Exhibit 10.1

     THIS EMPLOYMENT AGREEMENT is effective as of the 31st day of December, 2008
(the “Effective Date”) by and between Trans World Entertainment Corporation, a
New York corporation (the "Company"), and Robert J. Higgins ("Higgins").

Background

     WHEREAS, Higgins and the Company executed an employment agreement effective
as of May 1, 2003, which expired on April 30, 2008 (the "2003 Employment
Agreement"); and

     WHEREAS, the Company desires to revise and extend the terms of the 2003
Employment Agreement to assure the Company of Higgins' continued services in a
leadership capacity and to compensate him therefor; and

     WHEREAS, Higgins is willing to commit to continue serving the Company on
the terms and conditions provided in this Agreement.

     NOW THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and intending to be legally bound hereby, the
parties agree as follows:

SECTION 1. CAPACITY AND DUTIES

     1.1 Employment. The Company hereby employs Higgins and Higgins hereby
accepts employment by the Company upon the terms and conditions hereinafter set
forth for a term commencing on the date hereof and expiring on the third
anniversary of the Effective Date (unless Higgins' service is sooner terminated
as set forth below) (the "Contract Period"). The initial three-year term of this
Employment Agreement is subject to automatic one year extensions starting on the
second anniversary of the Effective Date and on each subsequent anniversary
date, unless, at least 30 days before any such anniversary date, Executive or
the Company cancels the automatic extension by giving written notice to the
other party of its election to cancel such extension, in which case the term of
Executive’s employment hereunder shall terminate one year following such
anniversary date.

     1.2 Capacity and Duties.

          1.2.1 Higgins shall be employed by the Company as its Chief Executive
Officer and shall have the executive authority, consistent with such position,
as may from time to time be specified by the Board of Directors of the Company
or any duly authorized committee thereof (the "Board").

          1.2.2 Higgins shall devote his full working time, energy, skill and
best efforts to the performance of his duties hereunder, in a manner that will
faithfully and diligently serve the business and interest of the Company and its
affiliates (as defined below),

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provided that Higgins may devote such time as is reasonably required for
charitable and other personal activities in accordance with the Company's
practices and policies.

         1.2.3 For the purposes of this Agreement, an "affiliate" of the Company
means any person or entity that controls the Company, is controlled by the
Company, or which is under common control with the Company. For the purposes of
this definition of "affiliate", "control" means the power to direct the
management and policies of a person or entity, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" shall have correlative meanings; provided
that any person or entity who owns beneficially, either directly or though one
or more intermediaries, more than 20% of the ownership interests in a specified
entity shall be presumed to control such entity for the purposes of this
Agreement.

SECTION 2. COMPENSATION

     2.1 Base Compensation. As compensation for Higgins' services hereunder, the
Company shall pay Higgins a base salary at the annual rate of $1,000,000. This
base salary shall be payable in installments in accordance with the Company's
regular payroll practices in effect from time to time. The annual base salary of
Higgins shall not be decreased at any time during the Contract Period from the
amount then in effect, unless Higgins otherwise agrees in writing. Participation
in deferred compensation, discretionary bonus, retirement and other employee
benefit plans and in fringe benefits shall not reduce the annual base salary
payable to Higgins under this Section 2.1.

     2.2 Benefits.

          2.2.1 During the Contract Period, Higgins (and his covered dependents,
if applicable) shall be entitled to participate in all incentive, savings,
retirement, welfare and other employee benefit plans, practices, policies and
programs that the Company may provide for the benefit of its executive employees
generally (together with the fringe benefits described below, "Employee
Benefits"). Higgins shall also be entitled to participate in any other fringe
benefits which may be or become applicable to the Company's executive employees,
including the payment of reasonable expenses for attending annual and periodic
meetings of trade associations and any other benefits that are commensurate with
the duties and responsibilities to be performed by Higgins under this Agreement.

