STOCK-BASED COMPENSATION PLANS

2010 Stock Award and Incentive Plan

The 2010 Stock Award and Incentive Plan (the “2010 Plan”) was approved by our Board of Directors and shareholders in Fiscal 2010. The 2010 Plan replaces our 2004 Stock Award and Incentive Plan (the “2004 Plan”) and no new awards will be granted under the 2004 Plan. Shares for equity awards to our non-employee directors under our 2003 Non-Employee Directors Compensation Plan (the “2003 Plan”), including grants of awards in Fiscal 2010, will also be drawn from the 2010 Plan and no further awards will be granted from remaining shares which were reserved under the 2003 Plan. In addition, no further awards will be granted under our 1988 Key Employee Stock Option Plan (the “1988 Plan”). The 2004 Plan, 2003 Plan, and 1988 Plan are further described below.

The number of shares reserved for issuance under the 2010 Plan consist of 4,000,000 shares plus (i) 2,414,004 shares remaining available under the 2004 Plan, which have been transferred to the 2010 plan, and (ii) shares subject to outstanding awards under the 2004 Plan and predecessor plans (2000 Associates’ Stock Incentive Plan and 1993 Employees’ Stock Incentive Plan, which are described below, and 1999 Associates’ Stock Incentive Plan) that are canceled, forfeited, or otherwise become available under the share recapture provisions of the 2010 Plan. Unissued shares remaining available under the 2003 Plan and 1988 Plan as of June 24, 2010 were not added to the shares authorized under the 2010 Plan.

The 2010 Plan provides for a broad range of awards, including stock options; stock appreciation rights (“SARs”); restricted stock units (“RSUs”); restricted stock awards (“RSAs”); deferred stock; other stock-based awards; dividend equivalents; performance shares or other stock-based performance awards; cash-based performance awards; and shares issuable in lieu of rights to cash compensation. Stock options include both incentive stock options and non-qualified stock options. Executive officers and other employees of Charming Shoppes, Inc. and its subsidiaries, non-employee directors, consultants, and others who provide substantial services to us are eligible for awards under the 2010 Plan.

The 2010 Plan includes a limitation on the amount of awards that may be granted to any one participant in a given fiscal year in order to qualify awards as “performance-based” compensation not subject to the limitation on deductibility under Section 162(m) of the Internal Revenue Code. The 2010 Plan does not allow the amendment or replacement of options or SARs previously granted under the 2010 Plan in a transaction that constitutes a “re-pricing” under generally accepted accounting principles without shareholder approval and does not authorize loans to participants.

Additional information related to the 2010 Plan is as follows:



	Year Ended
	January 28, 2012		January 29, 2011
RSUs granted	657,691		324,206
Weighted average market price at date of grant	$	3.89	$	4.76
Shares issued under RSUs	304,926		—
Cancellations of RSUs	34,250		—
RSUs outstanding at end of period	642,721		324,206
SARs exercisable at year-end	39,159		—

2004 Stock Award and Incentive Plan

The 2004 Plan replaced our 2000 Associates’ Stock Incentive Plan (the “2000 Plan”) and our 1993 Employees’ Stock Incentive Plan (the “1993 Plan”), which are described below, and our 1999 Associates’ Stock Incentive Plan. In 2009 our shareholders re-approved the material terms of the performance goals under the 2004 Plan in order to preserve our Federal income tax deduction for performance-based awards under the plan. As a result of the adoption of our 2010 Plan (described above), no further awards will be granted under the 2004 Plan. The plan was administered by our Board of Directors and its Compensation Committee.

