8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) August 25, 2008

CHARMING SHOPPES, INC.

(Exact name of registrant as specified in its charter)

PENNSYLVANIA	000-07258	23-1721355
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

450 WINKS LANE, BENSALEM, PA  19020

(Address of principal executive offices) (Zip Code)

(215) 245-9100

(Registrant’s telephone number, including area code)

NOT APPLICABLE

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01  Entry Into a Material Definitive Agreement.

Sale of Non-Core Misses Apparel Catalogs

On August 25, 2008, Charming Shoppes, Inc. (the “Company”) entered into a Stock Purchase Agreement (the “Agreement”) with Crosstown Traders, Inc. (“Crosstown”), a wholly-owned indirect subsidiary of the Company, Norm Thompson Outfitters, Inc., a subsidiary of Orchard Brands (a portfolio company owned by Golden Gate Capital) (the “Purchaser”) and the other parties listed on the signature page to the Agreement in order to sell the Company’s non-core misses apparel catalogs to the Purchaser (the “Transaction”).  The Transaction will be accomplished by the Purchaser acquiring all the outstanding shares of capital stock of Arizona Mail Order Company, Inc., a wholly-owned subsidiary of Crosstown (“Arizona”).  The Transaction includes the following catalog titles and their associated E-commerce sites:  Old Pueblo Traders, Bedford Fair, Willow Ridge, Lew Magram, Brownstone Studio, Intimate Appeal, Monterey Bay Clothing Company and Coward Shoe (the “Catalogs”).  The purchase price is $35 million in cash, subject to adjustment for certain outstanding current liabilities.

The parties agreed to customary representations, warranties and covenants in the Agreement.  The Agreement may be terminated upon specified occurrences including for any material breach of any pre-closing covenant or any inaccuracy in any representation or warranty, which is not cured within 10 days.  In addition, subject to certain limitations, Crosstown agreed to indemnify Purchaser and its affiliates for breaches of its representations, warranties and covenants.  Crosstown and the Company also agreed to an 18-month non-solicitation of any employee of the Purchaser or its affiliates.  The closing of the Transaction is subject to customary conditions, and is expected to take place by the end of September 2008.

The Purchaser is not acquiring the office facilities, distribution center and certain other assets used by the Catalog business.  Consequently, in connection with the Transaction, Charming Shoppes of Delaware, Inc. (“Charming”), a wholly-owned subsidiary of the Company, and Arizona also agreed to enter into a transition services agreement whereby Charming would make available to Arizona certain transition services for specified time periods ranging up to one year following closing of the Transaction (the “Transition Period”), depending on the services provided.  The services that Charming would provide to Arizona include: (i) distribution centers and order processing; (ii) call centers; (iii) information technology services; (iv) benefits administration; (v) office space within existing facilities for transferred employees and retail stores; (vi) quality assurance and control; (vii) financial and accounting services; and (viii) e-commerce and marketing services.  In addition, Arizona has agreed to provide certain transition services to Charming, including: (i) shared inventory; (ii) paper, print and catalog production services; (iii) inventory and merchandising reporting; and (iv) master integration plans.  Subsequent to the Transition Period, the Company will be responsible for the remaining lease liabilities and disposition costs for the distribution and office facilities.

The foregoing description of the terms and conditions of the Transaction is qualified in its entirety by reference to the Agreement, which is attached as Exhibit 10.1 to this current report and incorporated herein by reference.

Sale of Misses Apparel Catalog Credit Card Receivables

Spirit of America National Bank, a wholly-owned indirect subsidiary of the Company (“Spirit”), provides an accounts receivable proprietary credit card program for the Catalogs.  Under the arrangement, Spirit owns the account relationship with the customers (the “Accounts”), originates the receivables and operates the credit program.  Spirit reimburses Crosstown daily for credit card sales generated at the Catalogs.

On August 25, 2008, contemporaneous with the signing of the Agreement, Spirit entered into a Purchase Agreement (the “Purchase Agreement”) with World Financial Network National Bank (“WFNNB”) whereby Spirit agreed to sell and WFNNB agreed to purchase the Accounts related to the Catalogs (excluding Lane Bryant Woman, ShoeTrader.com and Home Etc. accounts) and related account balances.  The purchase price under the Purchase Agreement is a sum equal to the balances on the Accounts at the closing date.  The Purchase Agreement contains customary representations, warranties and indemnification provisions.  Closing under the Purchase Agreement is subject to customary conditions, and is anticipated to take place prior to the Company’s January 31, 2009 fiscal year end.

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In order to continue providing the accounts receivable proprietary credit card program for the Catalogs through the date of closing under the Purchase Agreement, on August 25, 2008 Spirit entered into a Private Label Credit Card Plan Agreement (the “Credit Card Agreement”) with Arizona pursuant to which Spirit will provide Arizona an accounts receivable proprietary credit card program, on substantially the same terms as are currently afforded Arizona, until the earlier to occur of closing under the Purchase Agreement or January 31, 2010.  If the closing of the Purchase Agreement does not occur on or prior to January 31, 2009, Arizona may terminate the Credit Card Agreement upon 90 days notice to Spirit.  The Credit Card Agreement contains customary representations, warranties and indemnification provisions.

The foregoing description of the terms and conditions of the Purchase Agreement and the Credit Card Agreement is qualified in its entirety by reference to such agreements, which are attached as Exhibit 10.2 and Exhibit 10.3, respectively, to this current report and incorporated herein by reference.

The Company issued a press release on August 25, 2008 with respect to the foregoing transactions, a copy which is attached as Exhibit 99.1 to this current report.

Item 9.01  Financial Statements and Exhibits.

Exhibit No.	Description
10.1	Stock Purchase Agreement dated as of August 25, 2008 by and between Crosstown Traders, Inc., Norm Thompson Outfitters, Inc., Charming Shoppes, Inc. and the other persons listed on the signature page thereto.*
10.2	Purchase Agreement dated as of August 25, 2008 between Spirit of America National Bank and World Financial Network National Bank.*
10.3	Private Label Credit Card Plan Agreement dated as of August 25, 2008 by and between Arizona Mail Order Company, Inc. and Spirit of America National Bank.*
99.1	Press release dated August 25, 2008.

*Schedules and attachments have been omitted but will be provided to the Commission upon request.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	CHARMING SHOPPES, INC.
	(Registrant)
Date:  August 28, 2008	/S/ ERIC M. SPECTER
	Eric M. Specter
	Executive Vice President
	Chief Financial Officer

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EXHIBIT INDEX

Exhibit No.	Description
10.1	Stock Purchase Agreement dated as of August 25, 2008 by and between Crosstown Traders, Inc., Norm Thompson Outfitters, Inc., Charming Shoppes, Inc. and the other persons listed on the signature page thereto.*
10.2	Purchase Agreement dated as of August 25, 2008 between Spirit of America National Bank and World Financial Network National Bank.*
10.3	Private Label Credit Card Plan Agreement dated as of August 25, 2008 by and between Arizona Mail Order Company, Inc. and Spirit of America National Bank.*
99.1	Press release dated August 25, 2008.

*Schedules and attachments have been omitted but will be provided to the Commission upon request.

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EX-10.1

EXHIBIT 10.1

STOCK PURCHASE AGREEMENT

dated as of

August 25, 2008

by and between

CROSSTOWN TRADERS, INC.

NORM THOMPSON OUTFITTERS, INC.

CHARMING SHOPPES, INC.

and

THE OTHER PERSONS LISTED ON THE SIGNATURE PAGES HERETO

TABLE OF CONTENTS

		Page
Section 1.	DEFINITIONS	1
1.1	Definitions	1
Section 2.	PURCHASE AND SALE OF SHARES	10
2.1	Purchase and Sale of Shares	10
2.2	Closing	10
2.3	Payment of Indebtedness	11
2.4	Assignment and Assumption	11
Section 3.	PURCHASE PRICE ADJUSTMENT	12
3.1	Estimated Closing Outstanding Checks and Estimated Closing CTI Borne Expenses	12
3.2	Closing Statement	12
3.3	Post-Closing Adjustment	13
3.4	Assumption of CTI Borne Expenses	14
Section 4.	REPRESENTATIONS AND WARRANTIES REGARDING CTI	14
4.1	Organization and Good Standing	14
4.2	Power and Authorization	15
4.3	No Conflicts	15
4.4	Ownership of the Shares	16
4.5	Brokers	16
Section 5.	REPRESENTATIONS AND WARRANTIES  REGARDING THE COMPANY AND SUBSIDIARIES	16
5.1	Organization and Good Standing	16
5.2	No Conflicts	16
5.3	Capitalization	17
5.4	Compliance with Laws	18
5.5	Litigation	18
5.6	Financial Statements	18
5.7	Inventory	19
5.8	Absence of Certain Changes and Events	20
5.9	Real Property	22
5.10	Personal Property; Bank Accounts	22
5.11	Material Contracts	22
5.12	Insurance	24
5.13	Intellectual Property	24
5.14	Suppliers	26
5.15	Labor Matters	26
5.16	Employee Benefits	27
5.17	Officers and Employees	28
5.18	Environmental Matters	29
5.19	Sufficiency of the Assets	31
5.20	Brokers	31
Section 6.	REPRESENTATIONS AND WARRANTIES OF BUYER	31
6.1	Organization and Good Standing	31
6.2	Power and Authorization	31
6.3	No Conflicts	32
6.4	No Reliance	32
6.5	Brokers	32
6.6	Financing	33
6.7	Disclaimer Regarding Projections	33
6.8	No Additional Representations	33
Section 7.	COVENANTS OF CTI	33
7.1	Conduct of Business Pending Closing	33
7.2	Negative Covenants Pending Closing	34
7.3	Governmental Authorizations; Consents	36
7.4	Access to Information	37
7.5	Confidential Information	38
7.6	Non-Solicitation	39
7.7	Elimination of Intercompany Accounts	39
7.8	Exclusivity	39
7.9	Financial Information	40
7.10	Maintenance of Insurance Policies	40
Section 8.	COVENANTS OF BUYER	40
8.1	Confidential Information	40
8.2	Governmental Authorizations	42
8.3	Notice of Breach; Failure to Satisfy Closing Condition	42
8.4	Non-Solicitation	42
Section 9.	ADDITIONAL COVENANTS OF BUYER, THE COMPANY AND CTI	42
9.1	Further Assurances	42
9.2	Certain Filings and Consents	43
9.3	Public Announcements	43
9.4	Excluded Subsidiaries and Excluded Assets	43
9.5	Transition Services	44
9.6	Mutual Release	44
Section 10.	TAX MATTERS	45
10.1	Tax Representations of CTI	45
10.2	Tax Covenants of CTI and the Company	46
10.3	Tax Indemnification	46
10.4	Tax Contest	47
10.5	Tax Sharing Agreements	48
10.6	Transfer Taxes	48
10.7	Section 338(h)(10) Election	48
10.8	Purchase Price Allocation	48
Section 11.	EMPLOYEE BENEFITS	49
11.1	Listed Employees; Transferred Employees	49
11.2	Comparability of Benefits	49
11.3	Welfare Plans	50
11.4	Service Credit	50
11.5	Rollovers and Transfers	50
11.6	Continuation Coverage	51
11.7	Retained Liabilities	51
11.8	Paid Time Off	52
11.9	Third Party Beneficiaries; Other Limitations	52
Section 12.	CLOSING CONDITIONS	52
12.1	Conditions to Obligation of Buyer	52
12.2	Conditions to Obligation of CTI	53
12.3	Frustration of Closing Conditions	54
Section 13.	TERMINATION AND ABANDONMENT	54
13.1	Termination	54
13.2	Procedure for Termination	55
Section 14.	SURVIVAL; INDEMNIFICATION	56
14.1	Survival	56
14.2	Indemnification	56
14.3	Procedures	57
14.4	Limitation on Damages	59
14.5	Assignment of Claims	59
14.6	Exclusivity	59
14.7	Limitation on Liability	60
Section 15.	MISCELLANEOUS	60
15.1	Costs and Expenses	60
15.2	Notices	60
15.3	Assignment	61
15.4	Amendment, Modification and Waiver	61
15.5	Governing Law	61
15.6	Waiver of Jury Trial	62
15.7	Consent to Jurisdiction	62
15.8	Section Headings and Defined Terms	62
15.9	Severability	63
15.10	Counterparts; Third-Party Beneficiaries	63
15.11	Entire Agreement	63
15.12	Waiver of Conflicts Regarding Representation; Nonassertion of Attorney-Client Privilege	63
15.13	Orchard Guaranty	64
15.14	Parent Guaranty	65

STOCK PURCHASE AGREEMENT

THIS STOCK PURCHASE AGREEMENT, dated as of August 25, 2008 (this “Agreement”), is made by and between CROSSTOWN TRADERS, INC., a Delaware corporation (“CTI”), CHARMING SHOPPES, INC., a Delaware corporation (“Parent”), NORM THOMPSON OUTFITTERS, INC., a Delaware corporation (the “Buyer”), and the other parties listed on the signature pages hereto.  Certain terms used herein are defined in Section 1.1 hereof.

