1988 KESOP Plan


    EXHIBIT
      10.2.1

    


    


    


    CHARMING
      SHOPPES, INC.

    1988
      KEY EMPLOYEE STOCK OPTION PLAN

    As
      Amended and Restated January 25, 2006

    


    The
      purpose of this Stock Option Plan (the "Plan") is to assist Charming Shoppes,
      Inc. (the "Company") and any subsidiaries thereof in retaining and attracting
      key employees by enabling them to acquire common stock of the Company at a
      price
      below the current market price for such shares. The Plan will enable them to
      acquire an equity interest in the Company and will provide an incentive for
      them
      to expend maximum effort for the success of the business of the Company and
      its
      subsidiaries.

    


    


    


    1. AMOUNT
      AND SOURCE OF STOCK

    


    The
      aggregate number and class of shares which may be the subject of Options granted
      pursuant to the Plan is 1,500,000 shares of common stock of the Company, par
      value of $.10 per share (the "Common Stock"), subject to adjustment as provided
      in Section 9. Such shares may be authorized but unissued shares of Common Stock
      of the Company or may be shares held in or acquired for the treasury of the
      Company. If any Option shall terminate for any reason without having been
      exercised in full, the unpurchased shares subject thereto shall be available
      for
      issuance or transfer under another Option granted under the Plan.

    


    


    2. ADMINISTRATION
      OF THE PLAN

    


    (a) The
      Plan
      shall be administered by a Committee (the "Committee") of three or more persons
      designated by, and who shall serve at the pleasure of, the Board of Directors
      of
      the Company (the "Board of Directors"). From time to time, the Committee or
      the
      Board of Directors may grant Options, subject to the terms of the Plan, to
      such
      eligible employees, and with respect to such number of shares of Common Stock
      as
      the Committee or the Board of Directors, each acting in its sole discretion,
      may
      determine. Each Option granted under the Plan shall be evidenced by a stock
      option agreement (the "Stock Option Agreement"), which shall be executed by
      the
      Company and by the person to whom the option is granted and which shall be
      in
      such form and contain such provisions, not inconsistent with the Plan, as the
      Committee or the Board of Directors shall determine. The Committee or the Board
      of Directors may impose any restrictions or conditions on the grant or exercise
      of Options, which are not inconsistent with the terms hereof.

    


    (b) Subject
      to the provisions of the Plan, the Committee shall be authorized to interpret
      the Plan and the grants made under the Plan, to establish, amend and rescind
      any
      rules and regulations relating to the Plan, and to make all determinations
      necessary or advisable for the administration of the Plan. The Committee may
      correct any defect, supply any omission and reconcile any inconsistency in
      the
      Plan or in any Option or grant in the manner and to the extent it shall deem
      appropriate. The determinations of the Committee in the administration of the
      Plan, as described herein, shall be final and conclusive. The Committee may
      adopt such rules and regulations as it deems necessary or appropriate for
      governing its affairs.

    



    
      
         

         

      

      
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    (c) Each
      member of the Committee shall be a director of the Company. Other provisions
      of
      the Plan notwithstanding, the Board may perform any function of the Committee
      under the Plan, in order to ensure that transactions under the Plan are exempt
      under Rule 16b-3 or for any other reason; provided,
      however,
      that
      authority specifically reserved to the Board under the terms of the Plan, the
      Company's Articles of Incorporation or By-laws, or applicable law shall be
      exercised by the Board and not by the Committee. The Board and Committee are
      authorized to delegate authority to one or more officers of the Company to
      act
      on behalf of the Board or Committee, to the fullest extent permitted under
      the
      Business Corporation Law of the Commonwealth of Pennsylvania.

    


    (d) 
      Any Plan
      provision to the contrary notwithstanding, any power of the Board of Directors
      under this Plan or any outstanding option agreement hereunder (including an
      Option granted by the Board of Directors under the Plan) may likewise be
      exercised by the Committee.; provided, however, that the Board shall retain
      exclusive power to terminate, modify, or amend the Plan under Section 10 hereof
      (with other powers under Section 10 exercisable by the Committee in accordance
      with the terms of the delegation of authority set forth in this Section
      2(c)).

