Document:

EX-10.46

	 	 	 	 	 

Exhibit 10.46

EXECUTION COPY

FIRST AMENDMENT TO 

AMENDED AND RESTATED GUARANTY OF PAYMENT OF DEBT

     This FIRST AMENDMENT TO AMENDED AND RESTATED GUARANTY OF PAYMENT OF DEBT (this “First
Amendment to Guaranty”) is made and entered into as of this 10th day of September, 2008, but shall
be effective as of July 31, 2008, by and among FOREST CITY ENTERPRISES, INC., an Ohio corporation
(the “Guarantor”), KEYBANK NATIONAL ASSOCIATION, as Administrative Agent (the “Administrative
Agent”), NATIONAL CITY BANK, as Syndication Agent (the “Syndication Agent” and, together with the
Administrative Agent, the “Agents”), BANK OF AMERICA, N. A., as Documentation Agent, and the banks
party to the Credit Agreement (as hereinafter defined) as of the date hereof (collectively, the
“Banks” and individually, a “Bank”). Capitalized terms not otherwise defined herein shall have the
respective meanings attributed to them in the Guaranty, as hereinafter defined.

W I T N E S S E T H;

     WHEREAS, Forest City Rental Properties Corporation (the “Borrower”), the Banks, and the Agents
previously entered into a certain Amended and Restated Credit Agreement, dated as of June 6, 2007
(the “Original Credit Agreement”); and

     WHEREAS, the Banks required, as a condition to entering into the Original Credit Agreement,
that the Guarantor execute and deliver to the Agents and the Banks a certain Amended and Restated
Guaranty of Payment of Debt, dated as of June 6, 2007 (the “Guaranty”) and the Guarantor agreed to
and did execute and deliver the Guaranty to the Agents and the Banks; and

     WHEREAS, the Borrower and the Guarantor have requested that the Banks and the Agents agree to
certain amendments to the Original Credit Agreement and to the Guaranty; and

     WHEREAS, the Borrower, the Banks and the Agents have entered into a First Amendment to Amended
and Restated Credit Agreement, dated as of the date hereof (said Amendment together with the
Original Credit Agreement, the “Credit Agreement”), that requires as one of its conditions to
effectiveness that the Guarantor enter into this First Amendment to Guaranty.

     NOW, THEREFORE, it is mutually agreed as follows:

     1. AMENDMENTS TO SECTION 1 OF THE GUARANTY. Section 1 of the Guaranty shall be
amended as follows:

          (a) Amendment of Definition of “Consolidated Net Operating Cash Flow “. Section 1 of
the Guaranty shall be amended by deleting the definition for “Consolidated Net Operating Cash Flow”
contained therein and replacing it with the following definition for “Consolidated Net Operating
Cash Flow”:

          “Consolidated Net Operating Cash Flow” shall mean, for any Test Period, Net Operating
Income (a) less (i) all scheduled payments of principal of non-recourse mortgage
Indebtedness owing by the Guarantor and/or its Subsidiaries (excluding any balloon payments),
(ii) all interest payments on such non-recourse Indebtedness, (iii) Twelve Million Dollars
($12,000,000) of normal recurring capital expenditures and (b) plus (i) net income
(loss) before taxes, corporate interest expense and non-cash expenses incurred in connection
with stock-based compensation, in each case incurred by or charged to the Land Group, (ii)
net income (loss) before taxes, corporate interest expense (including, but not limited to,
interest incurred on Debt, subordinated debt or any other third party debt) and non-cash
expenses incurred in connection with stock-based compensation, in each case incurred by or
charged to the Corporate Activity Group, (iii) actual cash taxes paid on the Net Operating
Income and the income set forth in subsections (b)(i) and (b)(ii) above, (iv) non-cash
interest expense accrued but not currently payable up to a maximum of Five Million Dollars
($5,000,000) with respect to Indebtedness owing by the Guarantor and its Subsidiaries other
than Indebtedness owing by the Guarantor and/or its Subsidiaries to the government of the
United States or any state or municipality thereof or any agencies of any of the foregoing
and (v) non-cash interest expense accrued but not currently payable with respect to
Indebtedness by the Guarantor and/or its Subsidiaries owing to the government of the United
States or any state or municipality thereof or any agencies of any of the foregoing.

 

 

          (b) Amendment of Definition of “EBDT”. Section 1 of the Guaranty shall be amended by
deleting the definition for “EBDT” contained therein and replacing it with the following definition
for “EBDT”:

          “EBDT” shall mean, for any period for the Guarantor, (a) the sum of the amounts for such
period of (i) net earnings (losses) from operations before depreciation, amortization and
deferred taxes on income for such period as reported on the Form 8-K that is furnished to the
Securities and Exchange Commission with respect to such period, (ii) non-cash expenses
incurred in connection with stock-based compensation or as a result of development project
write-offs, early extinguishment of Indebtedness and derivative losses, in each case to the
extent deducted in determining such net earnings (or losses), (iii) depreciation and
amortization expenses incurred in connection with the Nets basketball team segment, to the
extent deducted in determining such net earnings (or losses) and (iv) other extraordinary,
unusual or non-recurring losses and expenses to the extent disclosed or reported on the Form
8-K that is furnished to the Securities and Exchange Commission with respect to such period
less (b) (i) the amount for such period of any gains resulting from the re-appraisal
or write-up of any assets or with respect to derivatives and (ii) other extraordinary,
unusual or non-recurring gains except to the extent such gains described in this clause (ii)
are disclosed or reported in the Form 8-K that is furnished to the Securities and Exchange
Commission with respect to such period, in each case as determined in accordance with the Pro
Rata Consolidation Method.

          (c) Amendment of Definition of “Indemnification Lien”. Section 1 of the Guaranty
shall be amended by deleting the word “owned” contained in clause (c) of the definition of
“Indemnification Lien” contained therein and replacing it with the word “owed.

          (d) Amendment of Definition of “Net Operating Income”. Section 1 of the Guaranty
shall be amended by deleting the definition of “Net Operating Income” contained therein and
replacing it with the following definition for “Net Operating Income”:

          “Net Operating Income” shall mean for any relevant period, the excess of the Borrower’s
revenues over the Borrower’s operating expenses; provided, however, Net
Operating Income (a) shall not include any gains or losses from the sale of income producing
real property, other than gains or losses obtained from the sale of outlot parcels up to a
total maximum aggregate amount of $20,000,000 for the immediately preceding four consecutive
quarters, (b) shall include adjustments for cash flow of properties pursuant to which the
Borrower is receiving a preferred return over and above its ownership percentage in such
properties, (c) shall not include any gains resulting from the re-appraisal or write-up of
any assets or with respect to derivatives, (d) shall not include non-cash expenses incurred
in connection with stock-based compensation or as a result of development project write-offs,
early extinguishment of Indebtedness and derivative losses and (e) shall not include other
extraordinary, unusual or non-recurring gains, losses or expenses to the extent such gains,
losses or expenses are disclosed or reported in the Form 8-K that is furnished to the
Securities and Exchange Commission with respect to such period, in each case (including,
without limitation, the calculation of revenues and operating expenses) as determined in
accordance with the Pro Rata Consolidation Method.

          (e) Amendment of Definition of “Pro Rata Consolidation Method”. Section 1 of the
Guaranty shall be amended by deleting the definition of “Pro Rata Consolidation Method” contained
therein and replacing it with the following definition for “Pro Rata Consolidation Method “:

          “Pro Rata Consolidation Method” shall mean the pro rata method of consolidation as fully
reconciled to GAAP and as reported on each Form 8-K that is furnished by the Guarantor (or on
its behalf) to the Securities and Exchange Commission.