BACKGROUND

CTI is the record and beneficial owner of all of the outstanding shares of capital stock of the Company.

The parties hereto desire to provide for the acquisition by Buyer of the Company through the sale by CTI to Buyer of all the outstanding shares of capital stock of the Company and for certain other matters, all on the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual representations, warranties, covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows:

SECTION 1.  DEFINITIONS

1.1Definitions.  

(a)The following terms, as used herein, have the following meanings:

“Acquired Assets” means those assets, agreement, contracts and other items identified or described on Schedule 1.1A hereto.

“Accrued Vacation Amount” means the lesser of (a) the product of (i) any liability for accrued vacation, personal days, sick pay and other paid time off times (ii) 0.80, and (b) $200,000.

“Affiliate” means, with respect to any Person, any Person directly or indirectly controlling, controlled by, or under common control with such other Person.  For purposes of this definition, “control,” when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have correlative meanings.

“Assumed Liabilities” means (i) any Liabilities resulting from, arising out of, relating to, in the nature of, or caused by any Acquired Asset, (ii) any Liabilities included in the calculation of the Final Closing CTI Borne Expenses that are assumed by the Company and its Subsidiaries pursuant to Section 3.4, and (iii) any Liabilities for accrued vacation, personal

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days, sick pay and other paid time off that are assumed by the Company pursuant to Section 3.4.

“Business Day” means a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by Law to close.

“Closing CTI Borne Expenses” means the amount of unpaid CTI Borne Expenses as of the Closing.

“Closing Outstanding Checks” means the amount of Outstanding Checks as of the Closing.

“Closing Payment” means $35,000,000.

“Company” means Arizona Mail Order Company, Inc., a Delaware corporation.

“Consent” means any approval, consent, license, permit, franchise, grant, waiver or other authorization.

“CTI Borne Expenses” means, with respect to the Company and its Subsidiaries, the sum of (i) the amount of Past Due Payables (less the amount of any vendor credits (not to exceed $100,000 in the aggregate for all vendor credits) which may be used by the Company and its Subsidiaries to reduce amounts otherwise due and owing under such Past Due Payables to the applicable vendors) in excess of $250,000 in the aggregate, (ii) the amount of all unprocessed customer returns/refunds that have not been promptly processed in the ordinary course of business, (iii) any change-of-control, retention or similar payment which is triggered in whole or in part by the transactions contemplated by this Agreement, (iv) (A) any liability for accrued payroll, (B) any liability for accrued bonus payments, (C) the Accrued Vacation Amount, and (D) any other liability for accrued employee compensation, (v) any liability for accrued severance payments, (vi) any liability for accrued restructuring costs, (vii) any liability for Taxes, and (viii) the amount of all payables due to Direct Marketing Services, Inc.

“Encumbrance” means any mortgage, deed of trust, pledge, lien, security interest, charge, encumbrance, community property interest or restriction on use, voting, transfer or receipt of income.

“Environmental Laws” means all Laws concerning or relating to the protection of the environment and human health as it relates to the environment.

“Excluded Assets” means those assets, agreements, contracts and other items identified or described on Schedule 1.1B hereto.

“Excluded Liabilities” any Liabilities resulting from, arising out of, relating to, in the nature of, or caused by any Excluded Asset or the Excluded Subsidiaries (including any Liabilities relating to the Lane Bryant business).

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“Excluded Subsidiaries” means Home Etc., Inc., a Delaware corporation, and Old Pueblo Traders #8257, LLC, an Arizona limited liability company.

“GAAP” means United States generally accepted accounting principles applied consistently with those used to prepare the Financial Statements.

“Governmental Body” means any foreign or United States federal, state, local, municipal or other government, agency, instrumentality or authority.

“Governmental Authorization” means any Consent issued, granted, given, or otherwise made available by or under the authority of any Governmental Body or pursuant to any Laws.

“Hazardous Substance” means any substance governed or regulated under any Environmental Laws, including any substance which is: (i) petroleum, asbestos or asbestos-containing material, or polychlorinated biphenyls; (ii) defined, designated or listed as a “Hazardous Substance” pursuant to Sections 307 or 311 of the Clean Water Act, 33 U.S.C. §§ 1317, 1321, Section 101(14) of CERCLA, 42 U.S.C. § 9601; (iii) listed in the United States Department of Transportation Hazardous Material Tables, 49 C.F.R. § 172.101; or (iv) defined, designated or listed as a “Hazardous Waste” under Section 1004(5) of the Resource and Conservation and Recovery Act, 42 U.S.C. 6903(5).

“Indebtedness” of a Person means (i) any indebtedness of that Person for borrowed money or issued in substitution for or exchange of indebtedness for borrowed money, (ii) any indebtedness of that Person evidenced by any note, bond, debenture or other debt security, (iii) any indebtedness for the deferred purchase price of property or services with respect to which that Person is liable, contingently or otherwise, as obligor or otherwise (other than trade payables or other accruals incurred in the ordinary course of business), (iv) any commitment by which that Person assures a creditor against loss (including, without limitation, contingent reimbursement Liability with respect to letters of credit), (v) any indebtedness guaranteed in any manner by that Person (including, without limitation, guarantees in the form of an agreement to repurchase or reimburse), (vi) any Liabilities under capitalized leases with respect to which that Person is liable, contingently or otherwise, as obligor, guarantor or otherwise, (vii) any indebtedness secured by an Encumbrance on that Person’s assets, (viii) any off-balance sheet financing of that Person (other than operating leases), (ix) any accrued and unpaid interest on, and any prepayment premiums, penalties or similar contractual charges in respect of, any of the foregoing obligations computed as though payment is being made in respect thereof on the Closing Date, and (x) any Liabilities incurred by that Person (including, in the case of the Company and its Subsidiaries, any fees, costs and expenses incurred on behalf of CTI and any fees payable to Banc of America Securities LLC and Lehman Brothers, Inc.) in connection with the negotiation of this Agreement, the other Transaction Documents, the performance of such Person’s and its pre-Closing Affiliates’ obligations hereunder and thereunder, and the consummation of the transactions contemplated hereby and thereby.

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“Knowledge” means the actual knowledge of (i) with respect to CTI, any one or more of Eric Specter and Edwin Neumann and (ii) with respect to Buyer, any one or more of Neale Attenborough, Dave Walde and Joshua Olshansky.

“Laws” means any law (including principles of common law), constitution, statute, regulation, ordinance, certificate, judgment, order, award or other decision or requirement of any Governmental Body.

“Liability” means any liability, debt, obligation, assessment, fine, claim, cause of action or other loss of any kind or nature whatsoever, whether asserted or unasserted, absolute or contingent, known or unknown, accrued or unaccrued, liquidated or unliquidated, and whether due or to become due and regardless of when asserted.

“Material Adverse Effect” means any change, effect, event or condition that, individually or in the aggregate, has had or would be reasonably likely to have a material adverse effect on (i) the business, operations, results of operations, assets or financial condition of the Company and the Subsidiaries, taken as a whole, or (ii) the ability of CTI to consummate the transactions contemplated by this Agreement or any other Transaction Document; provided, however, that any such effect to the extent attributable to any change, effect, event or condition (a) generally applicable to the industries and markets in which the Company and the Subsidiaries operate and not disproportionately affecting the Company or its Subsidiaries, (b) generally applicable to financial, banking or securities markets, (c) relating to any change in applicable Law, in GAAP or in any interpretation thereof occurring after the date hereof, (d) expressly contemplated by the terms of this Agreement or any other Transaction Document or approved by Buyer in writing, (e) resulting from the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or resulting from the occurrence of any military or terrorist attack upon the United States, (f) resulting from seasonal fluctuations affecting the Company or the Subsidiaries or the apparel retail industry, or (g) resulting from the execution of this Agreement or any other Transaction Document or the public announcement of the transactions contemplated hereby or thereby, in any such case, shall not, in and of itself,  constitute a “Material Adverse Effect.”  Notwithstanding the foregoing, CTI may include in the Disclosure Schedule disclosure with respect to items that would not have a Material Adverse Effect within the meaning of the previous sentence, and this inclusion shall not be deemed to be an acknowledgement by CTI that these items, or any of them, would have a Material Adverse Effect or further change, amend or define the meaning of the term Material Adverse Effect for purposes of this Agreement.

“Net Tax Benefit” means, with respect to any indemnification claim, the actual reduction in the aggregate federal and state income tax liability in the taxable period of the loss or other adjustment for which the indemnification is payable, calculated on a with and without basis.

“Orchard” means, collectively, Draper’s & Damon’s, Inc., a California corporation, Haband Company LLC, a Delaware limited liability company, Johnny Appleseed’s Inc., a Massachusetts corporation, and Blair LLC, a Delaware limited liability company, Orchard Brands Corporation, a Delaware corporation.

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“Outstanding Checks” the amount of all checks written by the Company or its Subsidiaries but not cashed prior to Closing (including, without limitation, in respect of accounts payable and customer refunds).

“Past Due Payables” means the amount of all payables of the Company and its Subsidiaries (including any accounts payable, notes payable and any disputed payables) and accrued expenses, in each case, that are past due.

“Permitted Encumbrances” means (i) Encumbrances for Taxes and other governmental charges and assessments that are not yet due and payable, (ii) Encumbrances of landlords and Encumbrances of carriers, warehousemen, mechanics and materialmen and other like Encumbrances arising in the ordinary course of business, (iii) other non-consensual Encumbrances or imperfections of title to or on property that are not material in amount and do not materially detract from the value of or impair in any material respect the existing use of the property affected by such Encumbrance or imperfection, (iv) all Encumbrances of record or identified in any title reports obtained by Buyer or delivered to Buyer by CTI prior to the date of this Agreement, (v) all local and other building and zoning Laws now or hereafter in effect relating to or affecting any real property, (vi) all leases, subleases, licenses and occupancy and/or use agreements affecting any real property (or any portion thereof) which are identified on the Disclosure Schedule, (vii) all service contracts and agreements affecting any real property which are identified on the Disclosure Schedule, or (viii) Encumbrances reflected in the contracts identified in Section 5.11 of the Disclosure Schedule or which are disclosed in the notes accompanying the Financial Statements.

“Person” means any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, labor union or other entity or Governmental Body.

“Personally Identifiable Data” means the names, addresses, email addresses, telephone numbers and fax numbers of any individuals, or any other data likely to substantially identify any individual, together with any other information about an individual which is combined with or linked to any of the foregoing information, including but not limited to, customer lists, mailing lists, telemarketing lists, email lists, customer or prospective customer databases, credit reports, data regarding purchases of identified customers, and databases or records of website usage by users who are identified by any of the foregoing information.