    


    


    3. EFFECTIVE
      DATE AND TERM OF PLAN

    


    The
      Plan
      became effective September 9, 1988, and was approved by the Company's
      shareholders at the Annual Meeting of Shareholders on June 7, 1989.

    


    


    4. ELIGIBLE
      PARTICIPANTS

    


    Only
      the
      key employees of the Company and any subsidiaries of the Company shall be
      eligible to receive New Options under the Plan. A director of the Company or
      one
      of its subsidiaries who is also a key employee shall be eligible to participate
      under the Plan.

    


     

    5. TERMS
      OF OPTIONS

    


    Except
      as
      hereinafter provided, all Options shall be subject to the following terms and
      conditions:

    


    (a) Purchase
      Price

    


    The
      purchase price for the shares of Common Stock to be purchased upon exercise
      of
      the Options granted pursuant to the Plan shall be one dollar ($1.00) per share.
      

    


    (b) Number
      of Shares

     

    The
      number of shares of Common Stock which may be purchased upon exercise of the
      Options granted pursuant to the Plan shall be determined by the Committee or
      the
      Board of Directors. 

    


    (c) Duration
      of Option

    


    Subject
      to the provisions of this Section 5, the Board or Committee shall determine
      the
      time at which each Option granted pursuant to the Plan will terminate, provided
      that such termination shall be no later than ten years from the date on which
      it
      is granted.

    


    (d) Transferability
      of Option

    


    Unless
      otherwise determined by the Committee, no Option shall be transferable by the
      employee in whole or in part other than by will or the laws of descent and
      distribution, and each Option shall be exercisable, during the lifetime of
      the
      employee, only by him or her. Unless otherwise determined by the Committee,
      upon
      any attempt to so transfer any Option or upon the levy of attachment or similar
      process upon any Option, the Option shall automatically become null and
      void.

    


    
      
         

      

      
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    (e) Exercise
      of Option

    


    Subject
      to the provisions of this Section 5, the Committee or the Board of Directors
      (depending upon which granted the Option) shall have the absolute discretion
      in
      determining whether any Options shall be exercisable in whole, at one time,
      or
      in part, from time to time and, if in part from time to time, the rate or times
      at which such Options shall be exercisable on a cumulative or non-cumulative
      basis. Either the Committee or the Board of Directors may, in its absolute
      discretion, provide for the acceleration of any Option upon a change in control
      of the Company, or otherwise accelerate the time at which any Option may be
      exercised in whole or in part. Except as provided in Sections 7 and 8, no Option
      may be exercised at a time when the optionee is not an employee of the Company
      or one of its subsidiaries; provided, however, that either the Committee or
      the
      Board of Directors may, in its absolute discretion, specify a period following
      any termination of an optionee's employment with the Company or any of its
      subsidiaries during which an Option shall remain outstanding and be exercisable,
      except that no Option, as so specified, shall remain outstanding and be
      exercisable later than ten years after the date on which it was granted and
      no
      Option, as so specified, shall be exercisable later than five years (or such
      longer period as may be specified pursuant to Section 7 or 8) after the date
      of
      such termination of the optionee's employment with the Company or any of its
      subsidiaries.

    


    (f) Modification
      of Options Vesting in 2005 and Later Years.
      

    


    Other
      provisions of the Plan notwithstanding, any Option outstanding hereunder at
      any
      time in 2005 which Option vested in 2005 or would vest after 2005 (an “Affected
      Option”) shall be subject to the provisions of this subsection (f), in order to
      comply with the requirements of Code Section 409A which became effective January
      1, 2005. As permitted under IRS Notice 2005-1 and Proposed Treasury Regulation
§
1.409A:

     

    

      
        	 	
                (i)

              	
                Any
                  Affected Option that is otherwise exercisable in 2005 may be exercised
                  in
                  2005, which shall be deemed a termination of the Affected Option
                  in
                  accordance with Q/A 20 of IRS Notice 2005-1.


