CHARMING SHOPPES, INC. Annual Incentive Program For Year Ending January 29, 2011 (Fiscal 2010) As Amended and Restated March 29, 2010

(a) “Annual Incentive Award” or “Award” means the amount of a Participant’s Annual Incentive Award Opportunity in respect of a specified Performance Period (typically, one fiscal year) determined by the Committee to have been earned and the Participant’s rights to future payments of cash in settlement thereof.

 

(b) “Annual Incentive Award Opportunity” or “Award Opportunity” means the Participant’s opportunity to earn specified dollar-denominated amounts under this Plan based on performance during a Performance Period.  An Annual Incentive Award Opportunity constitutes a conditional right to receive settlement of an Annual Incentive Award.

(c) “Participant” means an employee participating in this Program.

(d) “Performance Goal” means the Company, divisional, individual, or other accomplishment required as a condition to the earning of an Award Opportunity.  Unless otherwise determined by the Committee at the time Award Opportunities are authorized, Performance Goals shall meet the requirements of Section 6(b) of the Plan.

(e) “Performance Period” means the period of one fiscal year over which an Annual Incentive Award Opportunity may be earned, provided that the Committee may specify a shorter duration for any Performance Period.

(f) “Retirement” shall mean the voluntary termination of a Participant’s employment by the Participant at or after the Participant has attained the age of 62 immediately after which the Participant is not employed by the Company or any Subsidiary.

(g) “Termination of Employment” means (i) the termination of a Participant’s employment by the Company or a Subsidiary, or (ii) the voluntary termination of a Participant’s employment (other than a Retirement) immediately after which the Participant is not employed by the Company or any Subsidiary.

Employees who are eligible to participate in the Plan may be selected by the Committee to participate in this Program.

(a) Designation of Award Opportunities and Performance Goals.  The Committee shall select employees to participate in the Program for a Performance Period and designate, for each such Participant, the Award Opportunity such Participant may earn for such Performance Period, the nature of the Performance Goal the achievement of which will result in the earning of the Award Opportunity, and the levels of earning of the Award Opportunity corresponding to the levels of achievement of the Performance Goal.  In the case of a Covered Employee, the Committee’s determinations under this Section 4(a) shall be made not later than 90 days after the Performance Period begins and in no event after 25% of the Performance Period has elapsed.  The Award Opportunity earnable by each Participant shall range from 0% to a specified maximum percentage of a specified target Award Opportunity.  The Committee shall specify a table, grid, or formula that sets forth the amount of a Participant’s Award Opportunity that will be earned corresponding to the level of achievement of a specified Performance Goal.  The foregoing notwithstanding, the per-person limitation under Section 5 of the Plan shall apply to each Participant’s Award Opportunity.  For this purpose, awards under the Plan shall be deemed to use the per-person award limitation thereunder in the order in which the applicable performance periods are scheduled to end, and for performance periods ending on the same date in the order in which the award opportunities were authorized.

(b) Determination of Annual Incentive Award.  Within a reasonable time after the end of each Performance Period, the Committee shall determine the extent to which the Performance Goal for the earning of the Participant’s Annual Incentive Award Opportunity was achieved during such Performance Period and the resulting Award to the Participant for such Performance Period.  To the extent permitted under Section 6(d) of the Plan, the Committee may adjust the amount of an Award in its discretion in light of such considerations as the Committee may deem relevant (but subject to the applicable maximum Award Opportunity authorized for each Participant); provided, however, that, with respect to a Covered Employee, no upward adjustment may be made and such adjustments otherwise shall comply with applicable requirements of Treasury Regulation 1.162-27(e) under the Code.  Subject to Section 6 hereof, the Annual Incentive Award shall be deemed earned and vested at the time the Committee makes the determination pursuant to this Section 4(b).

(a) Elective Deferral.  A Participant will be permitted to elect to defer settlement of the Annual Incentive Award if and to the extent such Participant is selected to participate in the Company’s Variable Deferred Compensation Plan for Executives and deferrals of Awards are authorized and validly deferred in accordance with that plan.

