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EXHIBIT 10.13
 
CHARMING SHOPPES, INC.
 
Annual Incentive Program – Fiscal 2009
 
As Amended and Restated March 27, 2008
 
1.   General
 
This Annual Incentive Program, as amended and restated (the “Program”), of
Charming Shoppes, Inc. (the “Company”) authorizes the grant of Annual Incentive
Awards under the Company’s 2003 Incentive Compensation Plan (the “Plan”) to
executives and key employees and sets forth certain terms and conditions of such
Awards.  The purpose of the Program is to help the Company secure and retain
executives and key employees of outstanding ability and to motivate such persons
to help the Company achieve excellent performance, by providing incentives
directly linked to measures of annual performance based on corporate
consolidated results, divisional results, individual performance, and/or other
performance measures, and otherwise to further the purposes of the Plan.  The
terms and conditions of the Plan are hereby incorporated by reference in this
Program.  If any provision of this program or an implementing document hereunder
conflicts with a provision of the Plan, the provision of the Plan shall
govern.  The Annual Incentive Awards authorized hereunder for Covered Employees
are intended to qualify as “performance-based” compensation under Section 162(m)
of the Code.
 
2.   Definitions
 
Capitalized terms used in this Program but not defined herein have the same
meanings as defined in the Plan.  In addition to such terms and those terms
defined in Section 1 above, the following are defined terms under this Program:
 
(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.
 
3.   Eligibility
 
Employees who are eligible to participate in the Plan may be selected by the
Committee to participate in this Program.
 
4.   Designation and Earning of Annual Incentive Award Opportunities
 
(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).
 
5.   Settlement of Awards.
 
(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 Committee 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 than the Company or a subsidiary or
affiliate.
 
6.   Effect of Termination of Employment; Retirement
 
Upon a Participant’s Termination of Employment prior to completion of a
Performance Period or, after completion of a Performance Period but prior to the
Stated Settlement Date (i.e., the date of payment and settlement of the
Participant’s Annual Incentive Award under Section 5(b) with respect to that
Performance Period assuming no elective deferral), 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.
 

 
 

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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 and the Stated Settlement Date 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.
 
7.   General Provisions.
 
(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,
without 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.
 
(e)   Severablity.  The invalidity of any provision of the Program or a document
hereunder shall not be deemed to render the remainder of this Program or such
document invalid.
 

 
 

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Compensation Committee Minutes March 27, 2008 and Board of Directors March 28,
2008
 
Annual Incentive Program - Designation of Fiscal 2009 Performance Period,
Performance
 
Goal, and Annual Incentive Award Opportunities
 
In furtherance of Section 4 of the Annual Incentive Program (the “Program”), for
the Company’s 2009 fiscal year (the “Fiscal 2009 Performance Period”) the
Performance Goal, Award Opportunities, and participation shall be as set forth
in this Designation.  Terms used in this Designation have the meanings defined
in the Program.
 
Part I.             Performance Goals and Award Opportunities for the Fiscal
2009 Performance Period
 
(a)  
Nature of Performance Goals.  For the Fiscal 2009 Performance Period, the
Performance Goal shall be based solely or in part on corporate consolidated
results (specifically, consolidated operating earnings before income taxes  and
excluding extraordinary and non-recurring items including, without limitation,
severance payments, store closing costs and proxy contest and related expenses
(“Consolidated Operating Earnings”), as defined in the “Charming Shoppes, Inc.
2008 Budget Presentation”), division performance goals and individual
performance goals.  The specific Performance Goals and the Participants
including all Executive Officers and other senior officers to whom they apply
are set forth below and in Schedules I and II hereto.  The Performance Goals of
other Participants shall be determined by the Chief Executive Officer and the
Divisional President (to the extent applicable) in consultation with the Chief
Financial Officer and the Executive Vice President - Human Resources of the
Company (the “Authorized Officers”).  In furtherance of the foregoing:

 
 
--
The Consolidated Operating Earnings Performance Goal for fiscal 2009 shall be a
Minimum of $_____________ (the “Minimum Goal”), a Target of $__________, and a
Maximum of $___________.