“Purchase Price” means the Closing Payment, as finally adjusted in accordance with Section 3.

“Related Party” means (i) CTI, (ii) any Affiliate of CTI, (iii) any director or officer of CTI or its Affiliates and (iv) any member of the immediate family of any individual included in (iii).  For purposes of this definition, the “immediate family” of an individual includes only the individual’s spouse, parents, children and siblings.

“Related Party Agreements” means agreements, contracts, commitments or understandings by and between any Related Party, on the one hand, and the Company or any

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Subsidiary, on the other hand, including, without limitation, any such agreements, contracts, commitments or understandings pursuant to which a Related Party provides or receives any information, assets, properties, support or other services to or from the Company or any Subsidiary (including, but not limited to accounting, tax, data processing, information technology and legal services).

“Representative” means with respect to a particular Person, any director, member, partner, general partner, limited partner, officer, employee, agent, consultant, advisor, or other representative of such Person, including legal counsel, accountants, and financial advisors.

“Response,” “Removal” and “Remedial Action” shall have the meanings ascribed to them in Sections 101(23)-101(25) of the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), as amended by the Superfund Amendments and Reauthorization Act, 42 U.S.C. §§ 9601(23)-9601(25).

“Software” means all computer programs (whether in source code or object code form), databases, compilations and data, and all documentation related to any of the foregoing that is owned, leased, used or held by, granted to or licensed by the Company or any Subsidiary.

“Subsidiaries” means Bedford Fair Apparel, Inc., a Delaware corporation, LM&B Catalog, Inc., a Delaware corporation, and Monterey Bay Clothing Company, Inc., a Delaware corporation.

“Tax” means all federal, state, local or foreign income, gross receipts, windfall profits, severance, property, production, sales, use, ad valorem, transfer, franchise, capital, paid-up capital, license, greenmail, excise, franchise, stamp, occupation, premium, environmental, employment, withholding or other taxes, escheat, unclaimed or abandoned property, governmental fees or other like assessments, together with any interest, additions or penalties with respect thereto.

“Tax Returns” means all reports, returns, statements and forms with respect to Taxes.

“Trade Secrets” means (i) all customer and supplier lists, pricing and cost information, business and marketing plans and proposals, and Personally Identifiable Data, and (ii) all material proprietary formulas, know-how, trade secrets, business methods, technical data, and inventions, in each case owned, leased, used or held by, granted to or licensed by the Company or any Subsidiary.

“Transaction Documents” means this Agreement and all other agreements required to be delivered by any party hereto pursuant to the terms of this Agreement.

“Transition Period” shall mean the period commencing on the date of this Agreement and ending on September 15, 2008, during which (i) Buyer shall develop and execute a plan to integrate the business operations of the Company and its Subsidiaries into the business operations of Buyer and its Affiliates, (ii) CTI shall cause the Company and the Subsidiaries to provide Buyer and its Representatives access to certain information as contemplated by

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Section 7.4 and (iii) CTI shall provide, and shall cause its Affiliates to provide, the cooperation in connection with facilitating the Closing as contemplated by Section 7.9.

“Wachovia Facility” means that certain Second Amended and Restated Loan and Security Agreement dated as of July 28, 2005 by and among CTI and certain of its Affiliates and a syndicate of banks and other financial institutions identified therein, including Wachovia Bank, National Association as agent for the lenders, as amended.

(b)Each of the following terms is defined in the Section set forth opposite such term:

Term	Section
Agreement	Preamble
Assignment and Assumption	2.4(a)
Balance Sheet	5.6(a)
Business	5.19
Buyer	Preamble
Buyer Group Health Plan Effective Date	11.2
Buyer Material Adverse Effect	6.3(c)
Buyer Plan Effective Date	11.5
Buyer Transaction Documents	6.1
Buyer’s Representatives	7.4
CERCLA	1.1
Claim	14.3(a)
Closing	2.2
Closing Date	2.2
Closing Statement	3.2(a)
Code	5.16(a)
Company Account	5.10(b)
Company Intellectual Property	5.13(a)
Continuation Coverage Laws	11.6
Copyrights	5.13(a)
Covered Individual	11.3
CTI	Preamble
CTI Confidential Information	8.1(b)
Current Representation	15.12(a)
Damages	14.2(a)
Defined Benefit Plan	5.16(d)
Designated Person	15.12(a)
DOL	5.16(a)
Domain Registrations	5.13(a)
Election	10.7
Employee Benefit Plans	5.16(a)

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Term	Section
Employee Pension Benefit Plan	5.16(c)
ERISA	5.16(a)
ERISA Affiliate	5.16(d)
Final Check Excess	3.3(d)
Final Closing Outstanding Checks	3.3(d)
Final Closing CTI Borne Expenses	3.3(d)
Financial Statements	5.6(a)
Indemnified Party	14.3(a)
Indemnifying Party	14.3(a)
Independent Accounting Firm	3.2(c)
IRS	10.1(c)
Listed Employees	11.1
Marks	5.13(a)
Multiemployer Plan	5.16(d)
Nasdaq	7.5(a)
Old Coverage	11.2
Orchard Guaranteed Obligations	15.13(a)
Orchard Guaranty	15.13(a)
Orchard Post-Closing Guaranteed Obligations	15.13(b)
Orchard Post-Closing Guaranty	15.13(b)
Orchard Pre-Closing Guaranteed Obligations	15.13(a)
Orchard Pre-Closing Guaranty	15.13(a)
Parent	Preamble
Parent Guaranteed Obligations	15.14(a)
Parent Guaranty	15.14(a)
Patents	5.13(a)
Post-Closing Representation	15.12(a)
Potential Contributor	14.5
Pre-Closing Tax Period	10.3(a)
Purchase Price Allocation	10.8
Required Amount	11.2
Seller Transaction Documents	4.1
Shares	2.1(a)
Straddle Period	10.3(b)
Surviving Representations and Warranties	14.1
Tax Contest	10.4
Terminating Buyer Breach	13.1(d)
Terminating Seller Breach	13.1(c)

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Term	Section
Third Party Claim	14.3(b)
Transferred Employees	11.1
Transition Services Agreement	9.5
WARN Act	5.15(b)
Warranty Breach	14.2(a)

(c)Except as otherwise provided or unless the context otherwise requires, whenever used in this Agreement, (i) any noun or pronoun shall be deemed to include the plural and the singular, (ii) the use of masculine pronouns shall include the feminine and neuter, (iii) the terms “include” and “including” shall be deemed to be followed by the phrase “without limitation,” (iv) the word “or” shall be inclusive and not exclusive, (v) all references to Sections refer to the Sections of this Agreement, all references to the Disclosure Schedule refer to the Disclosure Schedule attached hereto or delivered with this Agreement, as appropriate, and all references to Exhibits refer to the Exhibits attached to this Agreement, each of which is made a part of this Agreement for all purposes, (vi) each reference to “herein” means a reference to “in this Agreement,” and (vii) accounting terms which are not otherwise defined in this Agreement shall have the meanings given to them under GAAP; provided, however, that to the extent that a definition of a term in this Agreement is inconsistent with the meaning of such term under GAAP, the definition set forth in this Agreement will control.

(d)Any matter set forth in any Section of the Disclosure Schedule shall be deemed set forth in all other Sections to the Disclosure Schedule to the extent the applicability of such matter to such other Sections is reasonably apparent.  The inclusion of any information (including dollar amounts) in any Section of the Disclosure Schedule shall not be deemed to be an admission or acknowledgment by CTI that such information is material to or outside the ordinary course of the business of CTI, the Company or any Subsidiary.  Matters reflected in the Disclosure Schedule are not necessarily limited to matters required by this Agreement to be reflected in the Disclosure Schedule.  The information contained in this Agreement, the Exhibits hereto and the Disclosure Schedule is disclosed solely for purposes of this Agreement, and no information contained herein or therein shall be deemed to be an admission by any party hereto to any third party of any matter whatsoever (including, without limitation, any violation of Law or breach of contract).

(e)The provisions of this Agreement shall be construed according to their fair meaning and neither for nor against any party hereto irrespective of which party caused such provisions to be drafted.  Each of the parties hereto acknowledges that it has been represented by an attorney in connection with the preparation and execution of this Agreement and the other Transaction Documents.

(f)Unless expressly provided otherwise, the measure of a period of one month or one year for purposes of this Agreement shall be that date of the following month or year corresponding to the starting date, provided that if no corresponding date exists, the measure shall be that date of the following month or year corresponding to the next day

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following the starting date.  For example, one month following February 18th is March 18th, and one month following March 31 is May 1.

SECTION 2.   PURCHASE AND SALE OF SHARES

2.1Purchase and Sale of Shares.  

(a)Upon the terms and subject to the conditions of this Agreement, at the Closing, CTI shall sell, transfer and deliver to Buyer, and Buyer shall purchase from CTI, all of the outstanding shares of Common Stock, par value $0.01 per share, of the Company (the “Shares”), free and clear of any Encumbrance (except for restrictions imposed generally by applicable securities Laws).

(b)Upon the terms and subject to the conditions of this Agreement, in consideration for CTI’s delivery of the Shares, Buyer shall pay to CTI the Purchase Price.

2.2Closing.  The closing of the purchase and sale of the Shares (the “Closing”) pursuant to this Agreement shall take place at the offices of Drinker Biddle & Reath LLP, One Logan Square, 18th and Cherry Streets, Philadelphia, PA 19103, commencing at 10:00 A.M., Eastern time, on a date to be mutually agreed by Buyer and CTI (the “Closing Date”), which shall be no later than the later of (x) three Business Days after satisfaction or waiver of the conditions set forth in Section 12, and (y) September 30, 2008.  Buyer and CTI will work in good faith to effect the Closing on or prior to the termination of the Transition Period or as soon as reasonably practicable thereafter.  At the Closing, in addition to the other actions contemplated elsewhere herein:

(a)CTI shall deliver to Buyer:

(i)certificates representing all of the Shares, duly endorsed for transfer or with stock powers affixed thereto executed in blank in proper form for transfer;

(ii)a certificate, dated the Closing Date and signed by an authorized person of CTI (in his or her capacity as such), certifying as to the satisfaction of the conditions to Closing set forth in Sections 12.1(b) and (c);

(iii)copies of the resolutions of the board of directors and sole stockholder of CTI, authorizing the execution, delivery and performance of this Agreement and the other Seller Transaction Documents, certified as of the Closing Date by an authorized person (in his or her capacity as such) of CTI;

(iv)certificates representing all of the outstanding shares or membership interests of each Subsidiary (to the extent applicable), registered in the name of the Company;

(v)the original corporate seals, minute books and stock transfer and record books of the Company and each Subsidiary as they exist on the Closing Date;

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(vi)a certificate, dated the Closing Date and signed by an authorized person of CTI (in his or her capacity as such), certifying as to the payment of Indebtedness and release of Encumbrances pursuant to Section 2.3;

(vii)a copy of the Assignment and Assumption, duly executed and delivered by each of the parties thereto; and

(viii)the other documents and agreements required to be delivered pursuant to Section 12.1.

(b)Buyer shall deliver to CTI:

(i)an amount equal to the Closing Payment plus or minus the adjustment provided for in Section 3.1(b) by wire transfer of immediately available funds to such account or accounts as shall, at least two Business Days before Closing, be designated by CTI in writing to Buyer;

(ii)certificates, dated the Closing Date and signed by an authorized person of Buyer (in their respective capacities as such), certifying as to the satisfaction of the conditions to Closing set forth in Sections 12.2(b) and (c);

(iii)copies of the resolutions of the board of directors Buyer, authorizing the execution, delivery and performance by Buyer of this Agreement and the other Buyer Transaction Documents, certified as of the Closing by an authorized person of Buyer (in their respective capacities as such); and

(iv)the other documents and agreements required to be delivered pursuant to Section 12.2.