(b) Settlement of Award.  Any non-deferred Annual Incentive Award shall be paid and settled by the Company promptly after the date of determination by the Committee under Section 4(b) hereof (such scheduled payment date being the “Stated Settlement Date”), but no later than 90 days after the end of the Performance Period.  With respect to any deferred amount of a Participant’s Annual Incentive Award, such amount will be credited to the Participant’s deferral account under the Company’s Variable Deferred Compensation Plan for Executives as promptly as practicable at or after the date of determination by the C ommittee under Section 4(b) hereof.

(c) Tax Withholding.  The Company shall deduct from any payment in settlement of a Participant’s Annual Incentive Award or other payment to the Participant any Federal, state, or local withholding or other tax or charge which the Company is then required to deduct under applicable law with respect to the Award.

(d) Non-Transferability.  An Annual Incentive Award Opportunity, any resulting Annual Incentive Award, including any deferred cash amount resulting from an Annual Incentive Award, and any other right hereunder shall be non-assignable and non-transferable except pursuant to the laws of descent and distribution in the event of the death of the Participant (or pursuant to a beneficiary designation, if permitted by the Committee), and shall not be pledged, encumbered, or hypothecated to or in favor of any party other than the Company or a subsidiary or affiliate or subject to any lien, obligation, or liability of the Participant to any party other tha n the Company or a subsidiary or affiliate.

Upon a Participant’s Termination of Employment prior to completion of a Performance Period , the Participant’s Annual Incentive Award Opportunity relating to such Performance Period shall cease to be earnable and shall be canceled, and the Participant shall have no further rights or opportunities hereunder, unless otherwise provided in an employment agreement or severance agreement between the Company and the Participant in effect at the time of Termination of Employment or otherwise determined by the Committee in its sole discretion.

Upon a Participant’s Retirement prior to completion of a Performance Period, a Pro-Rata Portion of the Participant’s Annual Incentive Award relating to such Performance Period shall be deemed earned and vested in accordance with and at the time that the Committee makes, the determination pursuant to Section 4(b) hereof.  For purposes hereof, a Pro-Rata Portion of the Participant’s Annual Incentive Award shall be the product of (i) the Annual Incentive Award determined by the Committee pursuant to Section 4(b) hereof as if the Participant was employed by the Company or any Subsidiary through the completion of the Performance Period multiplied by (ii) a fraction, the numerator of which shall be the number of full and partial months that the Participant was employed by the Company or any Subsidiary between the date of commencement of the Performance Period and the date of Retirement, and the denominator of which shall be the number twelve (12).  The Retirement of a Participant after completion of a Performance Period will not result in forfeiture or otherwise affect the Participant’s Annual Incentive Award for that Performance Period.

(a) Changes to this Program.  The Committee may at any time amend, alter, suspend, discontinue, or terminate this Program, and such action shall not be subject to the approval of the Company’s shareholders or Participants; provided, however, that any amendment to the Program beyond the scope of the Committee’s authority shall be subject to the approval of the Board of Directors.  Nothing shall limit the authority of the Committee, in its discretion, to accelerate the termination of any deferral period and the resulting payment and settlement of deferred amounts, with respect to an individual Participant or all Participants, w ithout the consent of the affected Participants.

(b) Unfunded Status of Participant Rights.  Annual Incentive Awards, accounts, deferred amounts, and related rights of a Participant represent unfunded deferred compensation obligations of the Company for ERISA and federal income tax purposes and, with respect thereto, the Participant shall have rights no greater than those of an unsecured creditor of the Company.

(c) Nonexclusivity of the Program.  The adoption of this Program shall not be construed as creating any limitations on the power of the Board or Committee to adopt such other compensation arrangements as it may deem desirable for any Participant, or to pay other amounts as annual bonuses apart from the Program, whether under the Plan or otherwise.

(d) No Right to Continued Employment.  Neither the Program nor any action taken hereunder shall be construed as giving any employee the right to be retained in the employ of the Company or any of its subsidiaries or affiliates, nor shall it interfere in any way with the right of the Company or any of its subsidiaries or affiliates to terminate any employee’s employment at any time.