          2.2.2 If Higgins becomes a participant in any employee benefit plan,
practice or policy of the Company or its affiliates, Higgins shall be given
credit under such plan for all service in the employ of the Company and any
predecessors thereto or affiliates thereof prior to the date hereof, for
purposes of eligibility and vesting, benefit accrual and for all other purposes
for which such service is either taken into account or recognized under the
terms as such plan, practice or policy.

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          2.2.3 The Company shall pay or reimburse Higgins for all reasonable
expenses (including expenses of travel and accommodations) incurred or paid by
Higgins in connection with the performance of Higgins' duties hereunder upon
receipt of itemized vouchers therefor and such other supporting information as
the Company shall reasonably require.

          2.2.4 During the Contract Period, the Company shall continue to
provide Higgins with an automobile for use by Higgins consistent with past
practices and shall continue to pay or reimburse Higgins for expenses he
reasonable incurs for the maintenance and operation of such automobile upon
receipt of itemized vouchers therefor and such other supporting information as
the Company shall reasonably require.

          2.2.5 During the Contract Period, Higgins shall be entitled to paid
vacations in a manner commensurate with Higgins' status as the Chief Executive
Officer of the Company, which shall not be less than the annual vacation period
which Higgins is presently entitled.

     2.3 Executive Bonus Plan. The Company maintains the Executive Bonus Plan
(the "EBP") to provide performance-based incentive compensation to Higgins and
certain other executives of the Company. During the Contract Period, Higgins
shall be eligible to earn an annual performance bonus of 0 to 200% of his annual
base salary in effect for that year ("incentive compensation"), calculated in
such fashion and based on the achievement of certain performance criteria as are
approved by the Board or the Compensation Committee prior to the beginning of
such year under the EBP.

     2.4 Insurance. During each calendar year of the Contract Period (beginning
with calendar year 2009), the Company shall pay or advance for life insurance
protection for Higgins’ designated beneficiary, under an arrangement selected by
Higgins, an amount equal to $150,000.

     2.5 Additional Compensation. The Board, although under no obligation to do
so, may determine from time to time to pay to Higgins compensation in addition
to the annual base salary and incentive compensation required to be paid above.
The Board may grant Higgins options to purchase shares of common stock of the
Company ("Common Stock"), may issue him restricted Common Stock or may award him
stock appreciation rights. In addition to the foregoing, pursuant to the
provisions of the 2005 Long Term Incentive Plan (the “Plan”), upon effectiveness
of this Agreement, the Employee will be awarded Restricted Share Units, the
Common Stock subject to which will have a fair market value on the date of grant
equal to $1,100,000 (the “Restricted Share Units”), subject to the terms and
conditions of the Plan and those set forth in the Restricted Stock Unit
Agreement.

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SECTION 3. TERMINATION OF EMPLOYMENT

     3.1 Death or Disability of Higgins.

          3.1.1 Higgins' employment hereunder shall immediately terminate upon
his death, upon which the Company shall pay earned but unpaid base salary
through the date of death, reimbursement for expenses incurred prior to the date
of death in accordance with the Company’s expense reimbursement policy, payment
for accrued but unused vacation time in accordance with Company policy, and
annual bonus for the fiscal year of death in an amount determined by the
Compensation Committee of the Board of Directors based on the achievement of the
performance goals under the annual bonus plan applicable to Higgins for the
entire fiscal year but prorated based upon the number of days in the fiscal year
through the date of death. The annual bonus amount shall be paid on the date
bonuses for the fiscal year are paid to other executives but in all events on a
date that is after the end of the fiscal year and within four months after the
end of the fiscal year, and the other amounts payable under this Section 3.1.1
(other than expense reimbursements, which shall be paid in accordance with the
applicable Company policy) shall be paid within thirty (30) days after Higgins’
death.