2.3Payment of Indebtedness.  At the Closing, immediately upon receipt of the Closing Payment (plus or minus the adjustment provided for in Section 3.1(b)), CTI shall repay all Indebtedness of the Company and its Subsidiaries outstanding immediately prior to the Closing and shall cause all Encumbrances relating to such Indebtedness to be released.  At Closing, CTI shall certify as to the payment of such Indebtedness and the release of such Encumbrances.

2.4Assignment and Assumption.  

(a)Prior to the Closing, the Company, its Subsidiaries, CTI, Parent, and Charming Shoppes of Delaware, Inc. shall enter into an Assignment and Assumption and Shared Contract Agreement in the form attached hereto as Exhibit A (the “Assignment and Assumption”), pursuant to which (i) the Company and its Subsidiaries will assign the Excluded Assets to CTI or one of its Affiliates (other than the Company or one of its Subsidiaries); (ii) CTI or one of its Affiliates shall assume the Excluded Liabilities; (iii) CTI will assign to the Company or its Subsidiaries the Acquired Assets; (iv) the Company and/or its Subsidiaries shall assume the Assumed Liabilities described in clause (i) of the definition of Assumed Liabilities; and (v) the parties thereto will provide one another certain benefits under their agreements with certain third-party vendors following the Closing.  The transfer of

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assets and assumption of liabilities contemplated by the Assignment and Assumption shall be consummated prior to the Closing.

(b)If Buyer, the Company or CTI identifies, prior to Closing or within one year after Closing, any assets which are owned by CTI and its Affiliates and not included as part of the Acquired Assets that are related primarily to the operation of the Business or otherwise reasonably necessary to operate the Business in the same manner in which it was operated prior to the Closing recognizing that the parties intend for certain assets to be made available to Buyer, the Company or its Subsidiaries through the Transition Services Agreement and the Assignment and Assumption, then CTI shall, and shall cause its Affiliates to, promptly transfer, convey and/or assign such assets to the Company or its Subsidiaries, at no additional cost to Buyer; provided, that CTI and its Affiliates shall not be obligated to transfer, convey and/or assign any such assets that are, or that primarily relate to, the Excluded Assets.  As a condition to the assignment of any asset pursuant to this Section this Section 2.4(b), the Company or one of its Subsidiaries shall assume all Liabilities resulting from, arising out of, relating to, in the nature of, or caused by such assets.

SECTION 3.   PURCHASE PRICE ADJUSTMENT

3.1Estimated Closing Outstanding Checks and Estimated Closing CTI Borne Expenses.

(a)Not less than one Business Day prior to the Closing Date and following reasonable advance consultation with Buyer, CTI shall deliver to Buyer a certificate (the “Estimate Certificate”) of an executive officer of CTI setting forth CTI’s good faith estimate of (i) the amount of the Closing Outstanding Checks (the “Estimated Closing Outstanding Checks”) and (ii) the amount of the Closing CTI Borne Expenses (the “Estimated Closing CTI Borne Expenses”). The Estimated Closing CTI Borne Expenses set forth on the Estimate Certificate shall be calculated in accordance with the provisions of Section 3.2(a).  The amount, if any, by which the Estimated Closing Outstanding Checks exceeds $2,500,000 is referred to herein as the “Estimated Check Excess”.

(b)If the sum of the (i) Estimated Check Excess plus (ii) the Estimated Closing CTI Borne Expenses exceeds the amount of cash actually in the bank accounts of the Company and its Subsidiaries at Closing, the amount of such excess shall be subtracted from the Closing Payment to be made by Buyer pursuant to Section 2.2(b)(i).

3.2Closing Statement.

(a)As promptly as practicable, but no later than 60 days, after the Closing Date, CTI will cause to be prepared and delivered to Buyer a statement of Closing Outstanding Checks and Closing CTI Borne Expenses (the “Closing Statement”). The Closing Statement will be accompanied by a certificate of an executive officer of CTI specifying that the Closing Statement was prepared in accordance with the provisions of this Section 3.2(a). The determination of Closing CTI Borne Expenses shall be made by applying the principles, policies and practices used in connection with the preparation of the relevant portions of the Balance Sheet so long as they are in accordance with GAAP.

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(b)If Buyer disagrees with CTI’s calculation of the Closing Outstanding Checks or Closing CTI Borne Expenses set forth in the Closing Statement, Buyer may, within 45 days after delivery of the certificate referred to in Section 3.2(a), deliver a notice to CTI disagreeing with such calculation and setting forth Buyer’s calculation of such amount. Any such notice of disagreement shall specify those items or amounts as to which Buyer disagrees, and Buyer shall be deemed to have agreed with all other items and amounts contained in the Closing Statement.

(c)If a notice of disagreement shall be duly delivered pursuant to Section 3.2(b), Buyer and CTI shall, during the 30 days following such delivery, use their reasonable best efforts to reach agreement on the disputed items or amounts of Closing Outstanding Checks and Closing CTI Borne Expenses. If, following such period, Buyer and CTI are unable to reach such agreement, they shall promptly thereafter cause an independent accountant of nationally recognized standing reasonably satisfactory to Buyer and CTI (who shall not have any material relationship with Buyer or CTI) (the “Independent Accounting Firm”), promptly to review this Agreement and the disputed items or amounts for the purpose of calculating the Closing Outstanding Checks and Closing CTI Borne Expenses.  In making such calculation, the Independent Accounting Firm shall consider only those items or amounts in the Closing Outstanding Checks and Closing CTI Borne Expenses as to which Buyer has disagreed.  The Independent Accounting Firm shall deliver to Buyer and CTI, as promptly as practicable, a report setting forth such calculation, it being understood that neither the Closing Outstanding Checks nor the Closing CTI Borne Expenses calculated by the Independent Accounting Firm shall be less than the amount thereof shown in the Closing Statement nor more than the amount thereof shown in Buyer’s calculation delivered pursuant to Section 3.2(b).  Such report shall be final and binding upon the parties hereto. The cost of such review and report shall be allocated to be paid by CTI, on the one hand, and/or the Buyer, on the other hand, based upon the percentage which the portion of the contested amount not awarded to each party bears to the amount actually contested by such party, as determined by the Independent Accounting Firm.

(d)Buyer and CTI agree that they will, and agree to cause their respective independent accountants and the Company and each Subsidiary to, cooperate and assist in the preparation of the Closing Statement and the calculation of the Closing Outstanding Checks and Closing CTI Borne Expenses and in the conduct of the audits or reviews referred to in Section 3.2(c).

3.3Post-Closing Adjustment.  

(a)If an adjustment to the Closing Payment was made pursuant to Section 3.1(b) and (i) the sum of (A) the Final Check Excess plus (B) the Final Closing CTI Borne Expenses exceeds (ii) the sum of (A) Estimated Check Excess plus (B) the Estimated Closing CTI Borne Expenses, then CTI shall pay Buyer, in the manner provided in Section 3.3(e), the amount of such excess.

(b)If no adjustment to the Closing Payment was made pursuant to Section 3.1(b) and the sum of (i) the Final Check Excess plus (ii) the Final Closing CTI Borne Expenses exceeds the amount of cash actually in the bank accounts of the Company and its

13

Subsidiaries at Closing, CTI shall pay Buyer, in the manner provided in Section 3.3(e), the amount of such excess.

(c)If an adjustment to the Closing Payment was made pursuant to Section 3.1(b) and the (i) the sum of (A) Estimated Check Excess plus (B) the Estimated Closing CTI Borne Expenses, exceeds (i) the sum of (A) the Final Check Excess plus (B) the Final Closing CTI Borne Expenses, Buyer shall pay to CTI, in the manner provided in Section 3.3(e), the lesser of (x) the amount of such excess and (y) the amount of the adjustment to the Closing Payment made pursuant to Section 3.1(b).

(d)“Final Check Excess” means the amount, if any, by which the Final Closing Outstanding Checks exceeds $2,500,000.  “Final Closing Outstanding Checks” means Closing Outstanding Checks as shown in CTI’s calculation delivered pursuant to Section 3.2(a), if no notice of disagreement with respect thereto is duly delivered pursuant to Section 3.2(b), or if such a notice of disagreement is delivered, as agreed by Buyer and CTI pursuant to Section 3.2(c) or in the absence of such agreement, as shown in the Independent Accounting Firm’s calculation delivered pursuant to Section 3.2(c).  “Final Closing CTI Borne Expenses” means Closing CTI Borne Expenses as shown in CTI’s calculation delivered pursuant to Section 3.2(a), if no notice of disagreement with respect thereto is duly delivered pursuant to Section 3.2(b), or if such a notice of disagreement is delivered, as agreed by Buyer and CTI pursuant to Section 3.2(c) or in the absence of such agreement, as shown in the Independent Accounting Firm’s calculation delivered pursuant to Section 3.2(c).

(e)Any payment made by Buyer or CTI pursuant to Sections 3.3(a), (b) or (c) shall be made within five days after such calculation has been determined by delivery by Buyer or CTI, as the case may be, in immediately available funds by wire transfer to an account of CTI (in the case of a payment by Buyer) or Buyer (in the case of a payment by CTI).

3.4Assumption of CTI Borne Expenses.  Effective as of the Closing, the Company shall assume any and all Liabilities included in the calculation of the Final Closing CTI Borne Expenses (to the extent such Liabilities are not already Liabilities of the Company and its Subsidiaries at Closing) and all Liabilities for accrued vacation, personal days, sick pay and other paid time off for all the Transferred Employees (to the extent such Liabilities are not already included in the calculation of Final Closing CTI Borne Expenses) and shall pay, discharge and perform all such Liabilities as they become due.

SECTION 4.   REPRESENTATIONS AND WARRANTIES REGARDING CTI

CTI hereby represents and warrants to Buyer that, as of the date of this Agreement and as of the Closing Date, except as set forth on the Disclosure Schedule attached hereto:

4.1Organization and Good Standing.  CTI is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all necessary corporate power and authority to perform all of its obligations under this Agreement and the other Transaction Documents to which it is a party (collectively, the “Seller Transaction Documents”).

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4.2Power and Authorization.  CTI has all legal right, power and authority to execute and deliver this Agreement and each other Seller Transaction Document, to perform its obligations hereunder and thereunder, and to carry out the transactions contemplated hereby and thereby.  All necessary corporate and stockholder action has been taken by CTI to authorize the execution, delivery and performance of this Agreement and each other Seller Transaction Document by CTI, and the consummation by CTI of the transactions contemplated hereby and thereby.  CTI has duly executed and delivered this Agreement and, at or prior to the Closing, will have duly executed and delivered each other Seller Transaction Document.  This Agreement is, and each other Seller Transaction Document, when duly executed and delivered at Closing by CTI, will be, the legal, valid and binding obligation of CTI, enforceable against CTI in accordance with their respective terms, except as enforceability of such obligations may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws now or hereafter in effect relating to or limiting creditors’ rights generally and general principles of equity relating to the availability of specific performance and injunctive and other forms of equitable relief.

4.3No Conflicts.

(a)The execution, delivery and performance by CTI of this Agreement and the other Seller Transaction Documents do not and will not (with or without the passage of time or the giving of notice, or both):

(i)contravene, conflict with or result in a violation of (A) the certificate of incorporation or bylaws of CTI; (B) any resolution adopted by the board of directors or stockholders of CTI; or (C)  in any material respect any Laws or Governmental Authorizations binding upon or applicable to CTI; or

(ii)contravene, conflict with, result in a violation or breach of or constitute a default or otherwise cause any loss of benefit under, any material agreement or other obligation to which CTI is a party or by which it or any of CTI’s assets are bound, or give to others any rights (including rights of termination, foreclosure, cancellation, modification or acceleration) in or with respect to any of the Shares.