     2. AMENDMENT TO SECTION 2 OF THE GUARANTY. Section 2 of the Guaranty shall be amended
by adding the phrase “and other extensions of credit” immediately after the phrase “for Revolving
Loans” contained in the second sentence thereof, but leaving it the same in all other respects.

     3. AMENDMENTS TO SECTION 9.7 OF THE GUARANTY. Section 9.7 of the Guaranty shall be
amended as follows:

          (a) Amendment of Section 9.7(d). Section 9.7(d) of the Guaranty shall be amended by
deleting the phrase “by Charles A. Ratner, Albert Ratner, Samuel H. Miller or Thomas G. Smith”
contained therein and replacing it with the phrase “from any Senior Officer of the Guarantor” but
leaving it the same in all other respects.

          (b) Amendment of Section 9.7(e). Section 9.7(e) of the Guaranty shall be amended by
adding the word “and” between the words “Securities” and “Exchange” but leaving it the same in all
other respects.

 

 

     4. AMENDMENT TO SECTION 9.8 OF THE GUARANTY. Section 9.8 of the Guaranty shall be
amended by deleting the table contained therein, in its entirety, and replacing it with the
following table:

	 	 	 
	     Period
	 	EBDT
	 
	January 31, 2008 to, but not including, January 31, 2009
	 	$230,000,000
	 
	 	 
	January 31, 2009 to, but not including, January 31, 2010
	 	$240,000,000
	 
	 	 
	January 31, 2010 and thereafter
	 	$250,000,000

     5. AMENDMENT TO SECTION 9.19(b)(iv)(C) OF THE GUARANTY. Section 9.19(b)(iv)(C) of the
Guaranty shall be amended by deleting the phrase “Revolving Loans” contained therein and replacing
it with the word “Debt” but leaving it the same in all other respects.

     6. AMENDMENTS TO SECTION 10 OF THE GUARANTY. Section 10 of the Guaranty shall be
amended as follows:

          (a) Amendment to Section 10(d). Section 10(d) of the Guaranty shall be amended by
deleting it in its entirety and replacing it with the following:

          (d) The Guarantor and/or any Restricted Subsidiary defaults (i) in any payment of
principal or interest due and owing upon any Indebtedness in excess of $1,000,000 (whether
due and owing by scheduled maturity, required prepayment, acceleration, demand or otherwise),
or (ii) in the case of the Guarantor, in the payment or performance of any obligation
permitted to be outstanding or incurred pursuant to Sections 9.10 and/or 9.12 hereof in
excess of $1,000,000, beyond any period of grace provided with respect thereto or (iii) in
the performance of any other agreement, term or condition contained in any agreement under
which any such obligation is created, if the effect of such default under this clause (iii)
is to accelerate the maturity of the related Indebtedness or to permit the holder thereof to
cause such Indebtedness to become due prior to its stated maturity or to foreclose on any
Lien on property of the Guarantor securing the same, except that defaults in payment or
performance of non-recourse obligations of the Guarantor or any Restricted Subsidiary shall
not constitute Events of Default under this Section 10(d) unless such defaults have,
individually or in the aggregate, a material adverse effect on the business or financial
condition of the Guarantor; provided, that it shall be an Event of Default hereunder
if any default occurs (after giving effect to any applicable grace period) under (i) the
Senior Notes permitted by Section 9.10(h) of this Guaranty or under the Indenture or (ii) the
2006 Puttable Senior Notes or under the 2006 Indenture, or

          (b) Amendment of Section 10(e)(i)(D). Section 10(e)(i)(D) of the Guaranty shall be
amended by adding the phrase “(the “Bankruptcy Code”), whether in a voluntary or involuntary case
or proceeding” after the phrase “from time to time” but leaving it the same in all other respects.

          (c) Amendment of Section 10(g). Section 10(g) of the Guaranty shall be amended by
deleting it in its entirety and replacing it with the following:

          (g) The Guarantor shall (i) discontinue business, or (ii) generally not pay its debts
as such debts become due, or (iii) make a general assignment for the benefit of creditors, or
(iv) apply for or consent to the appointment of a receiver, a custodian, a trustee, an
interim trustee or liquidator of all or a substantial part of its assets, or (v) be
adjudicated a debtor or have entered against it an order for relief under the Bankruptcy
Code, whether in a voluntary or involuntary case or proceeding, or (vi) file a voluntary
petition under any chapter or provision of the Bankruptcy Code or file a petition or an
answer seeking reorganization or an arrangement with creditors or seeking to take advantage
of any other law (whether federal or state) relating to relief of debtors, or admit (by
answer, by default or otherwise) the material allegations of a petition filed against it in
any bankruptcy, reorganization, insolvency or other proceeding (whether federal or state)
relating to relief of debtors, or (vii) suffer or permit to continue unstayed and in effect
for thirty (30) consecutive days any judgment, decree or order entered by a court or
governmental commission of competent jurisdiction, which assumes custody or control of the
Guarantor, approves a petition seeking reorganization of the Guarantor or any other judicial
modification of the rights of its creditors, or appoints a receiver, custodian, trustee,
interim trustee or liquidator for the Guarantor or of all or a substantial part of its
assets, or (viii) take or omit to take any action in order thereby to effect any of the
foregoing, or

 

 

          (d) Amendment of Section 10(h). Section 10(h) of the Guaranty shall be amended by
deleting it in its entirety.

          (e) Amendment of Section 10(i). Section 10(i) of the Guaranty shall be amended by
re-numbering it as Section 10(h), but leaving it the same in all other respects.

          (f) Amendment of Section 10. Section 10 of the Guaranty shall be amended by deleting
the phrase “or 10(h)” in each place that it appears in the final paragraph of Section 10 that
follows Section 10(h).

     7. AMENDMENT TO SECTION 11 OF THE GUARANTY. Section 11 of the Guaranty shall be
amended by deleting the third sentence contained therein and replacing it with the following:

          This Guaranty shall bind the Guarantor and its successors and assigns and shall inure to
the benefit of the Agents and the Banks and their respective successors and assigns including
(without limitation) each holder of any Note, provided, that the Guarantor may not
assign or transfer any of its rights or obligations hereunder without the prior written
consent of all of the Banks (other than any defaulting Bank).

     8. REPRESENTATIONS AND WARRANTIES. The Guarantor represents and warrants to the
Agents and each of the Banks as follows:

          (a) INCORPORATION OF REPRESENTATIONS AND WARRANTIES. Each and every representation
and warranty made by the Guarantor in Section 7 of the Guaranty is incorporated herein as if fully
rewritten herein at length and is true, correct and complete as of the date hereof and no Event of
Default or Possible Default exists, or will exist on such date, after giving effect to this First
Amendment to Guaranty.

          (b) REQUISITE AUTHORITY. The Guarantor has all requisite power and authority to
execute and deliver and to perform its obligations in respect of this First Amendment to Guaranty
and each and every other agreement, certificate, or document required to be delivered as a
condition precedent to this First Amendment to Guaranty or to the First Amendment to Amended and
Restated Credit Agreement. The Guarantor has all requisite power and authority to perform its
obligations under the Guaranty as amended by this First Amendment to Guaranty.