          3.1.2 If Higgins, in the reasonable opinion of the Company, is
Disabled (as defined below), the Company shall have the right to terminate
Higgins' employment upon 30 days prior written notice to Higgins at any time
after the expiration of the 180 day period referred to below, in which event the
Company shall pay Higgins (v) earned but unpaid base salary through the date of
termination in accordance with normal payroll practices, (w) reimbursement for
expenses incurred prior to the date of termination in accordance with the
Company’s expense reimbursement policy, (x) payment for accrued but unused
vacation time in accordance with Company policy, such payment to be made within
thirty (30) days after Higgins’ termination of employment, (y) annual bonus for
the fiscal year of termination in an amount determined by the Compensation
Committee of the Board of Directors based on the achievement of the performance
goals under the annual bonus plan applicable to Higgins for the entire fiscal
year but prorated based upon the number of days in the fiscal year through the
date of termination, and (z) an amount equal to two (2) times his base salary
for the period from the date of termination until six months following the date
of such termination (half of which represents his bonus for such period at
target), such aggregate amount to be paid, subject to Section 5.1.1 below, in
equal installments over such period in accordance with the regular payroll
practices of the Company. The annual bonus amount set forth in clause (y) above
shall be paid on the date bonuses for the fiscal year are paid to other
executives but in all events on a date that is after the end of the fiscal year
and within four months after the end of the fiscal year. As used in this
Agreement, the term "Disabled" or "Disability" shall mean the inability of
Higgins to perform substantially Higgins' duties and responsibilities to the
Company by reason of a physical or mental disability or infirmity for a
continuous period of at least 180 days. The date of Disability shall be on the
last day of such 180 day period. The determination of whether the Disability has
occurred shall be made by a licensed physician chosen by the Board.

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     3.2 [RESERVED]

     3.3 Date of Termination.

          3.3.1 Except as otherwise provided in this Agreement, the employment
of Higgins hereunder shall terminate upon the earliest to occur of the dates
specified below:

          3.3.1.1 the end of the Contract Period;

          3.3.1.2 the close of business on the date of Higgins' death;

          3.3.1.3 the close of business on the date on which the Company
delivers to Higgins a written notice of the Company's election to terminate
Higgins' employment for "Cause" (as defined below);

          3.3.1.4 the close of business on the date which is 30 days after the
date on which the Company delivers to Higgins a written notice of the Company's
election to terminate Higgins' employment because of Disability;

          3.3.1.5 the close of business on the date on which Higgins delivers to
the Company a notice of his election to terminate his employment for "Good
Reason" (as defined below), which may not occur prior to the expiration of the
Company’s cure period set forth below; or

          3.3.1.6 the close of business on the date on which the Company
delivers to Higgins a written notice that the Board has adopted a resolution
terminating the Higgins' employment and such termination is not for death, Cause
or Disability.

          3.3.2 Any purported termination by the Company or by Higgins shall be
communicated by written Notice of Termination to the other. For the purposes of
this Agreement, a "Notice of Termination" shall mean a notice which indicates
the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Higgins' employment under the provision so indicated.
No such purported termination shall be effective without delivery of such Notice
of Termination. Termination of employment will not cause a termination of this
Agreement, the terms of which shall survive any termination of employment in
accordance with the express terms hereof.

     3.4 Termination for Cause.

          3.4.1 In the event Higgins' employment is terminated (i) by the
Company for Cause, or (ii) by Higgins for any reason other than Good Reason, the
Company's remaining obligations under this Agreement shall terminate as of the
date provided in Section 3.3.