(b)Section 4.3(b) of the Disclosure Schedule contains a complete and accurate list of each other material Consent of, or material registration, notification, filing or declaration with, any Governmental Body, creditor, lessor or other Person, in each case required to be given or made by CTI, its Affiliates, the Company or any Subsidiary in connection with the execution, delivery and performance of this Agreement and the other Seller Transaction Documents.

(c)There are no judicial, administrative or other governmental actions, proceedings or investigations pending or, to the Knowledge of CTI, threatened, which individually or in the aggregate, have had or would reasonably be expected to materially affect the ability of CTI to perform its obligations under this Agreement or any other Seller Transaction Document.

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4.4Ownership of the Shares.  CTI owns the Shares beneficially and of record, free and clear of any Encumbrance.  Other than this Agreement, there are no options, warrants, purchase rights, or other contracts, commitments or agreements to which CTI is a party that could require CTI to sell, transfer or otherwise dispose of any of the Shares or that could affect the right of CTI to convey the Shares to Buyer at Closing, and CTI has the absolute right, authority, power and capacity to sell, assign and transfer the Shares to Buyer free and clear of any Encumbrance (except for restrictions imposed generally by applicable securities Laws).  CTI is not a party to any voting trust, proxy or other agreement or understanding with respect to the voting of any of the Shares.  Upon delivery at the Closing by CTI to Buyer of the certificates for the Shares, Buyer will acquire good, valid and marketable title to such Shares, free and clear of any Encumbrance (except for applicable securities Laws restrictions).

4.5Brokers.  Other than Banc of America Securities LLC and Lehman Brothers Inc., there is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of CTI or any of its Affiliates that might be entitled to any fee or commission in connection with the transactions contemplated by this Agreement or any other Seller Transaction Document.

SECTION 5.   REPRESENTATIONS AND WARRANTIES  REGARDING THE COMPANY AND SUBSIDIARIES

CTI hereby represents and warrants to Buyer, as of the date of this Agreement and as of the Closing Date, that, except as set forth on the Disclosure Schedule attached hereto:

5.1Organization and Good Standing.  The Company and each Subsidiary is duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, formation or organization, as applicable, and has all necessary corporate or limited liability company, as applicable, power and authority to carry on its business as presently conducted,to own and lease the assets which it owns and leases, and to perform all of its obligations under each agreement to which it is a party or by which it or its assets are bound.  The Company and each Subsidiary is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction identified in Section 5.1 of the Disclosure Schedule, which includes each jurisdiction in which its ownership or leasing of assets or properties or the nature of its activities requires such qualification, except where the failure to be so qualified would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.  

5.2No Conflicts.  The execution, delivery and performance by CTI of this Agreement and the other Seller Transaction Documents do not and will not (with or without the passage of time or the giving of notice, or both):

(a)contravene, conflict with or result in a violation of (A) the certificate or articles of incorporation or bylaws (or other organizational documents) of the Company or any Subsidiary; (B) any resolution adopted by the board of directors, the board of managers (or similar governing body), or stockholders or members, as applicable, of the Company or any

16

Subsidiary; or (C) in any material respect any Laws or Governmental Authorizations binding upon or applicable to the Company or any Subsidiary;

(b)contravene, conflict with, result in a violation or breach of or constitute a default or otherwise cause any loss of benefit under, any material agreement or other obligation to which the Company or any Subsidiary is a party or by which they or any of their assets are bound, or give to others any rights (including rights of termination, foreclosure, cancellation, modification or acceleration) in or with respect to the Company or any Subsidiary or any of their respective assets; or

(c)result in, require or permit the creation or imposition of any Encumbrance (other than a Permitted Encumbrance) upon or with respect to any assets owned or leased by the Company or any Subsidiary.

5.3Capitalization.

(a)The Company’s authorized, issued and outstanding capital stock and its other equity securities are fully and accurately described in Section 5.3(a) of the Disclosure Schedule.  The Company has not granted to any Person any preemptive or other similar rights with respect to any of such equity interests or other equity securities and there are no offers, options, warrants, rights, agreements or commitments of any kind (contingent or otherwise) relating to the issuance, voting, conversion, exchange, registration, sale or transfer of any equity interests or other equity securities of the Company (including the Shares) or obligating the Company or any other Person to purchase or redeem any of such equity interests or other equity securities or to make capital contributions, advances or loans to or on behalf of the Company.  The Shares (i) constitute all of the issued and outstanding shares of capital stock of the Company and other equity securities, (ii) have been duly authorized, (iii) are validly issued and outstanding, fully paid and nonassessable, and (iv) have been issued in compliance in all material respects with all applicable securities Laws.

(b)The authorized, issued and outstanding capital stock and other equity securities of, or the membership interests in, each Subsidiary, as applicable, are fully and accurately described in Section 5.3(b) of the Disclosure Schedule.  All the outstanding capital stock and other equity securities of, or equity interests in, each Subsidiary, as applicable, are owned of record and beneficially by the Company.  No Person has any preemptive or other similar rights with respect to any such equity interests or other equity securities and there are no offers, options, warrants, rights, agreements or commitments of any kind (contingent or otherwise) relating to the issuance, voting, conversion, exchange, registration, sale or transfer of any equity interests or other securities of any Subsidiary, or obligating the Company, any Subsidiary, or any other Person to purchase or redeem any such equity interests or other equity securities or to make capital contributions, advances or loans to or on behalf of any Subsidiary.  All of the issued and outstanding shares of capital stock (or equivalent equity interests) of each Subsidiary have been duly authorized and are validly issued and outstanding, fully paid and non-assessable and have been issued in compliance in all material respects with applicable securities Laws.  Other than the Subsidiaries and the Excluded Subsidiaries, the Company does not own or control or have any right to acquire (directly or

17

indirectly) any stock, partnership interest, joint venture interest, equity participation or other security or interest in any other Person.

5.4Compliance with Laws.

(a)The Company and each Subsidiary is, and at all times since January 29, 2006 has been, in compliance in all material respects with all applicable Laws and Governmental Authorizations.  Neither the Company nor any of the Subsidiaries have, since January 29, 2006, received any written notice, order or other communication from any Governmental Body of any alleged, actual or potential violation of, or failure to comply in any material respect with, any Laws or Governmental Authorizations which has not been resolved in all material respects.

(b)Section 5.4(b) of the Disclosure Schedule lists all material Governmental Authorizations required for the operation of the business of the Company and each Subsidiary as currently conducted.  Each Governmental Authorization listed or required to be listed in Section 5.4(b) of the Disclosure Schedule is in full force and effect without any default or violation thereunder in any material respect by the Company, any Subsidiary or, to the Knowledge of CTI, by any other party thereto.  No proceeding is pending or, to the Knowledge of CTI, threatened by any Person to revoke or deny the renewal of any material Governmental Authorization of the Company or any Subsidiary.

5.5Litigation.  Since January 29, 2006, there have not been, nor are there currently pending, any material claims, actions, suits or proceedings (arbitration or otherwise) or, to the Knowledge of CTI, investigations involving or affecting the Company or any Subsidiary, their businesses or assets (including, as of the Closing, the Acquired Assets), any Employee Benefit Plan (other than routine claims for benefits), or, to the Knowledge of CTI, their respective directors or officers in their capacities as such before or by any Governmental Body, or before any arbitrator of any kind.  To the Knowledge of CTI, no such claim, action, suit, proceeding or investigation is presently threatened.  There are no unsatisfied material judgments, penalties or awards against or affecting the Company or any Subsidiary or any of their businesses, properties or assets (including, as of the Closing, the Acquired Assets).

5.6Financial Statements.

(a)Section 5.6(a) of the Disclosure Schedule includes the unaudited consolidated balance sheet of the Company and the Subsidiaries as of February 2, 2008 (the “Balance Sheet”) and February 3, 2007 and the related unaudited consolidated statements of income and cash flow for the fiscal years ended February 2, 2008 and February 3, 2007, respectively (collectively, the “Financial Statements”).  The Financial Statements fairly present in all material respects the consolidated financial condition, cash flow and results of operations of the Company and the Subsidiaries as of the respective dates thereof and for the periods therein referred to, all in accordance with GAAP as consistently applied, except to the extent that the Financial Statements do not reflect (i) federal and state income taxes (including provision for income taxes, income taxes payable and deferred income taxes); (ii) Liabilities associated with terminated leases and assets related to prepayments of rent; (iii) Liabilities associated with non-qualified retirement and deferred compensation plan obligations related

18

to CTI’s or its Affiliates’ employees; (iv) goodwill and other intangible assets and related amortization; (v) Liabilities for third-party insurance and self-insurance for certain risks, including workers’ compensation, medical, dental, automobile and general liability claims; (vi) the costs related to share based compensation accounted for under Statement of Financial Accounting Standard No. 123R; (vii) certain other miscellaneous assets and Liabilities accounted for on a centralized basis (including miscellaneous real estate and construction assets and liabilities) that were not material, individually or in the aggregate, to the Company or the Subsidiaries; and (viii) costs not allocated to the Company and the Subsidiaries.

(b)CTI maintains a system of internal accounting controls designed to provide reasonable assurances that (i) transactions engaged in by the Company or any of the Subsidiaries are executed in material compliance with the general policies of the Company and the Subsidiaries and/or the general or specific authorizations of management of the Company and the Subsidiaries, (ii) access to material assets of the Company and the Subsidiaries is permitted only in accordance with the general policies of the Company and the Subsidiaries and/or the general or specific authorizations of management of the Company and the Subsidiaries, and (iii) all intercompany transactions, charges and expenses among or between the Company, any of the Subsidiaries, CTI and/or their respective Affiliates are accurately reflected at fair arms’ length value on the books and records of the Company and the Subsidiaries.

(c)Neither the Company nor any of its Subsidiaries has any material Liability arising out of transactions entered into at or prior to the Closing, or any action or inaction at or prior to the Closing, or any state of facts existing at or prior to the Closing, except (i) Liabilities under agreements described in Section 5.11 of the Disclosure Schedule or under agreements which are not required to be disclosed thereon (but not Liabilities for breaches thereof), (ii) Liabilities reflected on the face of the Balance Sheet, (iii) Liabilities which have arisen in the ordinary course of business, consistent with past practice and otherwise in accordance with the terms and conditions of this Agreement (none of which is a Liability for breach of contract, breach of warranty, tort or infringement or a claim or lawsuit or an environmental Liability), and (iv) Liabilities disclosed in Section 5.6(c) of the Disclosure Schedule.

5.7Inventory.  Subject to any reserve therefor included in the Balance Sheet, at the date of the Balance Sheet, all inventories of the Company and its Subsidiaries (including inventory ordered but not yet received) consisted of items of a quality usable or saleable in the normal course of the business of the Company consistent with past practices and were to the Knowledge of CTI in quantities sufficient for the normal operation of the business of the Company in accordance with past practices.  The values at which inventories are reflected on the Balance Sheet have been determined in accordance with the customary valuation policy of the Company (which is the lower of cost or fair market value thereof) and in accordance with GAAP.  Since the date of the Balance Sheet, the Company and its Subsidiaries have continued to replenish its inventory and to seek to dispose of out-of-season and slow-moving inventory in a normal and customary manner consistent with past practices prevailing in the business of the Company.