 
--
The minimum, target and maximum levels of operating earnings for Lane Bryant,
Fashion Bug, Catherines and Crosstown are set forth in Schedule I hereto.

 
--
An Annual Incentive Award Opportunity based on the achievement of the
Consolidated Operating Earnings Performance Goal will be earned only if
Consolidated Operating Earnings equal or exceed the specified Minimum Goal; and
An Annual Incentive Award Opportunity based on divisional operating income and
individual performance goals will be earned only if the divisional operating
income equals or exceeds the specified minimum level for the Performance Period
for that division as set forth in Schedules I and II hereto.

(b)  
Designation of Participants and Award Opportunity Terms.  Participants in the
Program for the Fiscal 2009 Performance Period shall be executive officers,
senior officers and other employees designated in Impact Levels 1 through 9 at
the date hereof as more fully set forth in Schedule I hereto.  For each
Participant in Impact Levels 1 through 9, the Fiscal 2009 Performance Period,
the Participant’s target Annual Incentive Award Opportunity, designated levels
of achievement of the Company Performance Goals, range of potential Annual
Incentive Awards relating to the level of achievement of the Performance Goal,
and other Award Opportunity terms are set forth on Schedule I and Schedule II
hereto.  Division Performance Goals and related terms shall be determined by the
Authorized Officers, subject to The divisional performance weights  in
accordance with Schedule I and II.

 
For all “Corporate” participants (a) Annual Incentive Awards achieved at the
minimum, target and maximum Performance Goals will be equal to varying
percentages of the Annual Incentive Awards that would be payable on the
achievement of the target Performance Goal as more fully set forth in Schedule I
hereto; and (b) achievement of a Performance Goal between the minimum and target
Performance Goals set forth on Schedule I hereto shall be determined as
follows:  (i) the achievement of Consolidated Operating Earnings equal to or
greater than $__________ and less than $__________ will entitle payment of an
Annual Incentive Award equal to 25% of the Annual Incentive Award that would be
payable on the achievement of the target Performance Goal; (ii) the achievement
of Consolidated Operating Earnings equal to or greater than $________ and less
than $_________ will entitle payment of an Annual Incentive Award equal to 50%
of the Annual Incentive Award that would be payable on the achievement of the
target Performance Goal; (iii) the achievement of Consolidated Operating
Earnings equal to or greater than $________ and less than $________ will entitle
payment of an Annual Incentive Award equal to 50% of the Annual Incentive Award
that would be payable on the achievement of the target Performance Goal; (iv)
the achievement of Consolidated Operating Earnings equal to $_________ will
entitle payment of an Annual Incentive Award equal to 100% of the Annual
Incentive Award that is payable on the achievement of the target Performance
Goal; and (v)  Annual Incentive Awards based on the achievement of Performance
Goals between the applicable target and maximum Consolidated Operating Earnings
levels as set forth in the Schedule I hereto will be determined on a pro-rata
basis (i.e. interpolated) but in no event will an Annual Incentive Award be
granted in excess of the prescribed applicable percentage of salary set forth in
the Schedule I hereto for the achievement of the maximum Consolidated Operating
Earnings level even if performance in excess of that level is achieved.
 
(c)  
Adjustments to Performance Goals.  The Committee may determine in its discretion
to adjust the Performance Goals specified in (a) above (except as limited by the
2003 Plan and the Program).

 

 

 

 
Part II.            Foreign Participants
 
Other provisions hereof notwithstanding, the Chief Executive Officer of the
Company may modify any Annual Incentive Award Opportunity or Annual Incentive
Award granted to any Participant in order to comply with local laws or customs
in any jurisdiction other than the United States applicable to such Participant.

 
 

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