          (c) DUE AUTHORIZATION; VALIDITY. The Guarantor has taken all necessary action to
authorize the execution, delivery, and performance by it of this First Amendment to Guaranty and
every other instrument, document, and certificate relating thereto. This First Amendment to
Guaranty has been duly executed and delivered by the Guarantor and is the legal, valid, and binding
obligation of the Guarantor enforceable against it in accordance with its terms.

          (d) NO CONSENT. No consent, approval, or authorization of, or registration with, any
governmental authority or other Person is required in connection with the execution, delivery, and
performance of this First Amendment to Guaranty and the transactions contemplated hereby.

     9. NO WAIVER. Except as otherwise expressly provided herein, the acceptance,
execution, and/or delivery of this First Amendment to Guaranty by the Agents and the Banks shall
not (a) constitute a waiver or release of any obligation or liability of the Guarantor under the
Guaranty as in effect prior to the effectiveness of this First Amendment to Guaranty, or as amended
hereby, (b) waive or release any Event of Default or Possible Default existing at any time, (c)
give rise to any obligation on the part of the Agents and the Banks to extend, modify or waive any
term or condition in the Guaranty or any of the other Related Writings, or (d) give rise to any
defenses or counterclaims to the right of the Agents and the Banks to compel payment of the Debt or
to otherwise enforce their rights and remedies under the Guaranty or any Related Writing.

     10. CONDITIONS TO CLOSING. Except as otherwise expressly provided in this First
Amendment to Guaranty, prior to or concurrently with the execution and delivery of this First
Amendment to Guaranty, and as conditions precedent to the effectiveness of the amendments to the
Guaranty provided for herein, the Agents and the Banks and their respective counsel shall have
received such opinions of counsel to the Guarantor, certified copies of resolutions of the Board of
Directors of the Guarantor, and such other documents as shall be required by the Agents, the Banks,
or their respective counsel to evidence and confirm the due authorization, execution, and delivery
of this First Amendment to Guaranty, all in form and substance satisfactory to the Agents and the
Banks and their respective counsel; and all costs, fees, and expenses required by the First
Amendment to Amended and Restated Credit Agreement to have been paid by the Borrower in connection
with the First Amendment to Amended and Restated Credit Agreement and/or this First Amendment to
Guaranty shall have been paid.

 

 

     11. CONFIRMATION OF GUARANTY. The Guarantor hereby confirms that the Guaranty is in
full force and effect on the date hereof and that, upon the amendments herein provided becoming
effective, the Guaranty will continue in full force and effect in accordance with its terms, as
hereby amended.

     12. EXECUTION IN COUNTERPARTS. This First Amendment to Guaranty may be executed in
any number of counterparts and by different parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken together shall constitute
but one and the same agreement. Delivery of an executed counterpart of a signature page to this
First Amendment to Guaranty by telecopier or pdf file shall be effective as delivery of a manually
executed counterpart of this First Amendment to Guaranty.

     13. GOVERNING LAW. This First Amendment to Guaranty shall be governed by, and
construed in accordance with, the laws of the State of Ohio, without regard to its principles of
conflict of laws.

     14. WAIVER OF JURY TRIAL. THE GUARANTOR WAIVES THE RIGHT TO HAVE A JURY PARTICIPATE
IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN OR AMONG THE
GUARANTOR AND THE AGENTS, THE BANKS, AND/OR THE BORROWER ARISING OUT OF OR IN CONNECTION WITH THE
CREDIT AGREEMENT, THE GUARANTY, THIS FIRST AMENDMENT TO GUARANTY, OR ANY OTHER AGREEMENT,
INSTRUMENT OR DOCUMENT EXECUTED OR DELIVERED IN CONNECTION THEREWITH OR THE TRANSACTIONS RELATED
THERETO.

 

 

     IN WITNESS WHEREOF, the parties
hereto have caused this First Amendment to Amended and
Restated Guaranty of Payment of Debt to be executed and delivered as of the date set forth above,
each by an officer thereunto duly authorized.

	 	 	 	 	 
	 	FOREST CITY ENTERPRISES, INC.

 	 
	 	/s/ CHARLES A. RATNER
 	 
	 	Name:  	Charles A. Ratner 	 
	 	Title:  	Chief Executive Officer and President 	 
	 
	 	KEYBANK NATIONAL ASSOCIATION individually and as Agent
 	 
	 	/s/ JOSHUA MAYERS
 	 
	 	Name:  	Joshua Mayers 	 
	 	Title:  	Vice President 	 
	 
	 	NATIONAL CITY BANK individually and as Syndication  Agent
 	 
	 	/s/ JOHN E. WILGUS II
 	 
	 	Name:  	John E. Wilgus II 	 
	 	Title:  	Senior Vice President 	 
	 
	 	THE HUNTINGTON NATIONAL BANK

 	 
	 	/s/ RYAN TERRANO
 	 
	 	Name:  	Ryan Terrano 	 
	 	Title:  	Vice President 	 
	 
	 	U.S. BANK NATIONAL ASSOCIATION

 	 
	 	
 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 

Signature Page 1 to 3

First Amendment to Amended and Restated Guaranty of Debt

 

 

	 	 	 	 	 
	 	COMERICA BANK

 	 
	 	/s/ ADAM SHEETS
 	 
	 	Name:  	Adam Sheets 	 
	 	Title:  	Assistant Vice President 	 
	 
	 	FIRST MERIT BANK

 	 
	 	/s/ EDWARD YANNAYON
 	 
	 	Name:  	Edward Yannayon 	 
	 	Title:  	Senior Vice President 	 
	 
	 	MANUFACTURERS AND TRADERS TRUST COMPANY

 	 
	 	/s/ DAVID LADORI
 	 
	 	Name:  	David Ladori 	 
	 	Title:  	Assistant Vice President 	 
	 
	 	FIFTH THIRD BANK

 	 
	 	/s/ ROY C. LANCTOT
 	 
	 	Name:  	Roy C. Lanctot 	 
	 	Title:  	Vice President 	 
	 
	 	BANK OF AMERICA, N.A.

 	 
	 	/s/ MICHAEL M. POMPOSELLI
 	 
	 	Name:  	Michael M. Pomposelli 	 
	 	Title:  	Senior Vice President 	 
	 

Signature Page 2 to 3

First Amendment to Amended and Restated Guaranty of Debt

 

 

	 	 	 	 	 
	 	RBS CITIZENS, N.A. dba

CHARTER ONE

 	 
	 	/s/ ERIN L. MAHON
 	 
	 	Name:  	Erin L. Mahon 	 
	 	Title:  	Assistant Vice President 	 
	 
	 	BMO CAPITAL MARKETS FINANCING, INC.

 	 
	 	
 	 
	 	Name:  	 	 
	 	Title:  	 	 
	 
	 	CALYON NEW YORK BRANCH

 	 
	 	/s/ PAUL T. RAGUSIN
 	 
	 	Name:  	Paul T. Ragusin 	 
	 	Title:  	Director 	 
	 
	 	 	 
	 	/s/ JOHN A. WAIN
 	 
	 	Name:  	John A. Wain 	 
	 	Title:  	Managing Director 	 
	 
	 	WACHOVIA BANK, N.A.

 	 
	 	/s/ LEONARD CLARK, JR.
 	 