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5.8Absence of Certain Changes and Events.  Since the date of the Balance Sheet, the Company and the Subsidiaries have in all material respects conducted their businesses only in the usual and ordinary course consistent with past practice and, except as expressly contemplated by this Agreement or any other Transaction Document, there has not, with respect to the Company or a Subsidiary, or in the case of Sections 5.8(f) and (q), with respect to CTI and its Affiliates, been any:

(a)event, condition, occurrence, contingency or development that has had or would reasonably be expected to have a Material Adverse Effect;

(b)any repurchase, redemption or other acquisition by the Company or any Subsidiary of any of shares of capital stock or other securities of the Company or any Subsidiary or any dividends or other distributions or payments in respect of any shares of capital stock of the Company or any Subsidiary other than distributions payable solely in cash and distributions of the capital stock or membership interests of the Excluded Subsidiaries;

(c)amendment of any term of any outstanding security of the Company or any Subsidiary;

(d)making of any loan, advance or capital contribution to or investment in any Person by the Company or any Subsidiary, other than loans, advances or capital contributions to a Subsidiary, travel and similar advances to employees, and advances and extended payment terms to suppliers, in each case in the ordinary course of business consistent with past practice;

(e)material change in the accounting methods, principles or practices followed by the Company or any Subsidiary (except for any such change required by reason of a change in GAAP);

(f)(i) adoption, amendment or modification in any material respect of an Employee Benefit Plan, other than an amendment or modification to comply with applicable Laws and adoptions, amendments and modifications that do not apply to any Listed Employee or officer, employee or consultant of the Company or any Subsidiary (ii) grant of severance or termination pay or any other compensation of any kind or nature payable, in whole or in part, by reason of the transactions contemplated by this Agreement to any Listed Employee or any officer, employee or consultant of the Company or any Subsidiary, or (iii) any change in employment terms (including compensation or benefits) for any Listed Employee or any officer, employee or consultant of the Company or any Subsidiary or increase in the contingent and non-contingent compensation of, or payment of any bonus to, any Listed Employee or any officer, employee or consultant of the Company or any Subsidiary;

(g)material damage, destruction or loss to any material asset or property of the Company and the Subsidiaries, taken as a whole, other than damage that has been repaired, damaged assets that have been replaced or damage for the repair of which insurance proceeds have been received and used for the repair thereof;

(h)sale (other than sales of inventory and customer list rentals and exchanges in the ordinary course of business consistent with past practice), assignment,

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transfer, hypothecation, conveyance, lease or other disposition of any material asset or property of the Company or any Subsidiary other than the Excluded Assets or mortgage, pledge or imposition of any Encumbrance on any material asset or property of the Company or any Subsidiary (except for Permitted Encumbrances);

(i)failure to pay when due any material indebtedness or other material Liabilities, except with respect to any such Liabilities being contested in good faith by the Company or any Subsidiary which are identified in Section 5.8(i) of the Disclosure Schedule;

(j)cancellation, discharge or satisfaction of any debts, liabilities, obligations or claims that are material to the Company and the Subsidiaries, taken as a whole, or any amendment, termination or waiver of any material rights of value to the Company and the Subsidiaries, taken as a whole;

(k)write down or write off of the value of any assets that are material to the Company and the Subsidiaries, taken as a whole, except for write downs and write offs of accounts receivable and inventory in the ordinary course of business consistent with past practice;

(l)failure to pay accounts payable or collect accounts receivable other than in the ordinary course consistent with past practice;

(m)entry into, amendment, termination or receipt of notice of termination of any lease or sublease of real property that is (or would be) required to be disclosed in Section 5.9 of the Disclosure Schedule or of any agreement or other document that is required to be disclosed in Section 5.11 of the Disclosure Schedule;

(n)merger or consolidation with any other Person, acquisition of any equity securities of any other Person, or acquisition of assets from any other Person, other than (i) the acquisition of inventory in the ordinary course of business in accordance with past practice, and (ii) capital expenditures in an amount in the aggregate not more than those set forth in the capital expenditure budget for the current fiscal year previously provided to Buyer;

(o)material change in the business or operations of the Company and the Subsidiaries, taken as a whole, or in the manner of conducting the same or entry by the Company or any Subsidiary into any material transaction (other than the transactions contemplated hereby), other than in the ordinary course of business consistent with past practice;

(p)any material capital expenditure or commitments therefor, other than  capital expenditures of not more than those set forth in the capital expenditure budget for the current fiscal year previously provided to Buyer; or

(q)agreement, whether or not in writing, to do any of the foregoing by the Company, any Subsidiary or, with respect to the Business, CTI.

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5.9Real Property.  Section 5.9 of the Disclosure Schedule describes each interest in real property leased by the Company or any Subsidiary, including the location thereof and the lessor of any such leased property.  Neither the Company nor any Subsidiary owns any real property in fee title.  Either the Company or one of its Subsidiaries owns all right, title and interest in all leasehold estates granted by the leases and other agreements required to be listed in Section 5.9 of the Disclosure Schedule, in each case free and clear of all Encumbrances except for Permitted Encumbrances.  To the Knowledge of CTI, all of the buildings and structures to the extent of the premises owned or leased by the Company or any Subsidiary are structurally sound with no material defects, are in good operating condition and repair, and each has adequate rights of ingress and egress for the operation in the ordinary course of business consistent with past practice.  No such building or structure, or any appurtenance thereto or equipment therein or the operation or maintenance thereof, violates in any material respect any restrictive covenant.  With respect to any real property leased by the Company or any Subsidiary, no event or condition exists that, with or without the passage of time or the giving of notice, or both, would constitute a material default or breach by the Company or any Subsidiary pursuant to any lease agreement governing such property.  To the Knowledge of CTI, each landlord under each such lease agreement has complied with its material obligations thereunder.  No condemnation proceeding is pending or, to the Knowledge of CTI, threatened with respect to any real property identified in Section 5.9 of the Disclosure Schedule.

5.10Personal Property; Bank Accounts.

(a)The Company and each Subsidiary have good and valid title to all of their material properties and assets used in the conduct of their respective businesses free and clear of all Encumbrances (other than Permitted Encumbrances).  All material properties and assets owned or leased by the Company or any Subsidiary are in the possession or under the control of the Company and the Subsidiaries, taken as a whole, and are in good condition and repair, ordinary wear and tear excepted.

(b)Section 5.10(b) of the Disclosure Schedule lists each bank, checking, money market, investment or similar account (each, a “Company Account”) owned by or used for the business and operations of the Company and the Subsidiaries and each individual authorized to have access to and make transactions under each Company Account.

(c)Notwithstanding the foregoing, this Section 5.10 does not address any real estate matters, which are addressed in Section 5.9, or any intellectual property matters, which are addressed in Section 5.13.

5.11Material Contracts.

(a)Except as expressly provided by this Agreement or the Transaction Documents and except for any agreement or contract included in the Excluded Assets, neither the Company nor any Subsidiary is a party to or is bound by any:

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(i)agreement, indenture or other instrument relating to Indebtedness for money borrowed or capital leases (excluding capital leases providing for annual payments of less than $25,000) or any guarantee or similar undertaking in respect of any indebtedness or obligations of any Person (other than in connection with relocation of employees or the endorsement of negotiable instruments for collection in the ordinary course of business consistent with past practice);

(ii)Encumbrance of any nature (other than Permitted Encumbrances) relating to or affecting any of the material assets or properties of the Company and the Subsidiaries, taken as a whole;

(iii)agreement, contract or commitment relating to a single capital expenditure of greater than $100,000 or any number of such agreements, contracts or commitments relating to capital expenditures of greater than $250,000 in the aggregate;

(iv)loan or advance to, or investment in, any Person (other than a Subsidiary) in any case in an amount in excess of $25,000, or $100,000 in the aggregate for all such loans, advances and investments or any agreement, contract or commitment relating to the making of any such loan, advance or investment, other than travel and similar advances to employees in the ordinary course of business consistent with past practice;

(v)management service, sales agency, sales representative, distributorship or any other similar contract with any Person (other than a Related Party), in each case under which the amount of payments required to be made thereunder in any fiscal year is greater than $100,000;

(vi)contract, agreement or commitment limiting in any material respect the freedom of the Company or any Subsidiary to engage in any line of business or to compete with any Person;

(vii)contract, agreement, purchase order or other commitment involving the performance of services or delivery of goods or materials, other than inventory purchased or sold in the ordinary course of business, by or to the Company or any Subsidiary (A) outside the continental United States or (B) of an aggregate amount in excess of $100,000 and which is not terminable by the Company or such Subsidiary without payment of penalty or premium on not more than sixty days notice;

(viii)contract, agreement or commitment providing for payments to or by any Person in excess of $100,000 in any fiscal year based on sales, purchases or profits, other than direct payments for goods or services;

(ix)agreement, contract or commitment related to the license to any Person (other than a Related Party) of any material item of Company Intellectual Property;

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(x)any material agreement, license, contract or commitment pursuant to which any Trade Secrets of the Company or any Subsidiary may be transferred, disclosed to or used by any third party (other than a Related Party);

(xi)any partnership, joint venture or similar agreement or arrangement; or

(xii)any other contract, agreement or commitment which is material to the business, operations, results of operations, assets or financial condition of the Company and the Subsidiaries, taken as a whole.

(b)The Company and each Subsidiary have furnished or made available to Buyer true and complete copies of each agreement, plan and other document required to be disclosed in Section 5.11 of the Disclosure Schedule.

(c)Each material contract, agreement or commitment disclosed or required to be disclosed in Section 5.11 of the Disclosure Schedule (including any such contract, agreement or commitment included in the Acquired Assets) is in full force and effect and is valid, binding and enforceable against the Company or the Subsidiary party thereto in accordance with its terms, except in each case as enforceability of such agreements may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws now or hereafter in effect relating to or limiting creditors’ rights generally and general principles of equity relating to the availability of specific performance and injunctive and other forms of equitable relief.  Neither the Company nor any Subsidiary is in violation in any material respect of any such contract, agreement or commitment, and, to the Knowledge of CTI, all of the material covenants to be performed by each other party thereto have been performed in all material respects.

5.12Insurance.  Section 5.12 of the Disclosure Schedule lists each policy and binder of insurance (including property, casualty, liability, life, health, accident, workers’ compensation and disability insurance and bonding arrangements) owned by, or maintained for the benefit of, or respecting which, any premiums are paid directly or indirectly by the Company or any Subsidiary, in each case identifying, with respect to the Company and the Subsidiaries: (i) the respective issuers and expiration dates thereof; (ii) all deductible amounts and amounts of coverage available and outstanding thereunder; (iii) whether such policies and binders are “claims made” or “occurrences” policies; (iv) all self-insurance programs or arrangements; and (v) any retrospective premium adjustments of which CTI has Knowledge.  Neither the Company nor any of the Subsidiaries is in material default under any such insurance policy.  All premiums due have been paid on such insurance policies.

5.13Intellectual Property.

(a)Section 5.13(a) of the Disclosure Schedule lists each (i)  fictitious business name, trade name, registered and unregistered trademark, service mark and related application (“Marks”), (ii)  patent and patent application (collectively, “Patents”), (iii) issued and pending copyright registration in published and material unpublished works of authorship including Software works (“Copyrights”), (iv) Internet domain name registration and related

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application (collectively “Domain Registrations”), in each case, owned by or licensed to the Company or any Subsidiary or used in connection with the Businesses, including, in each case, at the Closing, the Acquired Assets (collectively, the “Company Intellectual Property”).  The Company and the Subsidiaries are the sole owners of, and have all right, title and interest in and to, or have a valid and enforceable right to use pursuant to a license agreement described in Section 5.11 of the Disclosure Schedule, all Company Intellectual Property, free and clear of all Encumbrances (other than Permitted Encumbrances).  Neither the Company nor any Subsidiary has granted or licensed to any Person any rights with respect to any Company Intellectual Property and no other Person has any material rights in or to any of the Company Intellectual Property.  The rights of the Company and the Subsidiaries in and to any of such Company Intellectual Property will not be limited or otherwise affected in any material respect by reason of any of the transactions contemplated hereby.  The Company Intellectual Property is sufficient for the conduct of the Business in the same manner as the Business was conducted before the Closing in all material respects. 

