuant to other provisions of
        the Code. This Plan has not been submitted to the Internal Revenue
        Service for approval and thus there can be and is no assurance that
        intended tax benefits will be available. Any Participant, by accepting
        benefits under this Plan, agrees to be liable for any tax that may be
        imposed with respect to those benefits, plus any interest as may be
        imposed.

   7.7  Applicable Law. The Plan shall be construed and enforced according to
        the laws of the Commonwealth of Pennsylvania to the extent not preempted
        by any federal law.

   7.8  Source of Benefits. The Participating Employer and any insurance company
        contracts purchased or held by a Participating Employer shall be the
        sole sources of benefits under the Plan. No Employee or Beneficiary
        shall have any right to, or interest in, any assets of

                                       13

<PAGE>

        the Participating Employer upon termination of employment or otherwise,
        except as provided from time to time under the Plan, and then only to
        the extent of the benefits payable under the Plan to such Employee or
        Beneficiary.

   7.9  No Reversion to Employer. At no time shall any part of Plan assets be
        used for, or diverted to, purposes other than the exclusive benefit of
        Participants or their Beneficiaries, or for defraying reasonable
        expenses of administering the Plan.

   7.10 Severability. If any provision of this Plan shall be held invalid or
        unenforceable, such invalidity or unenforceability shall not affect any
        other provision; and this Plan shall be construed and enforced as if
        such provision had not been included.

   7.11 Heirs and Assigns. This Plan shall be binding upon the heirs,
        executors, administrators, successors and assigns of all parties,
        including each Participant and Beneficiary.

   7.12 Headings and Captions. The headings and captions set forth in the Plan
        are provided for convenience only, shall not be considered part of the
        Plan, and shall not be employed in construction of the Plan.

   7.13 Information to be Furnished. Participants shall provide the Employer
        and/or Participating Employer with such information and shall complete
        and sign such forms and documents, as may reasonably be requested from
        time to time for the purpose of administration of the Plan.


                                          Executed this 16 day of April, 1993.


ATTEST:                                   DEB SHOPS, INC.


Warren Weiner                             By: XXXXXXX
-----------------------------                --------------------------------
Secretary                                    (Authorized Officer)


                                       14

<PAGE>

                                 DEB SHOPS INC.

                                   SCHEDULE A

                              SCHEDULE OF BENEFITS
<TABLE>
<CAPTION>
MEDICAL PLAN                               Employee Contributions*

                                                         US           US
                                          Greater    Healthcare   Healthcare
                            Blue Cross    Atlantic       PA           NJ       Keystone
                            ----------    --------   ----------   ----------   --------
<S>                         <C>           <C>        <C>          <C>          <C>
Coverage Tiers
--------------

Employee Only                   **           **          **           **          **
Subscriber & Child              **           **          **           **          **
Subscriber & Children           **           **          **           **          **
Subscriber & Spouse             **           **          **           **          **
Family                          **           **          **           **          **
</TABLE>


DENTAL PLAN

                                             US
                                         Healthcare
                             Keystone        PA
                             --------    ----------

Employee Only                   **           **
Subscriber & Children           **           **
Subscriber & Spouse             **           **
Family                          **           **

 * Per weekly pay

** The Employee contributions necessary to obtain the coverage options set forth
   in this Schedule A above will be communicated by the Employer to Eligible
   Employees upon commencement of participation and to Participants at the time
   of the Enrollment Period. The required Employee contribution amounts will be
   considered as the maximum elective Employee contributions necessary for
   participation in each Plan option above.

   Additionally, the medical and/or dental plans offered will depend upon the
   plan's availability in each location. Dental benefits are 100% employee
   contributions.

                                       15

<PAGE>

                                 DEB SHOPS INC.

                                   SCHEDULE A

                              SCHEDULE OF BENEFITS

                                UNION EMPLOYEES

MEDICAL PLAN                               Employee Contributions*
<TABLE>
<CAPTION>
                                                                      US
                            Blue Cross   Blue Cross    Greater    Healthcare
                               CMM       Traditional   Atlantic       PA       Keystone
                            ----------   -----------   --------   ----------   --------
<S>                        <C>           <C>           <C>        <C>          <C>
Coverage Tiers
--------------

Employee Only                   **           **           **          **          **
Subscriber & Child              **           **           **          **          **
Subscriber & Children           **           **           **          **          **
Subscriber & Spouse             **           **           **          **          **
Family                          **           **           **          **          **
</TABLE>

DENTAL PLAN

                                             US
                                         Healthcare
                             Keystone        PA
                             --------    ----------

Employee Only                   **           **
Subscriber & Children           **           **
Subscriber & Spouse             **           **
Family                          **           **

 * Per weekly pay

** The Employee contributions necessary to obtain the coverage options set forth
   in this Schedule A above will be communicated by the Employer to Eligible
   Employees upon commencement of participation and to Participants at the time
   of the Enrollment Period. The required Employee contribution amounts will be
   considered as the maximum elective Employee contributions necessary for
   participation in each Plan option above.

   Additionally, the medical and/or dental plans offered will depend upon the
   plan's availability in each location. Dental benefits are 100% employee
   contributions.

                                       16