	 	Name:  	Leonard Clark, Jr. 	 
	 	Title:  	Vice President 	 
	 
	 	THE BANK OF NEW YORK

 	 
	 	/s/ KENNETH R.MCDONNELL
 	 
	 	Name:  	Kenneth R. McDonnell 	 
	 	Title:  	Vice President 	 
	 

Signature Page 3 to 3

First Amendment to Amended and Restated Guaranty of DebtEX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

Michael W. Rayden

     THIS AGREEMENT is effective as of December 3, 2008 by and between Tween Brands, Inc., a
Delaware corporation (the “Company”), and Michael W. Rayden (the “Executive”) (hereinafter
collectively referred to as “the parties”).

     WHEREAS, the Executive is currently employed as the Company’s Chief Executive Officer pursuant
to that certain Agreement of Employment by and between Executive and Company dated September 15,
2003 (the “Prior Agreement”), and is Chairman of the Board of Directors of the Company (the
“Board”); and

     WHEREAS, the Company and the Executive mutually desire that Executive continue as the
Company’s Chief Executive Officer and as a Director and Chairman of the Board of the Company; and

     WHEREAS, the Company and Executive wish to enter into this new Agreement to amend and restate
the Prior Agreement in its entirety and to set forth their mutual understanding as to the terms and
conditions of Executive’s continued employment by the Company.

     NOW, THEREFORE, in consideration of the foregoing and the respective agreements of the parties
contained herein, the parties hereby agree as follows:

     1. TERM. The initial term of employment under this Agreement shall be for the period
commencing on the effective date of this Agreement (the “Commencement Date”) and ending on the
fifth anniversary of the Commencement Date (the “Initial Term”); provided, however, that upon the
expiration of the fourth anniversary of the Commencement Date and on the anniversary date of each
year thereafter (the “Renewal Date”), the term of this Agreement shall be automatically extended
for a period of one year, unless either the Company or the Executive shall have given written
notice to the other at least 90 days prior to the Renewal Date that the term of this Agreement
shall not be so extended. Notwithstanding the above, if a Change in Control (as defined below) of
the Company occurs during the term of this Agreement, the term of this Agreement will be extended
for two (2) years from the date of the Change in Control.

     2. EMPLOYMENT.

          (a) Position. The Executive shall be employed as the Chief Executive Officer or such other
position of greater status and responsibilities as may be determined by the Board. If and as
elected by the stockholders to the Board of Directors of the Company and if and as elected by the
Board to the position of Chairman of the Board of Directors, the Executive agrees to so serve. The
Executive shall perform the duties, undertake the responsibilities and exercise the authority
customarily performed, undertaken and exercised by persons employed in a similar executive
capacity.

 

 

          (b) Obligations. The Executive agrees (1) to devote his best efforts and full business time
and attention to the business and affairs of the Company; (2) to exercise the highest degree of
loyalty and care with respect to the affairs of the Company; and (3) not to commit any willful or
intentional act with an objective to harm the Company’s business or reputation. The foregoing,
however, shall not preclude the Executive from serving on corporate, civic or charitable boards or
committees or managing personal investments, so long as such activities do not interfere with the
performance of the Executive’s responsibilities hereunder.

     3. BASE SALARY. The Company agrees to pay or cause to be paid to the Executive a minimum
annual Base Salary of $1,050,000 (hereinafter referred to as the “Base Salary”). This Base Salary
will be subject to annual review and may be increased from time to time by the Board considering
factors such as the Executive’s responsibilities, compensation of executives in other companies,
performance of the Executive and other pertinent factors. Such Base Salary shall be payable in
accordance with the Company’s customary practices applicable to similarly situated executives of
the Company.

     4. EQUITY COMPENSATION. The Company shall grant to the Executive rights to receive shares of
the Company’s common stock and options to acquire shares of the Company’s common stock as the Board
or Compensation Committee of the Board determines.

     5. EMPLOYEE BENEFITS. The Executive shall be entitled to participate in tax-qualified and
nonqualified deferred compensation and retirement plans, group term life insurance plans,
short-term and long-term disability plans, employee benefit plans, practices, and programs
maintained by the Company and made available to similarly situated executives generally, and as may
be in effect from time to time. Also, the Executive shall continue to participate in the deferred
compensation arrangement specified in Exhibit A to the Agreement of Employment by and between
Executive and Company dated August 23, 1999.

     6. BONUS AND LONG-TERM INCENTIVES. The Executive shall be entitled to participate in such
Company bonus and long-term incentive compensation programs which include similarly situated
executives of the Company as may exist from time to time (the “Incentive Plans”). The Executive’s
participation in such Incentive Plans, practices and programs shall be on the same general basis
and terms as are applicable to similarly situated executives of the Company, although bonuses,
target levels and criteria may differ among such executives as determined by the Board or
Compensation Committee of the Board.

     7. OTHER BENEFITS.

          (a) Life Insurance.

               (1) During the term of the Agreement, the Company shall maintain term life insurance coverage
on the life of the Executive in the amount of $5,000,000, the proceeds of which shall be payable to
the beneficiary or beneficiaries designated by the Executive; and

- 2 -

 

               (2) During the term of this Agreement, the Company shall be entitled to maintain a “key
person” term life insurance policy on the life of the Executive, the proceeds of which shall be
payable to the Company or its designees. The Executive agrees to undergo any reasonable physical
examination and other procedures as may be necessary to maintain such policy.

          (b) Office and Facilities. The Executive shall be provided with appropriate offices and with
such secretarial and other support facilities as are commensurate with the Executive’s status with
the Company and adequate for the performance of the Executive’s duties hereunder.

          (c) Benefits Not in Lieu of Compensation. No benefit or perquisite provided to the Executive
in this Section 7 shall be deemed to be in lieu of Base Salary, bonus or other compensation.

     8. EXPENSES. Subject to applicable Company policies, the Executive shall be entitled to
receive prompt reimbursement of all expenses reasonably incurred by the Executive in connection
with the performance of the Executive’s duties hereunder or for promoting, pursuing or otherwise
furthering the business or interests of the Company including, without limitation, travel,
automobile, and meal and entertainment expenses.

     9. VACATION. The Executive shall be entitled to four weeks of annual vacation or, if greater,
in accordance with the policies as periodically established by the Board for similarly situated
executives of the Company.

     10. DEFINITIONS, TERMS AND CONDITIONS. The Executive’s employment hereunder is subject to the
following terms:

          (a) Cause. “Cause” means that the Executive:

               (1) was grossly negligent in the performance of the Executive’s duties with the Company (other
than a failure resulting from the Executive’s incapacity due to physical or mental illness) causing
material harm to the Company; or

               (2) has pled “guilty” or “no contest” to or has been convicted of an act which is defined as a
felony under federal or state law; or

               (3) engaged in intentional misconduct or fraud which caused, or could reasonably be expected
to cause, material harm to the Company’s business or its reputation; or

               (4) committed a material breach of this Agreement (including a violation of the noncompete and
nondisclosure provisions) which is materially and demonstrably injurious to the Company.

     For purposes of this paragraph, no act, or failure to act, on the Executive’s part shall be
considered “intentional” unless done, or omitted to be done, by the Executive not in the best

- 3 -

 

interest of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered to the Executive a copy
of a resolution duly adopted by the affirmative vote of not less than two-thirds (2/3) of the
entire authorized membership of the Board at a meeting of the Board called and held for the purpose
(after reasonable notice and an opportunity for the Executive, together with counsel, to be heard
before the Board), finding that in the good faith opinion of the Board the Executive was guilty of
conduct set forth above in clauses (1), (2), (3) or (4) of the first sentence of this paragraph and
specifying the particulars thereof in detail.

          (b) Change in Control. “Change in Control” means a Change in Control as defined in the
Executive’s Executive Agreement.