The 2004 Plan provided for the grant of options (including both incentive and non-qualified stock options), RSAs, SARs, RSUs, and a variety of other types of awards. Awards representing an aggregate of up to 6,500,000 shares of our common stock, together with shares remaining available under the 1993 Plan and shares recaptured from outstanding awards under the 1993 Plan, 1999 Plan, and 2000 Plan, could be issued under this plan. Of the aggregate shares available, up to 2,000,000 shares could be issued in connection with “full-value” awards (equity awards for which a participant does not pay at least the grant-date fair market value of the award, such as RSAs or RSUs). Additional shares could be used for full-value awards by reducing the number of shares that remained available for options, SARs, and other non-full-value awards by three shares for each share to be used for full-value awards in excess of the 2,000,000 share limit.

The aggregate number of shares subject to awards granted under the 2004 Plan in any fiscal year could not exceed 2% of our common stock on a fully diluted basis as of the last day of the preceding fiscal year. The 2004 Plan prohibits the amendment or replacement of options or SARs granted under the plan in a transaction that constitutes a “re-pricing” under generally accepted accounting principles without shareholder approval.

Additional information related to our 2004 Plan is as follows:



	Year Ended
	January 28, 2012		January 29, 2011		January 30, 2010
RSUs granted	—		300,417		—
Weighted average market price at date of grant	$	—	$	5.15	$	—
Shares issued under RSAs/RSUs	281,282		256,485		253,671
Cancellations of RSAs/RSUs	56,656		63,396		258,761
RSAs/RSUs outstanding at year-end	354,863		692,801		712,265
SARs exercisable at year-end	1,160,423		911,660		314,919

2003 Non-Employee Directors Compensation Plan

Directors who are not employed by our company are eligible to participate in the 2003 Plan. Our Board of Directors administers the plan and approves the form and amount of awards under the plan. This plan provided for the grant of stock options, SARs, RSAs, RSUs, or deferred shares of up to an aggregate total of 600,000 shares of our common stock. No more than 50% of the shares reserved for issuance under the plan could be issued as restricted stock awards or RSUs. As a result of the adoption of the 2010 Plan (see above), shares for equity awards to our non-employee directors under the 2003 Plan, including grants of awards in Fiscal 2010, will also be drawn from the 2010 Plan and no further awards will be granted from remaining shares which were reserved under the 2003 Plan. The 2003 Plan is a sub-plan under the 2010 Plan and represents the policy-governing directors’ compensation, which is subject to modification or replacement from time to time by the Board of Directors.

Under the 2003 Plan annual RSUs for a number of shares equivalent to $135,000 of aggregate market value on the date of grant were granted to each non-employee director serving at the date of our Annual Meeting of Shareholders. On January 18, 2012 our Board of Directors amended the 2003 Plan to provide that the automatic annual grant of RSUs to non-employee directors will take place on June 1 each year rather than at the date of the Annual Meeting of Shareholders. The RSUs continue to vest in one year on June 1 as is currently the practice. Each RSU represents a right to receive one share of common stock or cash of equal value, at the company’s option, at the date of vesting or, if deferred by the director, at a later date after termination of service. Non-employee directors could also elect to receive deferred shares of common stock of an equivalent market value instead of cash director’s fees.

The exercise price of options or SARs granted under the 2003 Plan could not be less than the fair market value of our common stock on the date of grant. The maximum term of options and SARs issued under the plan is ten years. The plan includes a provision that options previously granted under the plan will not be amended or replaced in a transaction that constitutes a “re-pricing” as defined in the plan without shareholder approval.

Additional information related to our 2003 Plan is as follows:



	Year Ended
	January 28, 2012	January 29, 2011	January 30, 2010
Shares issued under RSAs/RSUs	—	—	15,334
Options exercisable at year-end	69,000	120,658	263,158

2000 Associates’ Stock Incentive Plan

The 2000 Plan provided for the grant of options, SARS, RSAs, deferred stock, or other stock-based awards of up to an aggregate total of 5,000,000 shares of our common stock. The form of the grants, exercise price, and maximum term, where applicable, were at the discretion of our Board of Directors and its Compensation Committee. As a result of our adoption of the 2004 Plan, we no longer issue options or awards under this plan. Additional information related to our 2000 Plan is as follows:



	Year Ended
	January 28, 2012	January 29, 2011	January 30, 2010
Shares issued under RSAs	—	—	58,560
Options exercisable at year-end	—	214,300	439,060

1993 Employees’ Stock Incentive Plan

The 1993 Plan provided for the grant of options or RSAs for up to an aggregate total of 10,898,726 shares of common stock plus 1,843,258 unissued shares available under our discontinued 1990 Employees’ Stock Incentive Plan. The form of the grants and exercise price, where applicable, were at the discretion of our Board of Directors and its Compensation Committee. The maximum term of options issued under the 1993 Plan was ten years. As a result of the adoption of the 2004 Plan, we no longer issue options or RSAs under this plan.

Additional information related to our 1993 Plan is as follows:



	Year Ended
	January 28, 2012	January 29, 2011	January 30, 2010
Shares issued under RSAs	—	—	73,440
Options exercisable at year-end	—	149,640	280,640

1988 Key Employee Stock Option Plan

Our 1988 Plan provided for the grant of options to our key employees to purchase up to an aggregate total of 3,000,000 shares of our common stock. The exercise price of options granted under this plan was $1.00 per share. As a result of the adoption of the 2010 Plan we no longer issue options under this plan. Additional information related to our 1988 Plan is as follows:



	Year Ended
	January 28, 2012	January 29, 2011	January 30, 2010
Options exercisable at year-end	—	5,884	8,504

The shares issued and options granted under the above plans are subject to forfeiture if the employees do not remain employed by us for a specified period of time. Service-based awards issued under the 2010 Plan and 2004 plan generally vest over 4 to 5 years. Under the 2003 Plan, shares issued and options granted are subject to forfeiture if the individual does not remain a Director of the Company for a specified period of time except, under certain circumstances, in the case of retirement or voluntary termination. Options issued under the 1988 Plan are service-based and generally vest over 5 years.

The table below summarizes options/SARs activity under our various plans:



	Option/ SARs Shares		Weighted Average Exercise Price		Range of Exercise Prices per Share
Outstanding at January 31, 2009⁽¹⁾	3,292,385		$	5.09	$	1.00	—	$	13.84
Granted – exercise price equal to market price⁽²⁾	4,775,360		1.74		0.99		—	5.72
Canceled/forfeited	(970,310	)	4.48		1.00		—	11.28
Exercised	(20,482	)	2.20		1.00		—	4.78
Outstanding at January 30, 2010⁽³⁾	7,076,953		2.92		0.99		—	13.84
Granted – exercise price equal to market price	1,032,607		5.05		3.54		—	6.62
Canceled/forfeited⁽⁴⁾	(1,978,215	)	3.52		0.99		—	11.28
Exercised	(33,192	)	1.45		1.00		—	2.93
Outstanding at January 29, 2011⁽⁵⁾	6,098,153		3.10		1.00		—	13.84
Granted – exercise price equal to market price	2,569,450		3.98		2.71		—	4.95
Canceled/forfeited	(935,967	)	4.86		1.00		—	13.84
Exercised⁽⁶⁾	(1,640,322	)	1.80		1.00		—	4.00
Outstanding at January 28, 2012⁽⁷⁾	6,091,314		$	3.55	$	1.00	—	$	11.28
Exercisable at January 28, 2012⁽⁷⁾	1,475,746		$	3.23	$	1.03	—	$	11.28


(1)	Includes 709,646 shares related to “inducement grants”of SARs in accordance with Nasdaq Marketplace Rule 5635(c)(4).


(2)	Includes 1,250,000 shares related to “inducement grants.”


(3)	Includes 1,959,646 shares outstanding related to “inducement grants,” of which 177,222 shares were exercisable.


(4)	Includes 543,150 shares rated to "inducement grants."


(5)	Includes 1,416,496 shares outstanding related to “inducement grants,” of which 427,848 shares were exercisable.