          3.4.2 For the purposes of this Agreement, the term "Cause" shall mean:

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          3.4.2.1 fraud, theft, misappropriation or embezzlement of the
Company's funds;

          3.4.2.2 conviction of (i) any felony, or any crime involving fraud or
misrepresentation, or (ii) of any other crime (whether or not connected with his
employment) the effect of which is likely to adversely affect the Company,
except, in the case of clause (ii) only, if Higgins' actions which result in
such a conviction were taken in good faith and in a manner Higgins reasonably
believed not to be adverse to the interests of the Company;

          3.4.2.3 after a written demand for substantial performance to Higgins
from the Board (mailing of such written demand having been authorized by a least
60% of the independent (within the meaning of the NASDAQ Stock Market Rules)
directors then in office) which specifically identifies the manner in which the
Board believes that Higgins has intentionally materially breached Higgins'
duties and provides Higgins with a 30 day period in which to cure such breach,
the willful and continuing intentional material breach by Higgins and failure
substantially to perform Higgins' duties with the Company (other than any such
failure resulting from Disability); or

          3.4.2.4 abuse of alcohol or other drugs which interferes with the
performance by Higgins of his duties, provided that Higgins has been given 30
days notice by the Company of its intent to terminate Higgins pursuant to this
provision during which time Higgins has not demonstrated the cessation of such
abuse to the reasonable satisfaction of the Board.

Notwithstanding the foregoing or any other provision hereof, Higgins shall not
be deemed to have been terminated for Cause unless there shall have been
delivered to Higgins a copy of a resolution duly adopted by the affirmative vote
of not less than 60% of the independent (within the meaning of the NASDAQ Stock
Market Rules) members of the Board.

          3.4.3 For the purposes of this Agreement, the term "Good Reason" shall
mean the occurrence of any of the events or conditions described in the
following subparagraphs without Higgins' express written consent:

          3.4.3.1 a material diminution of Higgins' status, title, position,
scope of authority or responsibilities (including reporting responsibilities),
the assignment to Higgins of any duties or responsibilities which are
inconsistent with such status, title, position, authorities or responsibilities,
Higgins ceasing to be Chairman of the Board of Directors, or any removal of
Higgins from or failure to reappoint or reelect Higgins to any of such
positions, except in connection with the termination of Higgins' employment for
Disability, Cause, as a result of Higgins' death or by Higgins other than for
Good Reason;

          3.4.3.2 a material reduction by the Company in Higgins' base salary,
bonus opportunity and benefits in the aggregate as provided for in this
Agreement;

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          3.4.3.3 the relocation of the Company's principal executive offices to
a location outside a 25-mile radius of Albany, New York or the Company's
requiring Higgins to be based at any place other than Albany, New York, except
for reasonable required travel on the Company's business;

          3.4.3.4 any material breach by the Company of any material provision
of this Agreement; or

          3.4.3.5 the failure of the Company to obtain a satisfactory agreement
from any purchaser of the Company or successor or permitted assignee of the
Company to assume and agree to perform this Agreement;

provided, however, that, it shall be a condition precedent to Higgins’ right to
terminate employment for Good Reason that (i) he shall first have given the
Company written notice that an event or condition constituting Good Reason has
occurred within ninety (90) days after such occurrence, and (ii) a period of
thirty (30) days from and after the giving of such written notice shall have
elapsed without the Company having effectively cured or remedied such occurrence
during such 30-day period.

     3.5 Termination Without Cause or for Good Reason.

          3.5.1 In the event Higgins' employment is terminated (i) by the
Company for any reason other than Cause, or the death or Disability of Higgins,
or (ii) by Higgins for Good Reason, the Company shall (w) immediately pay
Higgins his earned but unpaid base salary through the date of termination and
accrued but unused vacation time in accordance with Company policy, (x)
reimburse Higgins’ expenses incurred prior to the date of termination in
accordance with the Company’s expense reimbursement policy, and (y) pay Higgins
an amount equal to two (2) times his base salary for the period from the date of
termination until the latest of (A) the third anniversary of the Effective Date,
(B) the end of the Contract Period, or (C) one year after the date of
termination (half of which represents his bonus for such period at target), such
aggregate amount to be paid, subject to Section 5.1.1 below, in equal
installments over such period in accordance with the regular payroll practices
of the Company. In addition, Higgins (and his covered dependents) will be
entitled to continue participation in the Company’s medical, dental and vision
care plans (the “Health Benefit Plans”) until the latest of (A) the third
anniversary of the Effective Date, (B) the end of the Contract Period, or (C)
one year after the date of termination; provided, however, that Higgins’ (and
his covered dependents’) participation in the Company’s Health Benefit Plans
shall cease on any earlier date that he becomes eligible for substantially
similar benefits from a subsequent employer. Higgins’ participation in the
Health Benefit Plans will be on the same terms and conditions (including,
without limitation, any contributions that would have been required from him)
that would have applied had he continued to be employed by the Company.