          (c) Disability. “Disability” means “Total Disability” as defined in the Tween Brands
Long-term Disability Plan (effective August 1, 2007) (the “Disability Plan”), or any amended or
successor plan.

          (d) Disability Date. “Disability Date” means the date the Executive’s Disability began.

          (e) Executive Agreement. “Executive Agreement” means the Executive Agreement between the
Company and the Executive as of even date with this Employment Agreement, as well as any such
amended, successor, or substituted agreement.

          (f) Good Reason. “Good Reason” means:

               (1) a significant reduction in the Executive’s positions, duties, authority, responsibilities
and reporting requirements as set forth in Section 2 hereof, including the Executive’s position as
Chief Executive Officer and, if then so serving, as a Director of the Company and as Chairman of
the Board of Directors of the Company;

               (2) a reduction in or a material delay in payment of the Executive’s Base Salary required to
be provided in accordance with the provisions of this Agreement;

               (3) the Company, the Board or any person controlling the Company relocates the Executive to a
location in excess of fifty (50) miles from the location where the Executive is currently based;

               (4) the failure of the Company to abide by this Agreement or to obtain a satisfactory
agreement from any successor to the Company to assume and agree to perform this Agreement, as
contemplated in Section 15 of this Agreement where such failures would constitute a material breach
of this Agreement; or

               (5) the failure of the Company to obtain the assumption in writing of its obligation to
perform this Agreement by any successor to all or substantially all of the assets of the Company
within fifteen (15) days after a merger, consolidation, sale or similar transaction.

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     Notwithstanding the above, Good Reason shall not include (A) acts not taken in bad faith in
which (i) the Executive has provided written notice to the Company identifying in reasonable detail
the act or acts constituting Good Reason (a “Preliminary Notice of Good Reason”) and (ii) are cured
by the Company in all respects not later than 30 days from the date of receipt by the Company of
the Preliminary Notice of Good Reason or (B) acts taken by the Company by reason of the Executive’s
physical or mental infirmity which impairs the Executive’s ability to substantially perform the
duties under this Agreement. A Preliminary Notice of Good Reason shall not, by itself, constitute
a Notice of Termination.

          (g) Notice of Termination. “Notice of Termination” means a written notice indicating the
specific termination provision in this Agreement relied upon and setting forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the employment under the
provision so indicated. Except for a termination of employment for Cause or Disability, any
termination by the Company or by the Executive with Good Reason shall be communicated by a Notice
of Termination to the other party 30 days prior to the Termination Date. Any voluntary termination
by the Executive without Good Reason shall be communicated by a Notice of Termination 90 days prior
to the Termination Date. However, the Company may elect to pay the Executive 30 or 90 days of Base
Salary in lieu of 30 or 90 days written notice. If the Company notifies the Executive that it will
pay the Executive in lieu of 30 or 90 days written notice, the Company may deny the Executive
further access to the Company’s offices subject to the Executive’s right to recover any personal
effects at an agreed upon time. For purposes of this Agreement, no such purported termination of
employment shall be effective without a Notice of Termination.

          (h) Pro-Rated Bonus Amount. “Pro-Rated Bonus Amount” means any accrued but unpaid bonus for a
completed bonus period, plus a pro-rated portion of the Executive’s semi-annual bonus calculated as
of the Termination Date. The portion of the semi-annual bonus payable shall be the amount of
semi-annual bonus payable to the Executive with respect to the bonus period in which the
Termination Date occurs, based on the actual financial performance of the Company for such bonus
period, pro-rated by multiplying such amount by a fraction, the numerator of which is the number of
days during the bonus period which occur prior to the Termination Date, and the denominator of
which is 1821/2.

          (i) Retirement. “Retirement” means the voluntary resigning of employment by the Executive for
the purpose of retiring which resignation occurs after the last day in the month in which the
Executive turns age 65.

          (j) Termination Date. “Termination Date” means in the case of the Executive’s death, the date
of death, or in all other cases, the date on which the Executive incurs a “separation from service”
within the meaning of Treasury Regulation Section 1.409A-1(h).

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	 	11.	 	TERMINATION OF EMPLOYMENT; COMPENSATION UPON TERMINATION.

          (a) Termination by Company with Cause, or by Executive Without Good Reason. The Company shall
be entitled to immediately terminate the Executive’s employment for “Cause” after giving a Notice
of Termination. Such Notice of Termination shall state in detail the particular act or acts or
failure or failure to act that constitute the grounds on which the proposed termination for Cause
is based. The Executive may voluntarily terminate employment without Good Reason after giving a
Notice of Termination. If during the term of this Agreement (including any extensions thereof),
the Executive’s employment is terminated by the Company for Cause, or if the Executive terminates
employment without Good Reason, the Company’s sole obligation hereunder shall be to pay or
reimburse the Executive (or facilitate a tax qualified rollover of) the following amounts:

               (1) the Executive’s accrued Base Salary and accrued vacation not paid as of the Termination
Date;

               (2) the Executive’s vested benefits as of the Termination Date pursuant to the Company’s
benefit, retirement, incentive and other plans;

               (3) any and all monies advanced to or expenses incurred by the Executive pursuant to Section 8
through the Termination Date; and

               (4) the premiums provided for in Section 7(a)(1) through the end of the calendar year in which
the Executive’s termination occurs. The Executive’s entitlement to any other benefits shall be
determined in accordance with the Company’s employee benefit plans then in effect.

          (b) Termination by Company Without Cause, or by Executive for Good Reason. The Company may
terminate the Executive without Cause after giving a Notice of Termination. The Executive may
terminate employment hereunder for Good Reason by delivering to the Company (1) a Preliminary
Notice of Good Reason (as defined above), and (2) not earlier than 30 days from the delivery of
such Preliminary Notice of Good Reason, a Notice of Termination. If the Executive’s employment is
terminated by the Company other than for Cause or by the Executive for Good Reason, the Company’s
sole obligation hereunder shall be to pay or reimburse the Executive (or facilitate a tax qualified
rollover of) the following amounts:

               (1) the Executive’s accrued Base Salary and accrued vacation not paid as of the Termination
Date;

               (2) the Executive’s Pro-Rated Bonus Amount;

               (3) the Executive’s vested benefits as of the Termination Date pursuant to the Company’s
benefit, retirement, incentive and other plans;

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               (4) a lump sum amount equal to two times the sum of (i) the Executive’s Base Salary and (ii)
the greater of the Executive’s (a) annual par target (100%) bonus opportunity in the year of
termination or (b) the actual annual bonus earned by the Executive in the year prior to the year of
termination;

               (5) any and all monies advanced to the Company by the Executive or expenses incurred by the
Executive pursuant to Section 8 through the Termination Date;

               (6) the Company shall maintain in full force and effect for the continued benefit of the
Executive, for a two-year (2-year) period after the Termination Date, all medical coverage,
programs or arrangements in which the Executive was entitled to participate immediately prior to
the Termination Date, provided that the Executive’s continued participation is possible under the
general terms and provisions of such medical plans and programs. In the event that the Executive’s
participation in any such plan or program is barred, the Company shall arrange to provide the
Executive, on an after-tax basis, with benefits substantially similar to those which the Executive
was otherwise entitled to receive under such plans and programs for such two-year (2-year) period.
Any benefits or payments to be provided under this paragraph after completion of the time period
described in Treasury Regulation Section 1.409A-1(b)(9)(v)(B) shall be subject to the following
conditions: (i) the benefits or payments provided during any taxable year of the Executive may not
affect the benefits or payments to be provided to the Executive in any other taxable year; (ii)
reimbursement of any eligible expense must be made on or before the last day of the Executive’s
taxable year following the taxable year in which the expense was incurred; and (iii) the right to
such benefits or payments is not subject to liquidation or exchange for another benefit or payment;