              


      

      


      
        	 	
                (ii)

              	
                Employees
                  who hold an Affected Option shall be permitted to choose one of
                  the
                  following two exercise elections during 2005 (subject to such deadline
                  as
                  the Company may specify), and thereafter the Affected Option shall
                  be
                  exercisable only as permitted under that exercise election (including
                  any
                  related post-termination exercise provisions):


              


      

       

    

    	·  	
            Exercise
              Election A: The employee may elect to have each part of the Affected
              Option (a “tranche”) vesting at a date between 2005 and 2009 be
              exercisable from that vesting date until March 15th
              of
              the following year, in compliance with the “short-term deferral”
              provisions of Proposed Treasury Regulation § 1.409A-1(b)(iv) and Q/A 4(c)
              of IRS Notice 2005-1. 

          


    


    	·  	
            Exercise
              Election B: The employee may elect a particular calendar year in which
              the
              Affected Option tranche will become exercisable. Under this Exercise
              Election, the Affected Option will become exercisable on January 1
              of the
              year selected and will remain exercisable until December 31 of that
              year.
              The exercise year selected must be after the year in which the Affected
              Option tranche vests, and if the employee selects the year in which
              the
              option expires the exercise period will extend only from January 1
              of that
              year until the expiration date. This alternative is in compliance with
              Proposed Treasury Regulation § 1.409A-3(a)(4) and §
              1.409A-3(g)(1).

          


     

    

      
        	 	
                (iii)

              	
                The
                  periods following termination of employment, death or disability
                  during
                  which an Affected Option may be exercised will be as
                  follows:

              


      

       

    

    	·  	
            If
              Exercise Election A has been selected: If the employee’s employment with
              the Company or its subsidiaries terminates, the Affected Option will
              be
              exercisable, if and to the extent vested, for the lesser of the period
              provided in the applicable Stock Option Agreement or the period permitted
              under Proposed Treasury Regulation § 1.409A-1(b)(4) (in some cases not
              extending beyond March 15 of the year following the year of termination).
              

          


    


    
      
         

      

      
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    	·  	
            If
              Exercise Election B has been selected: If the employee’s employment with
              the Company or its subsidiaries terminates before the Affected Option
              has
              become exercisable under Exercise Election B, the Affected Option will
              be
              exercisable, if and to the extent vested, for the period provided under
              the Stock Option Agreement (A), for a termination before October 1
              of a
              given calendar year, for the period specified in the Stock Option
              Agreement but in no event beyond December 31 of that calendar year,
              and
              (B), for a termination on or after October 1 of a given calendar year,
              beginning on January 1 of the calendar year after termination for the
              period specified in the Stock Option Agreement, but in no event will
              the
              Option remain outstanding past its stated expiration date. If the
              employee’s employment with the Company or its subsidiaries terminates
              during the year the employee selected for exercise, the affected Option
              will remain outstanding for the period provided in the Stock Option
              Agreement but not beyond December 31 of that year and not beyond the
              Option’s expiration date. 

          


    


    

      
        	 	
                (iv)

              	
                In
                  the case of an employee’s termination due to death or disability or in
                  case of the employee’s death during a permitted exercise period following
                  termination, the exercise period of an Affected Option will be
                  the lesser
                  of the period provided under the employee’s Stock Option Agreement or, if
                  Exercise Election A applies, the maximum period permitted under
                  Proposed
                  Treasury Regulation § 1.409A-1(b)(4) or, if Exercise Election B applies,
                  the remainder of the exercise period under Exercise Election B
                  (applying
                  the termination of employment rules if death or disability resulted
                  in
                  termination); provided, however, that if the Affected Option has
                  not been
                  exercised before its termination date, the Company shall cause
                  it to be
                  exercised on the Option termination date (if it is in-the-money),
                  applying
                  Option shares to the payment of the exercise price and any applicable
                  tax
                  withholding, and turn over the Shares that constitute the net proceeds
                  of
                  exercise to the employee or his or her legatee or legatees.
                  

              


      



    (g) Compliance
      with Section 409A of the Internal Revenue Code for Grants in 2006 and
      Thereafter. 