          3.5.2 There shall be no requirement on the part of Higgins to seek
other employment or otherwise mitigate damages in order to be entitled to the
full amount of

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any payments or benefits to be made pursuant to this Agreement or any other
agreement between Higgins and the Company or any of its affiliates. Except as
set forth in Section 3.5.1 in the case of Health Benefit Plans, no payment or
benefit under any portion of this Agreement shall be subject to offset.

SECTION 4. RESTRICTIVE COVENANTS

     4.1 Confidentiality. Higgins acknowledges a duty of confidentiality owed to
the Company and shall not, directly or indirectly, at any time during or after
his employment by the Company divulge, furnish, or make accessible to anyone,
without the express authorization of the Board, any trade secret, private or
confidential or proprietary information or know-how of the Company or any of its
affiliates obtained or acquired by him while so employed. All computer software
and books paid for by the Company, and all records and files generated or
acquired while an employee of the Company are acknowledged to be the property of
and shall not be removed from the Company's possession or made use of other than
in pursuit of the Company's business and, upon termination of employment for any
reason, Higgins shall deliver to the Company, without further demand, all copies
thereof which are then in his possession or under his control. The provisions of
this Section 4.1 shall not apply to information which (i) is or becomes
generally available to the public other than as a result of a disclosure by
Higgins, (ii) was available to Higgins on a non-confidential basis prior to its
disclosure to Higgins, (iii) becomes available to Higgins on a non-confidential
basis from a source other than the Company, (iv) must be disclosed by law or by
order of a court or governmental authority, or (v) is used to enforce Higgins's
rights with the Company.

     4.2 Noncompetition.

          4.2.1 At any time while employed hereunder and, except as provided in
the last sentence of this Section 4.2.1, for a period of one year following
termination of Higgins' employment for any reason, Higgins shall not, directly
or indirectly: (i) engage, anywhere in the Territory (as defined in Section
4.2.2 below), in the retail sale of music, video or related products; (ii) be or
become a stockholder, partner, owner, officer, director or employee or agent of,
or a consultant to, or give financial or other assistance to, any person or
entity engaging in any such activities; (iii) seek in competition with the
business of the Company to procure orders from or do business with any customer
of the Company; or (iv) solicit or contact with a view to the engagement or
employment by any person or entity of any person who is or was an employee of
the Company during the one year preceding termination of Higgins’ employment,
provided this will not preclude hiring any person who contacts Higgins for
employment and who has not been employed by the Company at any time during the
preceding 6 months. Nothing herein shall prohibit Higgins without the written
consent of the Board from owning, as a passive investor, in the aggregate not
more than 5% of the outstanding publicly traded stock of any corporation so
engaged. The duration of Higgins' covenants set forth in this Section shall be
extended by a period of time equal to the number of days, if any, during which
Higgins is in violation of the provisions hereof. Higgins shall not be bound by
this

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Section 4.2.1 following the termination of his employment (a) by the Company
without Cause, or (b) by Higgins for Good Reason.

          4.2.2 For the purposes of this Agreement, "Territory" means the United
States.

          4.2.3 If either party hereto learns of any breach or potential breach
of this Agreement such party shall immediately notify the other party hereto of
such event, specifying the basis therefore in reasonable detail. The Company
may, in its sole discretion, afford Higgins an opportunity to remedy or
otherwise cure such breach or potential breach before seeking legal redress,
provided that Higgins is actively seeking to cure or remedy such breach or
potential breach; but such opportunity to remedy shall be without prejudice to
the right of the Company to seek and obtain injunctive or other relief.