               (7) the Company shall accelerate the vesting, by twenty-four (24) additional months, of all
unvested stock options, restricted stock, stock appreciation rights, deferred compensation, and
similar plan benefits and all such benefits shall thereafter be treated as vested benefits pursuant
to the respective benefit plan; provided, however, that notwithstanding the foregoing, the
acceleration of vesting under this provision shall not apply to any stock options, restricted
stock, stock appreciation rights, deferred compensation, and similar plan benefits where such
options, stock, rights, compensation or similar plan benefits were by the terms of grant thereof or
their respective benefit plans subject to one time cliff vesting two or more years from the grant
or issuance thereof;

               (8) the premiums provided for in Section 7(a)(1) hereof through the end of the calendar year
in which such termination occurs; and

               (9) fees and expenses for outplacement services and related travel costs up to a maximum
amount of thirty thousand dollars ($30,000).

          (c) Termination Upon Disability. The Company shall be entitled to terminate the Executive’s
employment after having established the Executive’s Disability and given a Notice of Termination
which shall indicate the Disability Date. If the Executive’s employment is terminated by the
Company by reason of the Executive’s Disability, the Company’s sole

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obligation hereunder shall be to pay or reimburse the Executive (or facilitate a tax qualified
rollover of) the following amounts:

               (1) the Executive’s accrued Base Salary and accrued vacation not paid as of the Termination
Date;

               (2) the Executive’s Pro-Rated Bonus Amount;

               (3) the Executive’s vested benefits as of the Termination Date pursuant to the Company’s
benefit, retirement, incentive and other plans;

               (4) any and all monies advanced to or expenses incurred by the Executive pursuant to Section 8
through the Termination Date;

               (5) one hundred percent (100%) of the Base Salary for the first 12 months following the
Termination Date and 80% of the Base Salary for the second 12 months following the Termination
Date. Notwithstanding the foregoing, if such amount exceeds two times the annual compensation
limitation prescribed by Section 401(a)(17) of the Internal Revenue Code of 1986 (the “Involuntary
Termination Limit”), and the payment of such amount would subject the Executive to additional tax
and interest payments under Section 409A of the Internal Revenue Code of 1986, as amended, and any
guidance promulgated thereunder (“Code Section 409A”), then the Company will pay this obligation in
two payment streams. The first payment stream will equal the Involuntary Termination Limit, and
the Company will pay this amount over a 6-month period beginning as soon as practicable after the
Termination Date. The amount of the second payment stream will equal the amount in excess of the
Involuntary Termination Limit. The Company will pay this amount beginning as soon as practicable
after the date that is six months after the Termination Date. Additionally, the Company will pay
the Executive 60% of the Base Salary for the third 12 months following the Termination Date.
Provided, however, that such Base Salary payments shall be reduced by the amount of any benefits
the Executive receives by reason of the Executive’s Disability under the Company’s relevant
disability plan or plans, if any;

               (6) if the Executive is disabled beyond 36 months from the Disability Date, the Company shall
continue to pay the Executive 60% of Base Salary up to a maximum of two hundred fifty thousand
dollars ($250,000) per year for the period of the Executive’s Disability, provided, however, that
such payments shall be reduced by the amount of any benefits the Executive receives by reason of
the Executive’s Disability under the Company’s relevant disability plan or plans;

               (7) the premiums provided for in Section 7(a)(1) hereof through the end of the calendar year
in which such Disability terminates; and

               (8) during the period the Executive is receiving salary continuation pursuant to this Section
11(c), the Company shall, at its expense, provide to the Executive and the Executive’s
beneficiaries medical and dental benefits substantially similar in the aggregate to

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those provided to the Executive immediately prior to the Executive’s Disability. Any benefits or
payments to be provided under this paragraph after completion of the time period described in
Treasury Regulation Section 1.409A-1(b)(9)(v)(B) shall be subject to the following conditions: (i)
the benefits or payments provided during any taxable year of the Executive may not affect the
benefits or payments to be provided to the Executive in any other taxable year; (ii) reimbursement
of any eligible expense must be made on or before the last day of the Executive’s taxable year
following the taxable year in which the expense was incurred; and (iii) the right to such benefits
or payments is not subject to liquidation or exchange for another benefit or payment.

               Notwithstanding the above, the salary continuation payments will cease at the earlier of (a)
the Disability ceasing to exist or (b) Retirement.

          (d) Termination Upon Death. If the Executive’s employment is terminated by reason of
Executive’s death, the Company’s sole obligation hereunder shall be to pay or reimburse (or
facilitate a tax qualified rollover of) to the Executive’s spouse, assignee, estate, or designated
beneficiary, as the case may be, the following amounts:

               (1) the Executive’s accrued Base Salary and vacation not paid as of the Termination Date;

               (2) the Executive’s Pro-Rated Bonus Amount;

               (3) the Executive’s vested benefits as of the Termination Date pursuant to the Company’s
benefit, retirement, incentive and other plans; and

               (4) any and all monies advanced to or expenses incurred by the Executive pursuant to Section 8
through the Termination Date.

          (e) Retirement. If the Executive’s employment is terminated as a result of Retirement, the
Company’s sole obligation hereunder shall be to pay or reimburse the Executive (or facilitate a tax
qualified rollover of) the following amounts:

               (1) the Executive’s accrued Base Salary and accrued vacation not paid as of the Termination
Date;

               (2) the Executive’s Pro-Rated Bonus Amount;

               (3) the Executive’s vested benefits as of the Termination Date pursuant to the Company’s
benefit, retirement, incentive and other plans; and

               (4) any and all monies advanced to or expenses incurred by the Executive pursuant to Section 8
through the Termination Date.

          (f) Termination Upon Change in Control. In the event of a Change in Control and subsequent
termination of Executive’s employment without Cause by the Company, or any

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successor, or with Good Reason by the Executive, the Executive shall be solely entitled to the
benefits described in the Executive Agreement and shall not be entitled to any benefits under this
Agreement.

          (g) Restricted Stock, Stock Options. Except as provided in Section 11(b)(7), for purposes of
this Agreement, restricted stock and stock options shall vest and be exercisable according to the
terms of the applicable plan.

          (h) No Duty to Mitigate. The Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise and no payment
hereunder shall be offset or reduced by the amount of any compensation or benefits provided to the
Executive in any subsequent employment.

          (i) Payment Date. Except as otherwise provided, all amounts to be paid by the Company under
this Section 11 shall be paid by the Company within 30 days of the Termination Date.

          (j) Executive Advances. Upon the termination of the Executive’s employment pursuant to
Sections 11(a), (b), (c), (d), or (e) hereunder, the Executive agrees that all monies that are
advanced to the Executive prior to such termination shall be repaid to the Company or the Company
shall be entitled to offset such amount against any payments to the Executive as provided for in
this Agreement.