    


    Options
      which are granted in 2006 or thereafter (“409A Options”) shall be exercisable
      only at times that qualify the options either for the short-term deferral
      exemption set forth in Proposed Treasury Regulation § 1.409A-1(b)(4) and any
      successor regulation thereto or meets applicable requirements for distributions
      of deferred amounts under Proposed Treasury Regulation § 1.409A-3 under Code
      Section 409A, together with applicable transition rules in effect under Section
      409A. Other provisions of this Section 5 notwithstanding, unless otherwise
      determined by the Board or Committee: 

    


    
      	
            	
              (i)

            	
              Each
                separate vesting tranche of a 409A Option shall be exercisable commencing
                upon the scheduled date of lapse of the risk of forfeiture due to
                a
                voluntary termination (i.e., the scheduled vesting date) of that
                tranche
                (if not previously vested or forfeited) and continuing only until
                the end
                of that same calendar year, except that this exercise period shall
                extend
                past the end of the calendar year to the extent necessary so that
                the
                exercise period is not less than 74 days;
                and

            


    

     

    
      	 	
              (ii)

            	
              Any
                tranche or other part of a 409A Option that vests and becomes exercisable
                upon termination of employment or upon a change in control shall
                be
                exercisable for the period provided in the option agreement, except
                that
                an option will not be exercisable for a period that extends beyond
                March
                15 of the year following the year in which such tranche or other
                portion
                vests and becomes exercisable. This rule also applies in the case
                of death
                or disability of the optionee, including death during a permitted
                exercise
                period following termination, provided, however, that if the 409A
                Option
                has not been exercised before its termination date, the Company shall
                cause it to be exercised on the Option termination date (if it is
                in-the-money), applying Option shares to the payment of the exercise
                price
                and any applicable tax withholding, and turn over the Shares that
                constitute the net proceeds of exercise to the employee or his or
                her
                legatee or legatees. 

            


    

    


    


    
      
         

      

      
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    6. MANNER
      OF EXERCISE OF OPTIONS

    


    (a) Unless
      the Committee shall otherwise determine, an Option, to the extent exercisable
      under the Plan, may be exercised by delivery to and receipt by the Secretary
      of
      the Company, at its principal office, of a written notice, signed by the person
      entitled to exercise the Option, specifying the number of shares under the
      Option which the optionee then wishes to purchase, along with the full purchase
      price for such number of shares in accordance with Section 6(b).

    


    

      (b) The
        Committee may determine with respect to any Option that the optionee shall
        be
        entitled to pay for the shares upon exercise by the combination of, or any
        one
        of, the alternatives set forth below:

      


      
        	 	
                (i)

              	
                Cash;

              


      

      
         

      

      
        	
              	
                (ii)

              	
                Certified
                  or bank cashier's check payable to the order of the
                  Company;

              


      

      


      
        	
              	(iii)	
                Common
                  Stock of the Company owned by the optionee, including Common Stock
                  then
                  being acquired upon exercise of the Option, which has an aggregate
                  fair
                  market value, determined on the date of exercise of the Option
                  by the
                  optionee based upon the reported trading price of the Company's
                  Common
                  Stock, equal to the aggregate exercise price of such Option (or
                  portion
                  thereof then being exercised); or

              


      

      


      
        	
              	(iv)	
                Such
                  other method or arrangement as the Committee shall
                  determine.

              


      
.


    In
      no
      event shall Common Stock be issued or certificates be delivered until full
      payment shall have been received by the Company, nor shall the optionee have
      any
      right or status as a shareholder prior to such payment.

    


    (c) Unless
      the shares to be acquired upon exercise of an Option may, at the time of such
      acquisition, be lawfully resold in accordance with a then currently effective
      registration statement or post-effective amendment under the Securities Act
      of
      1933, the Board of Directors may provide, as a condition to the delivery of
      any
      shares to be purchased upon exercise of the Option, that the Company receive
      appropriate evidence that the optionee is acquiring the shares for investment
      and not with a view to the distribution or public offering of the shares, or
      any
      interest in the shares, and a representation to the effect that the optionee
      shall make no sale or other disposition of the shares unless (i) the Company
      shall have received an opinion of counsel satisfactory to it in form and
      substance that the sale or other disposition may be made without registration
      under the then applicable provisions of the Securities Act of 1933 and the
      related rules and regulations of the Securities and Exchange Commission, or
      (ii)
      the shares shall be included in a currently effective registration statement
      or
      post-effective amendment under the Securities Act of 1933.