     4.3 Injunctive and Other Relief. Higgins acknowledges and agrees that the
covenants contained in Section 4.1 and 4.2 above are fair and reasonable in
light of the consideration paid hereunder, and that damages alone shall not be
an adequate remedy for any breach by Higgins of his covenants contained herein
and accordingly expressly agrees that, in addition to any other remedies which
the Company may have, the Company shall be entitled to injunctive relief in any
court of competent jurisdiction for any breach or threatened breach of any such
covenants by Higgins. Nothing contained herein shall prevent or delay the
Company from seeking, in any court of competent jurisdiction, specific
performance or other equitable remedies in the event of any breach or intended
breach by Higgins of any of his obligations hereunder. In the event the Company
prevails in an action to enforce its rights under Section 4.1 and 4.2 it shall
be entitled to be reimbursed for its costs and reasonable attorneys' fees
associated with so enforcing its rights.

SECTION 5. MISCELLANEOUS

     5.1 Reimbursement of Counsel Fees: Arbitration. The Company shall pay all
reasonable legal fees, accounting fees and related expenses incurred by Higgins
in connection with the preparation, negotiation and execution of this Agreement.
Any dispute or controversy arising under or in connection with this Agreement
shall be settled exclusively by arbitration in New York, New York in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrator's award in any court
having jurisdiction. The prevailing party, shall be entitled to recover from the
other party all of its legal fees, accounting fees and related expenses incurred
in any such arbitration including without limitation, all expenses of
arbitration, court costs, transcript costs, fees of experts, witness fees,
travel expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees and all other disbursements or
expenditures of the types customarily incurred in connection with prosecuting,
defending or investigating any arbitration, action or suit.

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     5.2 Severability. The invalidity or unenforceability of any particular
provision or part of any provision of this Agreement shall not affect the other
provisions or parts hereof. If any provision hereof is determined to be invalid
or unenforceable by a court of competent jurisdiction, Higgins shall negotiate
in good faith to provide the Company with protection as nearly equivalent to
that found to be invalid or unenforceable and if any such provision shall be so
determined to be invalid or unenforceable by reason of the duration or
geographical scope of the covenants contained therein, such duration or
geographical scope to the extent necessary to cure such invalidity.

     5.3 Assignment. Neither this Agreement nor any right or interest hereunder
shall be assignable by Higgins, Higgins' beneficiaries, or legal representatives
without the Company's prior written consent; provided, however, that nothing
herein shall preclude (i) Higgins from designating a beneficiary to receive any
benefit payable hereunder upon Higgins' death, or (ii) the executors,
administrators, or other legal representatives of Higgins or Higgins' estate
form assigning any rights hereunder to devisees, legatees, beneficiaries,
testamentary trustee or other legal heirs of Higgins (each a "Distributee"). If
Higgins should die while any amounts would still be payable to Higgins if
Higgins had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to Higgins'
Distributee or, if there is no such Distributee, to Higgins' estate.

     5.4 Notices. All notices hereunder shall be in writing and shall be
sufficiently given if hand-delivered, sent by documented overnight delivery
service or registered or certified mail, postage prepaid, return receipt
requested or by telegram, fax or telecopy (confirmed by U.S. mail), receipt
acknowledged, addressed as set forth below or to such other person and/or a such
other address as may be furnished in writing by either party hereto to the
other. Any such notice shall be deemed to have been given as of the date
received, in the case of personal delivery, or on the date shown on the receipt
or confirmation therefore, in all other cases. Any and all service of process
and any other notice in any such action, suit or proceeding shall be effective
against a party if given as provided in this Agreement; provided that nothing
herein shall be deemed to affect the right of a party to serve process in any
other manner permitted by law.