(6)	Includes 825,000 shares exercised related to “inducement grants.”


(7)	Includes 591,496 shares outstanding related to “inducement grants,” of which 207,164 shares were exercisable.

The table below summarizes information regarding weighted average exercise price and weighted average remaining contractual life in years for options/SARs outstanding and options/SARs exercisable as of January 28, 2012 for the ranges of exercise prices shown:



	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Life (Years)
Ranges of Exercise Prices
$1.00– $5.00:
Options/SARs outstanding	5,321,259	$	3.26	5.0
Options/SARs exercisable	1,226,685	2.63		3.9
$5.01– $10.00:
Options/SARs outstanding	755,055	$	5.44	5.0
Options/SARs exercisable	234,061	5.85		4.6
$10.01– $11.28:
Options outstanding	15,000	$	11.28	4.4
Options exercisable	15,000	11.28		4.4

The table below summarizes certain additional information with respect to our options, SARs and awards:



	Year Ended
(In thousands)	January 28, 2012		January 29, 2011		January 30, 2010
Aggregate intrinsic value of options/SARs outstanding at year-end⁽¹⁾	$	8,531	$	—	$	20,610
Aggregate intrinsic value of options/SARs exercisable at year-end⁽¹⁾	2,545		—		—
Aggregate market value of unvested stock awards at year-end	4,938		3,112		4,157
Aggregate intrinsic value of options/SARs exercised during the year⁽²⁾	2,232		78		65
Aggregate market value of stock awards vested during the year	2,290		1,538		875


(1)	Aggregate market value at year-end less aggregate exercise price.


(2)	Aggregate market value on date of exercise less aggregate exercise price.

Total stock-based compensation expense was as follows:



	Year Ended
(In thousands)	January 28, 2012		January 29, 2011		January 30, 2010
Stock-based compensation expense, excluding cash-settled RSUs	$	5,155	$	4,698	$	6,844
Stock-based compensation expense, cash-settled RSUs	—		4		819
Total stock-based compensation expense	$	5,155	$	4,702	$	7,663

Total stock-based compensation expense not yet recognized, related to the non-vested portion of SARs and awards outstanding, was $10,701,000 as of January 28, 2012. The weighted-average period over which we expect to recognize this compensation expense is approximately 3 years.

In applying the Black-Scholes model to determine the fair value of SARs we used the following assumptions: historically estimated stock price volatilities of 81.3% to 94.2%; a dividend yield of 0.0%; an expected life, based on historical experience, of 7.0 years; and risk-free interest rates of 1.38% to 3.6%. For our Employee Stock Purchase Plan we used historically estimated stock price volatilities of 54.2% to 190.2%; a dividend yield of 0.0%; actual life of 3.0 months; and risk-free interest rates of 0.0% to 0.19%.

The weighted average grant date fair values for options and SARs granted, using the Black-Scholes model and assumptions described above, are as follows:



	Year Ended
	January 28, 2012		January 29, 2011		January 30, 2010
Exercise price equal to market price	$	3.19	$	4.06	$	1.35

Employee Stock Purchase Plan

Our 1994 Employee Stock Purchase Plan permits employees to purchase shares of our common stock during quarterly offering periods at a price equal to 85% of the lower of the stock’s market price on the first day of, or the fifth business day after the end of, the offering period. Employees purchase shares through accumulation of payroll deductions of up to 10% of the employee’s compensation during each offering period. An aggregate total of 2,000,000 shares are reserved for grant under this plan. Additional information related to our Employee Stock Purchase Plan is as follows:



	Year Ended
	January 28, 2012		January 29, 2011		January 30, 2010
Shares purchased	156,281		138,415		257,238
Weighted average market price at date of grant	$	3.57	$	4.49	$	2.57

As of January 28, 2012 the following shares were available for future grants under our stock-based compensation plans:



	Shares Available
2010 Stock Award and Incentive Plan	5,106,330
Employee Stock Purchase Plan	252,394