(b)The list of Marks set forth in Section 5.13(a) of the Disclosure Schedule sets forth: (i) the name of the owner of such Mark; (ii) the jurisdictions by or in which such Mark has been issued or registered or in which an application for such issuance or registration has been filed; and (iii) the registration and application numbers of such Mark.  The list of Copyrights set forth in Section 5.13(a) of the Disclosure Schedule sets forth: (i) the name of the author and copyright claimant of such Copyright; and (ii) the registration numbers of such Copyright.  The list of Patents set forth in Section 5.13(a) of the Disclosure Schedule sets forth the name of each jurisdiction in which such Patents have been granted and applied for and all application numbers.  The Company and each Subsidiary have taken all reasonable precautions to preserve and protect the secrecy, confidentiality and value of their material Trade Secrets.

(c)To the Knowledge of CTI, no Company Intellectual Property is the subject of any outstanding judgment, injunction, order or decree restricting in any material respect the use thereof by the Company or any Subsidiary or restricting the licensing thereof by the Company or any Subsidiary to any Person.  To the Knowledge of CTI, no Mark, Domain Registration, Copyright, Patent or Software owned by or licensed to the Company or any Subsidiary has in any material respect been infringed, challenged or threatened in any material respect.  To the Knowledge of CTI, no Mark or Patent owned by or licensed to the Company or any Subsidiary is currently involved in any material interference, reissue, re-examination, opposition, invalidation or cancellation proceeding and, to the Knowledge of CTI, no such proceeding is threatened.

(d)Neither the Company nor any of the Subsidiaries has infringed, diluted, misappropriated or otherwise conflicted with, and the operation of their business as currently conducted does not infringe, dilute, misappropriate or otherwise conflict with, any Intellectual Property of any third party in any material respect.

(e)The representations and warranties set forth in this Section 5.13, along with the applicable representations in Section 5.4, Section 5.5 and Section 5.11 constitute CTI’s sole and exclusive representations and warranties related to intellectual property matters.

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5.14Suppliers.  Section 5.14 of the Disclosure Schedule lists the names of the five suppliers and vendors (other than any Related Party or Affiliate thereof) from whom the Company and the Subsidiaries made the most purchases (in terms of dollar amounts) during the fiscal year ended February 2, 2008 and a good faith approximation of the aggregate expenditures attributable to each in such year.  No such vendor or supplier that accounted for more than of 5% of the consolidated purchases of the Company and the Subsidiaries during the fiscal year ended February 2, 2008 has terminated or materially reduced, or has given written notice to the Company or any Subsidiary that it intends to terminate or materially reduce, the amount of business done with the Company or any Subsidiary.  CTI does not have any Knowledge of any such intention on the part of any such supplier or vendor, whether or not in connection with or as a result of, the transactions contemplated by this Agreement or any other Transaction Document.

5.15Labor Matters.

(a)No application or petition for certification of a collective bargaining agent is currently pending, and no union or bargaining representative is currently certified as a representative of the employees of CTI, its Affiliates, the Company or any Subsidiary.  Since January 29, 2006, neither CTI, its Affiliates, the Company nor any Subsidiary has been the subject of a representation campaign to organize any group of CTI’s, its Affiliates’, the Company’s or such Subsidiary’s employees.  Since January 29, 2006, there has not been and there is not currently pending any material labor arbitration or proceeding relating to the grievance of any employee of CTI, its Affiliates, the Company or the Subsidiaries, any application, charge or complaint filed by any such employee or union with the National Labor Relations Board or any comparable state or local agency, any strike, slowdown, picketing or work stoppage by any employees at any facility of CTI, the Company or any Subsidiary, any lockout of any such employees, or any other labor related controversy materially affecting the operations, assets, results of operations, financial condition or business of the Company or the Subsidiaries taken as a whole.  Except for the terms of the real property leases to which the Company or any of the Subsidiaries is currently a party, no agreement to which the Company or any of the Subsidiaries is a party restricts in any material respect the Company or any Subsidiary from relocating, closing or terminating any of their operations or facilities or any portion thereof.

(b)During the last 90 days prior to the date hereof, neither CTI, the Company nor any Subsidiary has (i) effectuated a “plant closing” (as defined in the Worker Adjustment and Retraining Act of 1988, as amended (the “WARN Act”)) affecting any site of employment or one or more facilities or operating units within any site of employment or facility of CTI, the Company or any Subsidiary; or (ii) effectuated a “mass layoff” (as defined in the WARN Act) affecting any site of employment or facility of CTI, the Company or any Subsidiary, or (iii) terminated or announced the termination of the employment of more than a total of 20 employees (other than “seasonal workers,” as defined by the WARN Act, terminated in the ordinary course of business).

(c)The representations and warranties set forth in this Section 5.15, along with the applicable representations in Section 5.4 and Section 5.5, constitute CTI’s sole and exclusive representations and warranties related to labor matters.

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5.16Employee Benefits.

(a)Section 5.16(a) of the Disclosure Schedule contains a complete and correct list of all benefit plans and arrangements (whether or not employee benefit plans as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)), including sick leave, vacation pay, severance pay, salary continuation for disability, consulting or other compensation arrangements, retirement, deferred compensation, bonus, incentive compensation, stock purchase, stock option, health including hospitalization, medical and dental, life insurance and scholarship programs maintained for the benefit of any present or former employees of CTI, the Company, any Subsidiary or any ERISA Affiliate to which CTI, the Company, any Subsidiary or any ERISA Affiliate has since January 29, 2006 contributed or otherwise has any liability or is or was since January 29, 2006 obligated to make payments excluding, in the case of CTI or an ERISA Affiliate, any such plan, arrangement or program that does not cover or does not apply to a Listed Employee, where neither the Company nor any Subsidiary has any liability with respect to such plan (collectively, the “Employee Benefit Plans”).  The Company has delivered or made available to Buyer, with respect to all such Employee Benefit Plans, true, complete and correct copies of the following:  all plan documents and handbooks; the most recent summary plan descriptions and any subsequent summaries of material modifications; Forms series 5500 as filed with the United States Department of Labor (“DOL”) since January 29, 2006; all trust agreements with respect to Employee Benefit Plans; plan contracts with service providers or with insurers providing benefits for participants; the most recent annual audit and accounting of plan assets for all funded plans; and the most recent IRS determination letter for all plans qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended (the “Code”).

(b)Each Employee Benefit Plan has been administered in compliance in all material respects with its terms and is in compliance in all material respects with the applicable provisions of ERISA, the Code and all other applicable Laws.

(c)Each Employee Benefit Plan which is an “Employee Pension Benefit Plan” (as defined in Section 3(2) of ERISA) and which is intended to be “qualified” within the meaning of Section 401(a) of the Code has been issued a favorable determination (or opinion) letter from the IRS, and to the Knowledge of CTI, since January 29, 2006 there has been no act or condition that would reasonably be expected to result in the loss of tax-qualified status of such Employee Benefit Plan or the loss of exemption from federal income tax under Section 501(a) of the Code of any trust created pursuant to any such Employee Pension Benefit Plan.

(d)Neither CTI, the Company, any Subsidiary nor any ERISA Affiliate maintains or since January 29, 2006 has maintained or been obligated to contribute to a “Multiemployer Plan” (as such term is defined by Section 3(37) of ERISA) or to a “Defined Benefit Plan” (as such term is defined by Section 3(35) of ERISA).  Neither the Company nor any Subsidiary has any actual or potential Liability, including as a result of being under common control with an ERISA Affiliate, with respect to a Multiemployer Plan or a Defined Benefit Plan.  As used herein, “ERISA Affiliate” shall refer to any corporation or trade or

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business, whether or not incorporated, under common control with the Company within the meaning of Section 414(b), (c), (m) or (o) of the Code.

(e)With respect to each Employee Benefit Plan, no material unsatisfied Liabilities to participants, the IRS, the DOL, the Pension Benefit Guaranty Corporation or to any other Person have been incurred as a result of the cessation of contributions under, the transfer of sponsorship of, or the termination of any Employee Benefit Plan.

(f)Neither CTI, the Company, any Subsidiary nor any ERISA Affiliate maintains any retiree life and/or retiree health insurance plans which provide for continuing benefits or coverage for any former employee, employee, or any beneficiary of an employee or former employee of CTI, the Company, any Subsidiary or any ERISA Affiliate after such employee’s termination of employment, other than (i) benefits that are required to be provided pursuant to Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, or state continuation coverage rights or (ii) a plan maintained by CTI or an ERISA Affiliate that does not cover or does not apply to a Listed Employee, where neither the Company nor any Subsidiary has any liability with respect to such plan.

(g)Section 5.16(g) of the Disclosure Schedule lists each employment, retention, severance, change of control, consulting, commission, agency and representative agreement or arrangement to which CTI, the Company, any Subsidiary or any ERISA Affiliate is a party or is otherwise bound with respect to any Listed Employee, including all agreements and commitments relating to wages, hours or other terms or conditions of employment (other than unwritten employment arrangements terminable at will).

(h)Except as required under any Employee Pension Benefit Plan or the Code with respect to any Employee Pension Benefit Plan, or as expressly contemplated by this Agreement and subject to the terms of Section 10.1(g), the consummation of the transactions contemplated by this Agreement and the other Transaction Documents will not, alone or together with any other event: (i) entitle any person to severance pay, unemployment compensation or termination benefits or any other payment; (ii) accelerate the time of payment or vesting of, or materially increase the amount of compensation due to any person or (iii) result in forfeiture of compensation or benefits to any employee of the Company and its Subsidiaries or any Listed Employee.

(i)The representations and warranties set forth in this Section 5.16 along with the applicable representations and warranties set forth in Sections 5.4, 5.5, 5.6, 5.8 and 5.17, constitute CTI’s sole and exclusive representations and warranties related to employee benefits matters.

5.17Officers and Employees. Section 5.17 of the Disclosure Schedule sets forth the following information for each consultant, agent and independent contractor regularly retained by the Company or any Subsidiary, whose aggregate compensation for the last fiscal year ended exceeded $100,000 or whose current aggregate annual rate of compensation exceeds such amount (including each such person on leave or layoff status), and each Listed Employee: (i) employer and location of employment; (ii) name and job title; (iii) current annual rate of compensation (identifying bonuses separately) and any change in

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compensation since the date of the Balance Sheet; (iv) vacation accrued; and (v) service credited for purposes of vesting and eligibility to participate in applicable Employee Benefit Plans.  

5.18Environmental Matters.  

(a)Since January 29, 2006, and to the Knowledge of CTI, prior to January 29, 2006, the Company, each Subsidiary and their respective predecessors, including all of their businesses and operations, have been operated in compliance in all material respects with all Environmental Laws.

(b)Neither the Company nor any Subsidiary has, since January 29, 2006, caused, and to the Knowledge of CTI, none of the Company, any Subsidiary or any predecessor entity thereof did, prior to January 29, 2006, cause, and to the Knowledge of CTI, none of the Company, any Subsidiary or any predecessor entity thereof has permitted any other Person to cause, any conditions on, about, beneath or arising from any real property, which is currently, or since January 29, 2006, was owned, leased or operated, or to the Knowledge of CTI, was at any time prior to January 29, 2006, owned, leased or operated, by the Company, any Subsidiary or their respective predecessors, which (i) give rise to material liability (contingent or otherwise) or the imposition of a statutory lien under any Environmental Law, or (ii) require any material Response, Removal or Remedial Action or other action under any Environmental Law.

(c)Neither the Company nor any Subsidiary has received since January 29, 2006, or to the Knowledge of CTI, prior to January 29, 2006, any written or oral notification of a material release or threat of a material release of a Hazardous Substance with respect to any real property that is currently, or was at any time since January 29, 2006, owned, leased or operated, or to the Knowledge of CTI, was at any time prior to January 29, 2006, owned, leased or operated, by the Company or any Subsidiary or their respective predecessors.