If to the Company:

Presiding Director
Trans World Entertainment Corporation
38 Corporate Circle
Albany, N.Y. 12203

with a copy to the Company’s Chief Financial Officer

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If to Higgins:

Mr. Robert J. Higgins
6 Sage Estates
Menands, N.Y. 12204

     5.5 Entire Agreement and Modification. This Agreement (and any Employee
Benefit plan or agreement contemplated hereby) constitutes the entire agreement
between the parties hereto with respect to the matters contemplated herein and
supersedes all prior agreements and understandings with respect thereto. Any
amendment, modification, or waiver of this Agreement shall not be effective
unless in writing. Neither the failure nor any delay on the part of any party to
exercise any right, remedy, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, remedy,
power or privilege preclude any other or further exercise of the same or of any
right, remedy, power or privilege with respect to any occurrence be construed as
a waiver of any right, remedy, power, or privilege with respect to any other
occurrence.

     5.6 Governing Law. This Agreement is made pursuant to, and shall be
construed and enforced in accordance with, the internal laws of the State of New
York (and United States federal law, to the extent applicable), without giving
effect to otherwise applicable principles of conflicts of law.

     5.7 Headings; Counterparts. The headings of sections in this Agreement are
for convenience only and shall not affect its interpretation. This Agreement may
be executed in two or more counterparts, each of which shall be deemed to be an
original and all of which, when taken together, shall be deemed to constitute
but one and the same Agreement.

     5.8 Further Assurances. Each of the parties hereto shall execute such
further instruments and take such other actions as any other party shall
reasonably request in order to effectuate the purposes of this Agreement.

     5.9 Indemnification. Throughout the Contract Period and for a period of
five years thereafter, the Company shall indemnify and defend Higgins against
all claims arising out of Higgins' activities as an officer, director or
employee of the Company to the fullest extent permitted under the law of the
applicable state of incorporation. In addition to the foregoing, Higgins shall,
upon reasonable notice, furnish such information and proper assistance to the
Company in connection with any litigation in which it is, or may become, a
party.

     5.10 Excise Tax Gross-Up. In the event it shall be determined that any
payment, award, benefit or distribution (including, without limitation, the
acceleration of any payment, award, distribution or benefit), by the Company or
any of its affiliates to or for the benefit of the Executive (whether pursuant
to the terms of this Agreement or otherwise, but determined without regard to
any additional payments required under this Section 5.10) (a “Payment”) would be
subject to the excise tax imposed by Section 4999

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of the Internal Revenue Code of 1986, as amended (the “Code”) or any
corresponding provisions of state or local tax law, or any interest or penalties
are incurred by Higgins with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the “Excise Tax”), then Higgins shall be entitled to receive an
additional payment (a “Gross-Up Payment”) in an amount such that after payment
by Higgins of all taxes (including any Excise Tax, income tax or employment tax)
imposed upon the Gross-Up Payment and any interest or penalties imposed with
respect to such taxes, Higgins retains from the Gross-Up Payment an amount equal
to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing
provisions of this Section 5.10, if it shall be determined that Higgins is
entitled to a Gross-Up Payment, but that the portion of the Payments that would
be treated as “parachute payments” under Section 280G of the Code does not
exceed by more than $100,000 the greatest amount (the “Safe Harbor Amount”) that
could be paid to Higgins such that the receipt of Payments would not give rise
to any Excise Tax, then no Gross-up Payment shall be made to Higgins and the
amount payable under clause (z) of Section 3.5.1 of this Agreement shall be
reduced so that the Payments, in the aggregate, are reduced to the Safe Harbor
Amount. For purposes of reducing the payments to the Safe Harbor Amount, only
amounts payable under this Agreement (and no other Payments) shall be reduced.
If the reduction of the amounts payable under this Agreement would not result in
a reduction of the Payments to the Safe Harbor Amount, no amounts payable under
this Agreement shall be reduced pursuant to this Section 5.10.

