KESOP Plan Agreement


    EXHIBIT
      10.2.2

    


    


    KEY
      EMPLOYEE STOCK OPTION AGREEMENT

    


    Agreement
      dated as of January 25, 2006, between CHARMING SHOPPES, INC. (the "Company")
      and
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      (the
      "Employee").

    


    It
      is
      agreed as follows:

    


    1. GRANT
      OF OPTION; VESTING AND EXPIRATION

    


    The
      Company grants to the Employee, under and pursuant to the Company's 1988 Key
      Employees' Stock Option Plan, as amended and restated (the "Plan"), the option
      to purchase *«shares»*
      shares
      of its common stock, par value $.10 per share (the "Common Stock"), at a price
      of $1.00
      per
      share. This option is a “409A Option” as defined in, and subject to, Section
      5(g) of, the Plan. 

    


    Subject
      to all of the terms and conditions of this Agreement, this option will vest
      and
      become exercisable in three equal parts, each one-third part being referred
      to
      as a “tranche,” as follows: 

    


    
      	
              Vesting
                Date

            	
              Number
                of Shares Purchasable Upon Exercise *

            	
              Stated
                Expiration Date

            
	
              January
                25, 2009

            	
              One-third
                of total

            	
              December
                31, 2009

            
	
              January
                25, 2010

            	
              One-third
                of total

            	
              December
                31, 2010

            
	
              January
                25, 2011

            	
              One-third
                of total

            	
              December
                31, 2011

            


    

     

    * Whole
      shares only; rounding will be downward until vesting of final
      tranche.

    


    Note:
      Because
      each tranche of the option has a separate Stated Expiration Date, each tranche
      will be treated as a
      separate option in
      reports to Employee and in on-line plan account information. In other words,
      Employee will be treated for purposes of administration as having
three
      options rather than one. 

    


     

    2. PERIOD
      IN WHICH EACH TRANCHE IS EXERCISABLE

    


    (a) Except
      as
      otherwise specifically provided herein, each tranche of the option may be
      exercised from the date it becomes vested and exercisable as set forth in
      Section 1 above until 5:00 p.m. on the Stated Expiration Date (i.e., 5:00 p.m.
      on December 31 of the calendar year in which it became exercisable). Subject
      to
      Section 5(g)(ii) of the Plan and Section 7 hereof, at the end of the applicable
      exercise period, that tranche of the option (if not exercised earlier) will
      terminate. 

    


    (b) Notwithstanding
      the provisions contained in Sections 1 and 2(a) above, the Committee or the
      Board of Directors, in its sole discretion, may at any time, upon written notice
      to the Employee, accelerate the vesting of the option or any tranche thereof
      to
      a specified date so that this option shall become vested and exercisable at
      such
      date to the extent of all or any portion of the shares covered hereunder.
      Acceleration pursuant to this Section 2(b) shall be separate and independent
      from any acceleration pursuant to Section 6.. Any portion of the option that
      becomes vested and exercisable upon acceleration pursuant to this Section 2(b)
      may be exercised from the date it becomes exercisable until 5:00 p.m. on the
      later of December 31 of the calendar year in which it became exercisable or
      the
      date that is 74 days after the date the option became exercisable under this
      Section 2(b). Subject to Section 5(g)(ii) of the Plan and Section 7 hereof,
      at
      the end of the applicable exercise period, that portion of the option that
      became exercisable under this Section 2(b) will terminate.

    


    


    3. EXERCISE
      PRICE

    


    The
      exercise price of the option shall be payable in cash or by certified or bank
      cashier's check, provided, however, that, in lieu of payment in full in cash
      or
      by either such check, the exercise price or balance thereof may, with the
      approval of the Board or the Committee, upon written request of the Employee,
      be
      paid in full or in part by delivery and transfer to the Company of that number
      of shares of Common Stock otherwise owned by the Employee or being acquired
      by
      exercise of the option with an aggregate fair market value (based upon the
      reported trading price of the Company's Common Stock) equal to the aggregate
      exercise price of that number of shares for which the option is being exercised
      or for which payment is being made in stock, as the case may be.

    


    4. TAX
      WITHHOLDING

    


    Whenever
      shares of Common Stock are to be delivered upon exercise of the option, the
      Company shall be entitled to require as a condition of delivery that the
      Employee 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 Company may require or permit the optionee to elect
      withholding of shares being acquired by exercise of the option with an aggregate
      fair market value (based upon the reported trading price of the Company’s Common
      Stock) not exceeding the amount of the mandatory taxes to be withheld upon
      exercise of the option. 