    


    (d) Whenever
      under the Plan, shares of Common Stock are to be delivered upon exercise of
      an
      Option, the Company shall be entitled to require as a condition of delivery
      that
      the optionee remit or, in appropriate cases, agree to remit when due an amount
      sufficient to satisfy all federal, state and local withholding tax requirements
      relating thereto. The Board of Directors or Committee may require or permit
      shares deliverable upon exercise of the option to be withheld to satisfy
      mandatory withholding obligations. 

    


    


    7. TERMINATION
      OF EMPLOYMENT OR CHANGE IN JOB CLASSIFICATION

    


    (a) The
      Committee or the Board of Directors shall determine the extent, if any, to
      which
      and the period, if any, during which an Option shall remain exercisable if
      an
      optionee's employment with the Company or any of its subsidiaries shall be
      voluntarily or involuntarily terminated other than for reasons covered by
      Section 8, or if, as a result of change in job classification, an optionee
      is no
      longer employed in a position which would enable such optionee to contribute
      to
      the success of the Company or the applicable subsidiary on at least as great
      a
      level as that to which he was enabled by his prior job classification, as
      determined by the Committee or the Board of Directors. Such determinations
      shall
      be set forth in the Stock Option Agreement. For options granted in 2006 or
      thereafter, any period in which the optionee is entitled to exercise following
      termination shall be subject to Section 5(g). 

    


    
      
         

      

      
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    (b) Nothing
      in the Plan or in any Option granted pursuant to the Plan shall confer on any
      individual any right to continue in the employ of the Company or any of its
      subsidiaries or interfere in any way with the right of the Company or any of
      its
      subsidiaries to terminate his or her employment at any time.

    


    


    8. DEATH
      OR DISABILITY OF AN OPTIONEE

    


    (a) The
      Committee or the Board of Directors shall determine the extent, if any, to
      which
      an Option shall become exercisable if an optionee shall die while employed
      by
      the Company or any of its subsidiaries and the period, if any, during which
      an
      Option shall remain exercisable by a legatee or legatees of the optionee under
      his or her last will or by his or her personal representative or distributees
      following an optionee's death during employment with the Company or any of
      the
      subsidiaries or while his or her Options were otherwise still exercisable.
      Such
      determinations shall be set forth in the Stock Option Agreement. For options
      granted in 2006 or thereafter, any period in which the optionee’s legatee or
      legatees are entitled to exercise following death shall be subject to Section
      5(g)(ii). 

    


    (b) The
      Committee or the Board of Directors shall determine the extent, if any, to
      which
      and the period, if any, during which an Option shall become or remain
      exercisable if an optionee shall become permanently disabled (within the meaning
      of Section 22(e)(3) of the Internal Revenue Code of 1986) while employed by
      the
      Company or any of its subsidiaries and his or her employment is terminated
      because of such disability. Such determinations shall be set forth in the Stock
      Option Agreement. For options granted in 2006 or thereafter, any period in
      which
      the optionee is entitled to exercise following disability shall be subject
      to
      Section 5(g)(ii). 

    


    9. ADJUSTMENT
      OF NUMBER AND PRICE OF SHARES SUBJECT TO OPTIONS

     

    (a) If
      the
      outstanding shares of the Common Stock of the Company are subdivided,
      consolidated, increased, decreased, changed into or exchanged for a different
      number or kind of shares or securities of the Company through reorganization,
      other than as set forth in Section 9(b) below, recapitalization,
      reclassification or capital adjustment, or if the Company shall issue Common
      Stock as a dividend or upon a stock split, then the number and kind of shares
      available for purposes of the Plan and all shares subject to the unexercised
      portion of any Options previously granted and the purchase price of those
      Options shall be appropriately adjusted.

    