          (k) Section 409A Compliance. The Executive and the Company desire to comply with Section 409A
of the Internal Revenue Code of 1986, as amended (the “Code”), and any guidance promulgated
thereunder. Therefore, notwithstanding any provision of this agreement to the contrary, if the
Company determines that the Executive is a “specified employee” as defined in Section 409A of the
Code, the Executive shall not be entitled to any payments under Sections 11(b) or 11(c) of this
Agreement after the Termination Date that otherwise would cause the Executive to incur any
additional tax or interest under Section 409A of the Code until the earlier of (i) the date that is
six months after the Termination Date, or (ii) the date of the Executive’s death. If any provision
of this Agreement or award of compensation under this Agreement would cause the Executive to incur
such additional tax or interest under Section 409A of the Code, the Company shall, after consulting
with the Executive and receiving the Executive’s approval (which shall not be unreasonably
withheld), reform such provision in such a manner as shall not cause the Executive to incur any
such tax or interest.

     12. EXECUTIVE COVENANTS.

          (a) Unauthorized Disclosure, Nondisparagement. The Executive shall not, during the term of
this Agreement and thereafter, make any disparaging comments which may be harmful to the Company’s
reputation or any Unauthorized Disclosure. For purposes of this Agreement, “Unauthorized
Disclosure” shall mean disclosure by the Executive without the prior written consent of the Board
to any person other than a person to whom disclosure is reasonably necessary or appropriate in
connection with the performance by the Executive of duties as an

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executive of the Company or as may be legally required, of any information relating to the business
or prospects of the Company (including, but not limited to, any confidential information with
respect to any of the Company’s customers, products, methods of distribution, strategies, business
and marketing plans and business policies and practices); provided, however, that such term shall
not include the use or disclosure by the Executive, without consent, of any information known
generally to the public (other than as a result of disclosure by the Executive in violation of this
Section 12(a)). This confidentiality covenant has no temporal, geographical or territorial
restriction.

          (b) Non-Competition. During the Non-Competition Period defined below, the Executive shall
not, directly or indirectly, without the prior written consent of the Board, own, manage, operate,
join, control, be employed by, consult with or participate in the ownership, management, operation
or control of, or be connected with (as a stockholder, partner, or otherwise), any business,
individual, partner, firm, corporation, or other entity that competes or plans to compete, directly
or indirectly, with the Company, its products, or any division, subsidiary or affiliate of the
Company; provided, however, that the “beneficial ownership” by the Executive after termination of
employment with the Company, either individually or as a member of a “group,” as such terms are
used in Rule 13d of the General Rules and Regulations under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), of not more than two percent (2%) of the voting stock of any publicly
held corporation, shall not be a violation of Section 12 of this Agreement.

     The “Non-Competition Period” means the period the Executive is employed by the Company plus
two (2) years from the Termination Date if the Executive’s employment is terminated (i) by the
Company for any reason, (ii) by the Executive for any reason, or (iii) by reason of either the
Company’s or the Executive’s decision not to extend the term of this Agreement as contemplated by
Section 1 hereof. Notwithstanding anything in this Agreement or the Executive Agreement to the
contrary, the Non-Competition Period shall terminate after a Change in Control, upon a termination
without Cause by the Company or by the Executive for Good Reason.

          (c) Non-Solicitation. During the No-Raid Period defined below, the Executive shall not,
either directly or indirectly, alone or in conjunction with another party, attempt to recruit or
hire, interfere with or harm, or attempt to interfere with or harm, the relationship of the
Company, its subsidiaries and/or affiliates, with any person who at any time was an employee,
customer or supplier of the Company, its subsidiaries and/or affiliates or otherwise had a business
relationship with the Company, its subsidiaries and/or affiliates.

     The “No-Raid Period” means the period the Executive is employed by the Company plus two (2)
years from the Termination Date if the Executive’s employment is terminated (i) by the Company for
any reason, (ii) by the Executive for any reason, or (iii) by reason of either the Company’s or the
Executive’s decision not to extend the term of this Agreement as contemplated by Section 1 hereof.

          (d) Delivery of Documents Upon Termination. The Executive shall deliver to the Company or its
designee at the termination of the Executive’s employment all correspondence,

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memoranda, notes, records, drawings, sketches, plans, customer lists, product compositions, and
other documents and all copies thereof, made, composed or received by the Executive, solely or
jointly with others, that are in the Executive’s possession, custody, or control at termination and
that are related in any manner to the past, present, or anticipated business of the Company, its
subsidiaries and/or affiliates. In this regard, the Executive hereby grants and conveys to the
Company all right, title and interest in and to, including without limitation, the right to
possess, print, copy, and sell or otherwise dispose of, any reports, records, papers, summaries,
photographs, drawings or other documents, and writings, and copies, abstracts or summaries thereof,
that may be prepared by the Executive or under the Executive’s direction or that may come into the
Executive’s possession in any way during the term of the Executive’s employment with the Company
that relate in any manner to the past, present or anticipated business of the Company, its
subsidiaries and/or affiliates.

          (e) Intellectual Property. The Executive shall hold in trust for the benefit of the Company,
and shall disclose promptly and fully to the Company in writing, and hereby assigns, and binds the
Executive’s heirs, executors, and administrators to assign, to the Company any and all inventions,
discoveries, ideas, concepts, improvements, copyrightable works, and other developments (the
“Developments”) conceived, made, discovered or developed by the Executive, solely or jointly with
others, during the term of the Executive’s employment by the Company, whether during or outside of
usual working hours and whether on the Company’s premises or not, that relate in any manner to the
past, present or anticipated business of the Company, its subsidiaries and/or affiliates. All
works of authorship created by the Executive, solely or jointly with others, shall be considered
works made for hire under the Copyright Act of 1976, as amended, and shall be owned entirely by the
Company. Any and all such Developments shall be the sole and exclusive property of the Company,
whether patentable, copyrightable, or neither, and the Executive shall assist and fully cooperate
in every way, at the Company’s expense, in securing, maintaining, and enforcing, for the benefit of
the Company or its designee, patents, copyrights or other types of proprietary or intellectual
property protection for such Developments in any and all countries. Within one (1) year following
the end of the term of this Agreement and without limiting the generality of the foregoing, any
Development of the Executive relating to any subject matter on which the Executive worked or was
informed during the Executive’s employment by the Company shall be conclusively presumed to have
been conceived and made prior to the termination of the Executive’s employment (unless the
Executive clearly proves that such Development was conceived and made following the termination of
the Executive’s employment), and shall accordingly belong and be assigned to the Company and shall
be subject to this Agreement.

          (f) Remedies. The Executive agrees that any breach of the terms of this Section 12 would
result in irreparable injury and damage to the Company for which the Company would have no adequate
remedy at law; the Executive therefore also agrees that in the event of said breach or any threat
of breach, the Company shall be entitled to an immediate injunction and restraining order to
prevent such breach and/or threatened breach and/or continued breach by the Executive and/or any
and all persons and/or entities acting for and/or with the Executive, without having to prove
damages, and to all costs and expenses, including reasonable attorneys’ fees and costs, in addition
to any other remedies to which the Company may be entitled at law or in

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equity. The terms of this paragraph shall not prevent the Company from pursuing any other
available remedies for any breach or threatened breach hereof, including but not limited to the
recovery of damages from the Executive. The Executive and the Company further agree that the
provisions of the covenants not to compete and solicit are reasonable and that the Company would
not have entered into this Agreement but for the inclusion of such covenants herein. Should a
court determine, however, that any provision of the covenants is unreasonable, either in period of
time, geographical area, or otherwise, the parties hereto agree that the covenant should be
interpreted and enforced to the maximum extent which such court or arbitrator deems reasonable.