    


    5. METHOD
      OF EXERCISE

    


    The
      option may be exercised as to any part of the shares which may then be purchased
      by delivery to and receipt by the Secretary of the Company at 450 Winks Lane,
      Bensalem, Pennsylvania 19020, of a written notice, signed by the Employee,
      specifying the number of shares which the Employee wishes to purchase,
      accompanied by payment of the exercise price therefor in accordance with Section
      3. As soon as practicable after the receipt of such notice and payment, the
      Company shall deliver to the Employee a stock certificate for the shares so
      purchased, with any requisite legend affixed.

    


    6. EXERCISE
      OF OPTION UPON A CHANGE OF CONTROL

    


    (a) This
      option shall become exercisable to the extent determined pursuant to the Change
      of Control Option Formula described in Section 6(c) and the Employee shall
      have
      the right to purchase the number of shares subject to this option determined
      pursuant to the Change of Control Option Formula, without regard to the
      provisions of Sections 1 and 2, if the Employee's employment with the Company
      is
      terminated following a Change of Control for any reason other than voluntarily
      by the Employee. Any tranche of this option that had become exercisable under
      Sections 1 and 2 in the year of termination shall terminate at December 31
      of
      the year of termination and any other portion of the option which is exercisable
      under this Section 6 will be exercisable in the year of termination and in
      any
      event for not less than 74 days following termination; in either case, at the
      end of such period of exercisability the option shall terminate (subject to
      applicable provisions of Section 7 hereof). 

    


    (b) For
      purposes of this Section 6, a "Change of Control" shall mean the occurrence
      of
      either of the following events:

    


    (1) any
      "person" (as defined in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange
      Act of 1934, as amended (the "Exchange Act")), together with his or its
      "affiliates" and "associates" (as defined in Rule 12b-2 under the Exchange
      Act)
      becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
      Act,
      modified to include any shares that such person has the right to acquire
      pursuant to any agreement, or upon exercise of conversion rights, warrants,
      options or otherwise), directly or indirectly, of securities of the Company
      having 20% or more of the total number of votes entitled to be cast for the
      election of directors of the Company (an "Acquisition"), or

    


    (2) as
      a
      result of, or in connection with, or within two years following any (i) tender
      or exchange offer, (ii) merger or other business combination, (iii) sale or
      other disposition of all or substantially all of the assets of the Company,
      (iv)
      reorganization, (v) proxy contest, or (vi) any combination of the foregoing
      transactions (each a "Transaction"), the persons who were directors of the
      Company immediately before the Transaction shall cease to constitute a majority
      of the Board of Directors of the Company or any successor Company, except as
      may
      be caused by death, disability or normal retirement from the Board in accordance
      with the policy of the Company which is in effect as of the date of grant of
      this option.

    


    A
      Change
      of Control shall not be deemed to have occurred if the Board of Directors,
      by
      action taken prior to the consummation or completion of an Acquisition or
      Transaction, shall have determined that such Acquisition or Transaction shall
      not constitute a Change of Control for purposes of all options then outstanding
      under the Plan. Such a determination with respect to an Acquisition or
      Transaction shall not be deemed to constitute a determination with respect
      to
      any subsequent Acquisition or Transaction.

    


    (c) For
      purposes of this Section 6, the "Change of Control Option Formula" shall be
      (i)
      the product of (A) the total number of shares covered by this option , times
      (B)
      a fraction, the numerator of which shall be the lesser of (x) 5, or (y) the
      sum
      of the number of full or partial years that the Employee has been employed
      by
      the Company or any of its subsidiaries between the date of grant of this option
      and the date of termination plus one additional year, and the denominator of
      which shall be the number 5, less (ii) any shares as to which the option had
      become exercisable before termination in accordance with Sections 1 and
      2.

    


    (d) Following
      a Change of Control, the provisions of Section 8 shall no longer be applicable
      and the provisions of this Section 6 shall supersede the provisions of Section
      7
      except with respect to a voluntary termination of the Employee's employment
      with
      the Company and provisions relating to death and disability. 

    


    7. TERMINATION
      OF EMPLOYMENT

    


    (a) This
      option, including each tranche) shall terminate at the time it ceases to be
      exercisable under this Section 7 following termination of employment or death,
      and shall be exercisable, to the extent indicated below, during the period,
      if
      any, between the occurrence of the termination of employment or other event
      specified below and the date designated for the termination of this
      option:

    


    (i) if
      Employee has an involuntary termination of employment with the Company or any
      of
      its subsidiaries for reasons of moral turpitude, this option shall immediately
      terminate; provided, that this option may not be exercised during any period
      as
      to which the Company has given the Employee notice that the Company is
      investigating a claim that the Employee has engaged in acts of moral turpitude;
      or

    


    (ii) if
      Employee has a voluntary or involuntary termination of employment with the
      Company or any of its subsidiaries for any reason (other than retirement
      governed by Section 7(a)(v)) at any time prior to the expiration of three years
      from the date of grant of this option, other than by reason of the Employee's
      death or permanent disability, this option shall immediately terminate;
      or