     5.11 Section 409A.

          5.11.1 It is intended that this Agreement will comply with Section
409A of the Internal Revenue Code of 1986, as amended (the “Code”) and any
regulations and guidelines promulgated thereunder (collectively, “Section
409A”), to the extent the Agreement is subject thereto, and the Agreement shall
be interpreted on a basis consistent with such intent. If an amendment of the
Agreement is necessary in order for it to comply with Section 409A, the parties
hereto will negotiate in good faith to amend the Agreement in a manner that
preserves the original intent of the parties to the extent reasonably possible.
No action or failure to act pursuant to this Section 5.11 shall subject the
Company to any claim, liability, or expense, and the Company shall not have any
obligation to indemnify or otherwise protect Higgins from the obligation to pay
any taxes, interest or penalties pursuant to Section 409A.

          5.11.2 Notwithstanding any provision to the contrary in this
Agreement, if Higgins is deemed on the date of his “separation from service”
(within the meaning of Treas. Reg. Section 1.409A -1(h)) with the Company to be
a “specified employee” (within the meaning of Treas. Reg. Section 1.409A -1(i)),
then with regard to any payment or benefit that is considered deferred
compensation under Section 409A payable on account of a “separation from
service” that is required to be delayed pursuant to Section 409A(a)(2)(B) of the
Code (after taking into account any applicable exceptions to such requirement),
such payment or benefit shall be made or provided on the date that is the
earlier of (i) the expiration of the six (6)-month period measured from the date
of Higgins’ “separation from service,” or (ii) the date of Higgins’ death (the
“Delay

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Period”). Upon the expiration of the Delay Period, all payments and benefits
delayed pursuant to this Section 5.11.2 (whether they would have otherwise been
payable in a single sum or in installments in the absence of such delay) shall
be paid or reimbursed to Higgins in a lump sum and any remaining payments and
benefits due under this Agreement shall be paid or provided in accordance with
the normal payment dates specified for them herein. Notwithstanding any
provision of this Agreement to the contrary, for purposes of any provision of
this Agreement providing for the payment of any amounts or benefits upon or
following a termination of employment, references to Higgins’ “termination of
employment” (and corollary terms) with the Company shall be construed to refer
to Higgins’ “separation from service” (within the meaning of Treas. Reg. Section
1.409A -1(h)) with the Company.

          5.11.3 With respect to any reimbursement or in-kind benefit
arrangements of the Company and its subsidiaries that constitute deferred
compensation for purposes of Section 409A, except as otherwise permitted by
Section 409A, the following conditions shall be applicable: (i) the amount
eligible for reimbursement, or in-kind benefits provided, under any such
arrangement in one calendar year may not affect the amount eligible for
reimbursement, or in-kind benefits to be provided, under such arrangement in any
other calendar year (except that the health and dental plans may impose a limit
on the amount that may be reimbursed or paid), (ii) any reimbursement must be
made on or before the last day of the calendar year following the calendar year
in which the expense was incurred, and (iii) the right to reimbursement or
in-kind benefits is not subject to liquidation or exchange for another benefit.
Whenever a payment under this Agreement specifies a payment period with
reference to a number of days (e.g., “payment shall be made within thirty (30)
days after termination of employment”), the actual date of payment within the
specified period shall be within the sole discretion of the Company. Whenever
payments under this Agreement are to be made in installments, each such
installment shall be deemed to be a separate payment for purposes of Section
409A.

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     IN WITNESS WHEREOF, the parties have executed this Agreement on the dates
set forth below.

    TRANS WORLD ENTERTAINMENT     CORPORATION         December 24, 2008   By:
/s/ John J. Sullivan       Name: John J. Sullivan       Title: Executive Vice
President, Chief       Financial Officer & Secretary               /s/ Robert J.
Higgins December 26, 2008     ROBERT J. HIGGINS

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