     The provisions of this Section 12 shall survive any termination of this Agreement, and the
existence of any claim or cause of action by the Executive against the Company, whether predicated
on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of
the covenants and agreements of this Section 12; provided, however, that this paragraph shall not,
in and of itself, preclude the Executive from defending against the enforceability of the covenants
and agreements of this Section 12.

     13. ADJUSTMENT TO PAYMENTS.

          (a) Gross-Up Payment. In the event it shall be determined that any payment or distribution of
any type to or for the benefit of the Executive, by the Company, any of its affiliates, any person
who acquires ownership or effective control of the Company or ownership of a substantial portion of
the Company’s assets within the meaning of Section 280G of the Code, and the regulations thereunder
or any affiliate of such person, whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement or otherwise (the “Total Payments”), would be subject to the excise
tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise
tax (such excise tax, together with any such interest and penalties, are collectively referred to
as the “Excise Tax”), then the Executive shall be entitled to receive an additional payment (a
“Gross-Up Payment”) in an amount such that after payment by the Executive of all taxes (including
any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed
upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Total Payments (not including any Gross-Up Payment). The Company will
pay the Gross-Up Payment to the Executive after it determines that the severance payment is subject
to the excise tax under Section 4999 of the Code, but in no event later than December 31 of the
year after the year in which the Executive remits such excise tax.

          (b) All determinations as to whether any of the Total Payments are “parachute payments”
(within the meaning of Section 280G of the Code), whether a Gross-Up Payment is required, the
amount of such Gross-Up Payment and any amounts relevant to the last sentence of Subsection 13(a),
shall be made by an independent accounting firm selected by the Company from among the largest five
accounting firms in the United States (the “Accounting Firm”). The Accounting Firm shall provide
its determination (the “Determination”), together with detailed supporting calculations regarding
the amount of any Gross-Up Payment and any other relevant matter, both to the Company and the
Executive within 30 days of the Termination Date, if

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applicable, or such earlier time as is requested by the Company or the Executive (if the Executive
reasonably believes that any of the Total Payments may be subject to the Excise Tax). Any
determination by the Accounting Firm shall be binding upon the Company and the Executive. As a
result of uncertainty in the application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that the Company should have made
Gross-Up Payments (“Underpayment”), or that Gross-Up Payments will have been made by the Company
which should not have been made (“Overpayments”). In either such event, the Accounting Firm shall
determine the amount of the Underpayment or Overpayment that has occurred. In the case of an
Underpayment, the amount of such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive. In the case of an Overpayment, the Executive shall, at the direction and
expense of the Company, take such steps as are reasonably necessary (including the filing of
returns and claims for refund), follow reasonable instructions from, and procedures established by,
the Company, and otherwise reasonably cooperate with the Company to correct such Overpayment.

     14. EXECUTIVE REPRESENTATION. The Executive expressly represents and warrants to the Company
that the Executive is not a party to any contract or agreement and is not otherwise obligated in
any way, and is not subject to any rules or regulations, whether governmentally imposed or
otherwise, which will or may restrict in any way the Executive’s ability to fully perform the
Executive’s duties and responsibilities under this Agreement.

     15. SUCCESSORS AND ASSIGNS.

          (a) This Agreement shall be binding upon and shall inure to the benefit of the Company, its
successors and assigns, and the Company shall require any successor or assign to expressly assume
and agree to perform this Agreement in the same manner and to the same extent that the Company
would be required to perform it if no such succession or assignment had taken place. The term “the
Company” as used herein shall include any such successors and assigns to the Company’s business
and/or assets. The term “successors and assigns” as used herein shall mean a corporation or other
entity acquiring or otherwise succeeding to, directly or indirectly, all or substantially all the
assets and business of the Company (including this Agreement) whether by operation of law or
otherwise.

          (b) Neither this Agreement nor any right or interest hereunder shall be assignable or
transferable by the Executive, the Executive’s beneficiaries or legal representatives, except by
will or by the laws of descent and distribution. This Agreement shall inure to the benefit of and
be enforceable by the Executive’s legal personal representative.

     16. ARBITRATION. Except with respect to the remedies set forth in Section 12(f), as a method
for resolving any dispute arising out of this Agreement, the Executive, in the Executive’s sole
discretion, may select binding arbitration in accordance with this Section. Except as provided
otherwise in this Section, arbitration pursuant to this Section shall be governed by the Commercial
Arbitration Rules of the American Arbitration Association. If the Executive wishes to arbitrate an
issue under this Section 16, the Executive shall deliver written notice to the Company, including a
description of the issue to be arbitrated. Within fifteen (15) days after the

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Executive demands arbitration, the Company and the Executive shall each appoint an arbitrator.
Within fifteen (15) additional days, these two arbitrators shall appoint the third arbitrator by
mutual agreement; if they fail to agree within this fifteen (15) day period, then the third
arbitrator shall be selected promptly pursuant to the rules of the American Arbitration Association
for Commercial Arbitration. The arbitration panel shall hold a hearing in Columbus, Ohio, within 90
days after the appointment of the third arbitrator. The fees and expenses of the arbitrators, and
any American Arbitration Association fees, shall be paid by the Company. Both the Company and the
Executive may be represented by counsel and may present testimony and other evidence at the
hearing. Within 90 days after commencement of the hearing, the arbitration panel will issue a
written decision; the majority vote of two of the three arbitrators shall control. The majority
decision of the arbitrators shall be binding on the parties, and the parties may not pursue other
available legal remedies if the parties are not satisfied with the majority decision of the
arbitrator. The Executive shall be entitled to seek specific performance of the Executive’s rights
under this Agreement during the pendency of any dispute or controversy arising under or in
connection with this Agreement.

     17. NOTICE. For the purposes of this Agreement, notices and all other communications provided
for in the Agreement (including the Notice of Termination) shall be in writing and shall be deemed
to have been duty given when personally delivered or sent by registered or certified mail, return
receipt requested, postage prepaid, or upon receipt if overnight delivery service or facsimile is
used, addressed as follows:

     TO THE EXECUTIVE:

Michael W. Rayden

5014 Kitzmiller Road

New Albany, Ohio 43054

     TO THE COMPANY

Tween Brands, Inc.

8323 Walton Parkway

New Albany, Ohio 43054

Attn: Michael C. Keane, Senior Vice President — Human Resources

     18. SETTLEMENT OF CLAIMS. Except as otherwise provided, the Company’s obligation to make the
payments provided for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Company may have against the Executive or others.

     19. MISCELLANEOUS. No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing and signed by the Executive
and the Company. No waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or

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conditions at the same or at any prior or subsequent time. No agreement or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement.

     20. GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Ohio without giving effect to conflict of law
principles thereof. The parties hereby consent to the exclusive jurisdiction of the state courts
of the State of Ohio and venue in Franklin County, Ohio.

     21. SEVERABILITY. The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity or enforceability of
the other provisions hereof.

     22. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto with respect to the
subject matter hereof.

     IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duty
authorized officer and the Executive has executed this Agreement as of the day and year first above
written.

	 	 	 	 	 	 	 
	 	 	TWEEN BRANDS, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:

Name:
	 	/s/ Michael C. Keane
 

Michael C. Keane
	 	 
	 

	 	Title:
	 	Senior Vice President — Human Resources	 	 
	 
	 	 	 	 	 	 
	 	 	EXECUTIVE	 	 
	 
	 	 	 	 	 	 
	 	 	/s/ Michael W. Rayden	 	 
	 	 	 	 	 
	 	 	Michael W. Rayden	 	 

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