    


    (iii) if
      Employee has a voluntary or, if for cause (other than for reasons of moral
      turpitude), an involuntary termination of employment with the Company or any
      of
      its subsidiaries at any time at or after the expiration of three years from
      the
      date of grant of this option (other than retirement governed by Section
      7(a)(v)), this option shall terminate at the earlier of three months after
      such
      termination or December 31 of the year of termination during which
      post-termination period this option shall be exercisable only to the extent
      that
      it was exercisable at the date of the Employee's termination of employment;
      or

    


    (iv) if
      Employee has an involuntary termination of employment for reasons other than
      cause, moral turpitude, death or disability with the Company or any of its
      subsidiaries at any time at or after the expiration of three years from the
      date
      of grant of this option, any tranche of this option that had become exercisable
      under Sections 1 and 2 in the year of termination shall terminate at the earlier
      of three months after such termination or December 31 of the year of
      termination, and Employee shall be entitled to exercise additional shares in
      accordance with the Option Formula for the greater of that same period or 74
      days after termination; or

    


    (v) if,
      with
      the consent of the Company (which may be given only in the year of termination),
      Employee has a normal retirement or early retirement pursuant to any retirement
      plan, Employee shall be entitled to exercise any tranche of this option that
      had
      become exercisable under Sections 1 and 2 in the year of retirement and
      additional shares in accordance with the Option Formula until the earlier of
      three months after such retirement or December 31 of the year of retirement,
      but
      in any event for not less than 74 days following retirement; or

    


    (vi) in
      the
      event of Employee's death while employed by the Company or any of its
      subsidiaries, Employee’s legatee or legatees may exercise any tranche of this
      option that had become exercisable under Sections 1 and 2 in the year of death
      and additional shares in accordance with the Option Formula in the year of
      death
      and until March 15 of the year following the year of death ; or

    


    (vii) in
      the
      event of Employee's death during the post-termination periods referred to in
      (iii), (iv) or (v) above, Employee’s legatee or legatees may exercise the option
      to the same extent provided in said (iii), (iv) or (v) above, respectively,
      in
      the year of termination and until March 15 of the year following the year of
      termination; or

     

    (viii) in
      the
      event of termination of the Employee's employment with the Company or any of
      its
      subsidiaries by reason of the Employee's permanent disability (within the
      meaning of Section 22(e)(3) of the Internal Revenue Code of 1986) if the
      Employee becomes permanently disabled while employed by the Company or any
      of
      its subsidiaries, the option shall be exercisable in full until March 15 of
      the
      year following the year of termination of employment. 

    


    (b) For
      purposes hereof, "cause" shall mean the Employee's chronic neglect, refusal
      or
      failure to fulfill his or her employment duties and responsibilities, other
      than
      for reasons of sickness, accident or other similar causes beyond the Employee's
      control. Such neglect, refusal or failure shall be determined in the sole and
      reasonable judgment of the Committee or the Board of Directors of the
      Company.

    


    (c) For
      purposes hereof, "moral turpitude" shall mean the Employee's dishonesty or
      intentional wrongdoing committed against the Company, its agents or employees
      or
      otherwise in connection with his or her employment by the Company or conviction
      of a crime, whether or not in connection with employment, other than a traffic
      infraction or other minor violation. The Committee or the Board of Directors
      shall have the sole discretion to determine whether the employee has committed
      an act of moral turpitude.

    


    (d) For
      purposes of this Section 7, the "Option Formula" shall be (i) the product of
      (A)
      the total number of shares covered by this option, times (B) a fraction, the
      numerator of which shall be the lesser of five (5) or the number of full or
      partial years that the Employee has been employed by the Company or any of
      its
      subsidiaries between the date of grant of this option and the date of
      termination of employment, and the denominator of which shall be the number
      five
      (5), less (ii) any shares as to which the option had become exercisable before
      termination in accordance with Section 1 and 2. 

    


    (e) If
      the
      option remains outstanding but unexercised at the date it would terminate
      following the death or disability of the optionee, and the option is then
“in-the-money,” the option shall be automatically exercised in accordance with
      Section 5(g)(ii) of the Plan. 

    


    8. CHANGE
      IN JOB STATUS

    


    Should
      the Employee's job classification change, and as a result of such change the
      Committee or the Board of Directors determines, in its sole discretion, that
      the
      Employee is no longer employed in a position which would enable him to
      contribute to the success of the Company on at least as great a level as that
      to
      which he was enabled by his prior job classification, then the Committee or
      the
      Board of Directors may immediately terminate all or a portion of this
      option.

    


    9. TRANSFERABILITY
      OF OPTION The
      option shall not be transferable by the Employee in whole or in part other
      than
      by will or the laws of descent and distribution.