    (b) Upon
      the
      effective date of the dissolution or liquidation of the Company, or of a
      reorganization, merger or consolidation of the Company with one or more other
      corporations in which the Company is not the surviving corporation, or of the
      transfer of all or substantially all of the assets or shares of the Company
      to
      another corporation, or of a reorganization, merger or consolidation of the
      Company with one or more other corporations in which the Company is the
      surviving corporation but as a result of which the Company's securities are
      no
      longer listed on a national securities exchange or included in the NASDAQ System
      or its then equivalent (any such transaction or any other transaction having
      a
      substantially equivalent effect being referred to herein as a "Terminating
      Event"), the Plan and any Option theretofore granted shall terminate, unless
      provision is made in writing in connection with such Terminating Event and
      prior
      to its consummation for the continuance of the Plan and for the assumption
      of
      Options theretofore granted, or the substitution for such Options of new options
      covering the shares of the successor corporation, or a parent or subsidiary
      thereof, with such appropriate adjustments as may be determined or approved
      by
      the Board of Directors as to the number and kind of shares subject to such
      substituted options and to the purchase price therefor, in which event the
      Plan
      and the Options theretofore granted or the new options substituted therefor
      shall continue in the manner and under the terms so provided. Upon the
      occurrence of a Terminating Event in which provision is not made for the
      continuance of the Plan and for the assumption of Options theretofore granted
      or
      the substitution for such Options or new options covering the shares of a
      successor corporation or a parent or subsidiary thereof, each optionee (or
      such
      person's personal representative, estate or any person who acquired the right
      to
      exercise the Option from such person pursuant to the Plan) shall be entitled,
      simultaneously with the effectiveness of any such Terminating Event, to
      surrender any such Option to the Company in exchange for receipt of cash equal
      to the difference between (i) the fair market value of the shares with respect
      to which the Option is then exercisable (based upon the reported trading price
      of the Company's Common Stock) and (ii) the aggregate purchase price for such
      shares. To the extent any Option is not then exercisable, it shall terminate,
      unless the Board of Directors, in its absolute discretion, otherwise
      provides.

    


    
      
         

      

      
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    (c) Adjustments
      under this Section 9 shall be made by the Board of Directors, whose
      determination as to what adjustments shall be made shall be final and binding.
      In computing any adjustment under this Section 9, any fractional share which
      might otherwise become subject to an Option shall be eliminated, or paid to
      the
      Optionee in cash, at the sole discretion of the Board of Directors.

    


    


    10. AMENDMENT
      AND TERMINATION

    


    The
      Plan
      and any Option granted hereunder may be terminated, modified or amended, in
      whole or in part, by the Board of Directors, at any time, except that no such
      termination, modification, or amendment shall adversely affect the rights of
      any
      optionee with respect to any Option then outstanding unless consented to by
      such
      optionee. In addition, no amendment to the Plan may (i) materially increase
      the
      benefits accruing to participants under the Plan, (ii) materially increase
      the
      number of securities which may be issued under the Plan, or (iii) materially
      modify the requirements as to eligibility for participation in the Plan, unless
      any such amendment is approved by a majority of the Company's shareholders
      at
      the annual meeting of shareholders next succeeding the adoption of any such
      amendment. The Plan will terminate at such time as no shares remain available
      for Options and the Company has no other remaining obligations to optionees
      under the Plan. 

    


    


    11. GOVERNING
      LAW

    


    The
      Plan
      shall be governed by the laws of the Commonwealth of Pennsylvania.

    


    


    12. COMPLIANCE
      WITH RULE 16b-3

    


     

    With
      respect to a Participant who is then subject to the reporting requirements
      of
      Section 16(a) of the Exchange Act in respect of the Company, the Committee
      shall
      implement transactions under the Plan and administer the Plan in a manner that
      will ensure that each transaction by such a Participant is exempt from liability
      under Rule 16b-3, except that such a Participant may be permitted to engage
      in a
      non-exempt transaction under the Plan if written notice is given to the
      Participant regarding the non-exempt nature of such transaction or it will
      not
      in fact result in short-swing profits liability. The Committee may authorize
      the
      Company to repurchase any Award or shares resulting from any Award in order
      to
      prevent a Participant who is subject to Section 16 of the Exchange Act from
      incurring liability under Section 16(b). Unless otherwise specified by the
      Participant, equity securities or derivative securities acquired under the
      Plan
      which are disposed of by a Participant shall be deemed to be disposed of in
      the
      order acquired by the Participant.

    


    


    


    


    


    

      
        	
                Adopted
                  by Board of directors:

              	
                September
                  8, 1988

              
	
                Amended
                  and Restated:

              	
                December
                  6, 1990

              
	 	
                June
                  18, 1992

              
	 	
                August
                  21, 1996

              
	 	
                January
                  25, 2006

              


      



    


    


    


    


    


    


    
      
         

      

      
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