    


    10. ADJUSTMENT
      OF NUMBER OF SHARES AND OPTION PRICE

    


    (a) Subject
      to Section 6, if the outstanding shares of Common Stock are subdivided,
      consolidated, increased, decreased, changed into or exchanged for a different
      number or kind of shares or securities of the Company through reorganization,
      merger, recapitalization, reclassification, capital adjustment or otherwise,
      or
      if the Company shall issue Common Stock as a dividend or upon a stock split,
      then the number and kind of shares subject to the option and the exercise price
      under the option shall be appropriately adjusted. However, no such adjustment
      shall change the total exercise price applicable to the unexercised portion
      of
      the option.

    


    (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 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 transaction have a substantially
      equivalent effect being referred to herein as a "Terminating Event"), the Plan
      and any option theretofore granted shall terminate, (except as provided in
      this
      Section 12(b)), unless provision is made in writing in connection with such
      Terminating Event 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, to the number and kind of shares subject to such
      substituted options and to the exercise 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 of new options covering the shares of a
      successor corporation or a parent or subsidiary thereof, each Employee (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 (i) the difference between 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 immediately before the Terminating Event) and
      (ii)
      the aggregate exercise price for such shares; provided, however, that to the
      extent any option is not then exercisable, the Employee (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 to receive
      from the Company (if the Company is continuing to carry on its business) or
      the
      successor to the Company's business, as the case may be, subsequent to the
      effectiveness of any such Terminating Event, a cash payment equal to the
      difference between (i) the fair market value, as of the effectiveness of the
      Terminating Event, of those shares not subject to exercise upon effectiveness
      of
      the Terminating Event and (ii) the exercise price for such shares, as and when
      the Employee satisfies the conditions set forth in such option for succeeding
      installments of shares covered by the option to become exercisable, with
      employment conditions met by employment with either the Company or any successor
      to the Company's business.

    


    11. RIGHTS
      AS SHAREHOLDER OR EMPLOYEE

    


    The
      Employee shall have no rights as a shareholder in the shares subject to the
      option until exercise of the option, payment of the option price, and delivery
      to him or her of certificates for the shares. This Agreement shall not confer
      upon the Employee any right to continue as an employee of the Company or any
      of
      its subsidiaries or interfere in any way with the right of the Company or any
      such subsidiary to terminate the Employee's employment at any time.

    


    12. INVESTMENT
      REPRESENTATION 

     

       
Unless
      the shares
      to be acquired upon the exercise of the option may at the time of acquisition
      be
      lawfully sold to the Employee in accordance with a then currently effective
      registration statement or post-effective amendment under the Securities Act
      of
      1933, the Employee shall provide the Company, as a condition to the delivery
      of
      any stock certificates, with appropriate evidence, satisfactory in form and
      substance to the Company, that he or she is acquiring the shares for investment
      and not with a view to the distribution of the shares or any interest in the
      shares and a representation to the effect that the Employee shall make no sale
      or other disposition of the shares unless (a) 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 (b) the shares shall be included
      in a currently effective registration statement or post-effective amendment
      under the Securities Act of 1933. The certificates representing the shares
      may
      bear an appropriate legend giving notice of the foregoing restriction on
      transfer of the shares.

    


    13. SUBJECT
      TO PLAN

    


    The
      option has been granted to the Employee under the Plan, the provisions of which
      are incorporated in this Agreement by reference. If there is any conflict
      between the provisions of this Agreement and the provisions of the Plan, the
      provisions of the Plan shall govern.

    


    14. BINDING
      EFFECT

    


    This
      Agreement shall be binding upon the heirs, executors, administrators and
      successors of the parties. It may be modified only by a writing signed by the
      Company.

    


     15.  COMPLIANCE
      WITH CODE SECTION 409A 

    


    The
      terms
      of this agreement are intended to prevent optionee from incurring tax penalties
      and unintended constructive receipt of compensation under Code Section 409A
      prior to the date of exercise of the option. Accordingly, if any modification
      to
      the terms of this agreement is necessary in order to prevent such tax penalties
      and constructive receipt under Code Section 409A, including a more restricted
      exercise period, a six-month delay in exercisability if optionee is a “key
      employee” at the time of termination of employment and exercisability would be
      affected by such status as a “key employee,” or a restriction on the right of
      the Company to accelerate the time of exercisability, the terms of this
      agreement shall be automatically modified to the extent necessary to avoid
      such
      tax penalties and constructive receipt.

    


    


    


    CHARMING
      SHOPPES, INC.

    


    


    


    BY:__________________________________

    Colin
      D.
      Stern

    Executive
      Vice President

     

    


    


    


    EMPLOYEE:

    


    


    


    _____________________________________

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