(d)No Hazardous Substances have been used, handled, generated, processed, treated, stored, transported to or from, released, discharged or disposed of by the Company or any Subsidiary or, to the Knowledge of CTI, any third party, and no Person has been exposed to any Hazardous Substances, on, about or beneath any property that is currently, or that has at any time since January 29, 2006 been, owned, leased or operated, or to the Knowledge of CTI, that was at any time prior to January 29, 2006, owned, leased or operated, by the Company or any Subsidiary or their respective predecessors so as to give rise to any material liabilities (contingent or otherwise) under any Environmental Laws.

(e)There are not currently, and since January 29, 2006 there have not been, any above ground or, to the Knowledge of CTI, underground storage tanks, asbestos containing materials, or transformers containing or, to the Knowledge of CTI, contaminated with polychlorinated biphenyls on, about or beneath any real property that is currently, or since January 29, 2006 has been, owned, leased or operated, or to the Knowledge of CTI, that was at any time prior to January 29, 2006, owned, leased or operated, by the Company or any Subsidiary or their respective predecessors in violation in any material respect of, or as would give rise to any material liabilities under, any Environmental Laws.

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(f)To the Knowledge of CTI, since January 29, 2006, neither the Company nor any Subsidiary has received written notice of:

(i)any material claim, demand, investigation, enforcement action, Response, Removal, Remedial Action, statutory lien or governmental or regulatory action instituted or threatened against the Company or any Subsidiary or any real property formerly or currently owned, leased or operated by the Company or any Subsidiary pursuant to any of the Environmental Laws; or

(ii)any material claim, demand notice, suit or action, made or threatened by any Person against the Company, any Subsidiary, or any real property formerly or currently owned, leased or operated by the Company or any Subsidiary relating to (A) any material damage, loss or injury resulting from, or claimed to result from, any Hazardous Substance on, about, beneath or arising from any real property formerly or currently owned, leased or operated by the Company or any Subsidiary or any other real property or (B) any alleged material violation of Environmental Laws by the Company or any Subsidiary.

(g)CTI has no Knowledge of any communication to or from any Governmental Body arising out of or in connection with Hazardous Substances on, about, beneath, arising from or generated at any real property formerly or currently owned, leased or operated by the Company or any Subsidiary.

(h)No wastes generated by the Company or any Subsidiary, have since January 29, 2006, or to the Knowledge of CTI, prior to January 29, 2006, been sent, transferred, transported to, treated, stored, or disposed of at any site requiring investigation or clean-up, including any site listed, or to the Knowledge of CTI, formerly proposed for listing, on the National Priority List promulgated pursuant to CERCLA or to any site listed on any state list of sites requiring or recommended for investigation or clean-up.  To the Knowledge of CTI, none of the real property that is currently, or since January 29, 2006 has been, owned, leased or operated, or to the Knowledge of CTI, prior to January 29, 2006, has been owned, leased or operated, by the Company or any Subsidiary or their respective predecessors, is listed on the National Priorities List or any state list of sites requiring or recommended for investigation or clean up.

(i)neither the Company nor any of its Subsidiaries has assumed, undertaken, provided an indemnity with respect to, or otherwise become subject to any material liabilities of any other Person relating to any Environmental Law.

(j)There has been no written environmental audit, investigation, inspection, report, sampling report, remediation report or other related report conducted by or on behalf of the Company, any Subsidiary or, to the Knowledge of CTI, any Governmental Body or other Person, of or related to the Company or its Subsidiaries or Affiliates, or the environmental condition of any property that is currently or since January 29, 2006 has been, owned, leased or operated, or to the Knowledge of CTI, prior to January 29, 2006, has been, owned, leased or operated, by the Company or any Subsidiary, which has not been made available to Buyer prior to the date hereof.

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(k)Notwithstanding anything in this Agreement to the contrary, Buyer acknowledges and agrees that this Section 5.18 contains the sole and exclusive representations and warranties in this Agreement relating to environmental matters.

5.19Sufficiency of the Assets.  As of the Closing, the assets of the Company and the Subsidiaries (excluding the Excluded Assets but including the Acquired Assets) together with the services and assets provided to the Company and the Subsidiaries pursuant to the Transition Services Agreement and the sharing of certain contracts as contemplated by the Assignment and Assumption, will be sufficient to conduct the business of the Company and the Subsidiaries substantially as conducted on the date hereof, which business includes the Crosstown Traders business of the Company and its Subsidiaries, namely, the direct marketing of women’s apparel, footwear and accessories from the locations specified on Section 5.9 of the Disclosure Schedule, through the Company’s and its Subsidiaries’ Old Pueblo Traders, Intimate Appeal, Coward Shoes, Bedford Fair Lifestyles, Bedford Fair Shoestyles, Willow Ridge, Lew Magram, Brownstone Studios and Monterey Bay Clothing Company catalog titles (collectively, the “Business”).

5.20Brokers.  Other than Banc of America Securities LLC and Lehman Brothers Inc., there is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of the Company or any Subsidiary that might be entitled to any fee or commission in connection with the transactions contemplated by this Agreement or any other Transaction Document.

SECTION 6.   REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer hereby represents and warrants to CTI, as of the date of this Agreement and as of the Closing Date, that:

6.1Organization and Good Standing.  Buyer is duly organized, validly existing and in good standing under the laws of its jurisdiction of formation and has all necessary power and authority to perform all of its obligations under this Agreement and the other Transaction Documents to which it is a party (collectively, the “Buyer Transaction Documents”).  

6.2Power and Authorization.  Buyer has all legal right, power and authority to execute and deliver this Agreement and the other Buyer Transaction Documents, to perform its obligations hereunder and thereunder and to carry out the transactions contemplated hereby and thereby.  All necessary corporate, shareholder and other legal action has been taken by Buyer to authorize the execution, delivery and performance by it of this Agreement and each other Buyer Transaction Document, and the consummation by Buyer of the transactions contemplated hereby and thereby. Buyer has duly executed and delivered this Agreement and, at or prior to the Closing, will have duly executed and delivered each other Buyer Transaction Document.  This Agreement is, and each other Buyer Transaction Document, when duly executed and delivered at or prior to the Closing by Buyer, will be, the legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with their respective terms, except as enforceability of such obligations may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws now or hereafter in

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effect relating to or limiting creditors’ rights generally and general principles of equity relating to the availability of specific performance and injunctive and other forms of equitable relief.

6.3No Conflicts.

(a)The execution and delivery by Buyer of this Agreement does not, the execution and delivery by Buyer of each Buyer Transaction Document to which it is, or is specified to be, a party will not, and the consummation of the transactions contemplated hereby and thereby and compliance by Buyer with the terms hereof and thereof will not conflict with, or result in any violation or breach of or constitute a default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to a loss of a material benefit under, or result in the creation of any Encumbrance (other than a Permitted Encumbrance) upon any of the material properties or assets of Buyer under, any provision of (i) the certificate of incorporation, by-laws or other similar organizational documents Buyer, (ii) any material agreement or other material obligation to which Buyer is a party or by which any of their property or assets are bound or (iii) any material Laws or Governmental Authorizations binding upon or applicable to Buyer.

(b)No material Consents or registrations, notifications, filings or declarations with, any Governmental Body, creditor, lessor or other Person are required to be given or made by Buyer in connection with the execution, delivery and performance of this Agreement or any other Buyer Transaction Document.

(c)There are no judicial, administrative or other governmental actions, proceedings or investigations pending or, to the Knowledge of Buyer, threatened, which individually or in the aggregate, have had or would reasonably be expected to have a material adverse effect on the ability of Buyer to perform its obligations under this Agreement or any other Buyer Transaction Document or on the ability of Buyer to consummate the transactions contemplated hereby or thereby (a “Buyer Material Adverse Effect”).

6.4No Reliance.  Buyer (a) is an informed and sophisticated buyer and has engaged expert advisors, experienced in the evaluation of transactions such as those contemplated in this Agreement, (b) has made its own inquiry and investigation into, and, based thereon, has formed an independent judgment concerning, the Company, the Subsidiaries and their businesses, and (c) has been furnished with or given adequate access to such information about the Company, each Subsidiary and their businesses as it has reasonably desired or reasonably requested.  Buyer’s Representatives have had adequate opportunity to meet with management and employees of the Company to discuss the businesses and assets of the Company and the Subsidiaries.  Buyer acknowledges that the business of the Company and the Subsidiaries has not been operated on a stand-alone basis.  No provision of this Section 6.4 shall limit or otherwise impair any representations or warranties made by any party hereto.

6.5Brokers.  There is no investment banker, broker, finder or other financial intermediary that has been retained by or is authorized to act on behalf of Buyer or any of its

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Affiliates that might be entitled to any fee or commission in connection with the transactions contemplated by this Agreement or any other Transaction Document.

6.6Financing.   Buyer has committed financing upon which it intends to draw to pay the Closing Payment at Closing.  Buyer acknowledges that its obligations under the Transaction Documents are not subject to its obtaining financing in order to pay the Closing Payment or to satisfy any of its other obligations under the Buyer Transaction Documents.

6.7Disclaimer Regarding Projections.  In connection with Buyer’s investigation of the Company and the Subsidiaries, Buyer has received from CTI and/or its Affiliates certain projections, estimates and other forecasts and business plan information.  Buyer acknowledges that there are uncertainties inherent in attempting to make such projections, estimates and other forecasts and plans and that it is taking full responsibility for making its own evaluation of the adequacy and accuracy of all projections, estimates and other forecasts and plans so furnished to it.  Accordingly, Buyer acknowledges, agrees and confirms that CTI, the Company and each of their respective Affiliates, officers, directors, employees, agents and representatives, do not make, have not made nor shall be deemed to have made any representation or warranty to Buyer, express or implied, at law or in equity, with respect to any such projections, estimates, forecasts or plans.

6.8No Additional Representations.  Buyer acknowledges that none of CTI, the Company, the Subsidiaries or any other Person has made any representation or warranty, expressed or implied, as to the accuracy or completeness of any written or oral information regarding the Company and the Subsidiaries furnished or made available to Buyer and its Representatives or otherwise with respect to the Company, the Subsidiaries or their operations, business, financial condition, assets, liabilities or prospects, except as set forth in Sections 4, 5 and 10.  Buyer shall acquire the Company and the Subsidiaries without any representation or warranty as to merchantability or fitness for any particular purpose, in an “as is” condition and on a “where as” basis, except as otherwise represented or warranted in Sections 4, 5 and 10.

SECTION 7.   COVENANTS OF CTI

7.1Conduct of Business Pending Closing.  From the date hereof until the Closing, except as expressly contemplated by any of the Transaction Documents or as set forth in Section 7.1 of the Disclosure Schedule, CTI shall cause the Company and each Subsidiary to, and with respect to Sections 7.1(e), (f) and (k), CTI also shall:

(a)maintain their corporate (or other organizational) existence, pay and discharge all of their respective material debts, Liabilities and obligations as they become due, and operate their respective businesses in all material respects in the ordinary course in a manner consistent with past practice;

(b)maintain their facilities and assets in all material respects in the same state of repair, order and condition as they were in on the date hereof, reasonable wear and tear excepted;

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(c)maintain their books and records in accordance with past practice in all material respects and use reasonable commercial efforts to maintain in full force and effect all material Governmental Authorizations and all material insurance policies and binders in an amount and scope consistent with any such insurance policies in effect as of the date hereof;

(d)use their commercially reasonable efforts to preserve their present business organization in all material respects and maintain their relations and goodwill with their material suppliers, vendors, customers and employees;

(e)promptly advise Buyer upon obtaining Knowledge of any threat or commencement of any material dispute, claim, action, suit, proceeding, arbitration or investigation by or against the Company, any Subsidiary or any of their operations, properties or assets;

(f)promptly advise Buyer upon obtaining Knowledge of (i) the existence of any fact or condition that would constitute a breach in any material respect of any of CTI’s representations and warranties contained in this Agreement or (ii) the occurrence of any breach in any material respect of any covenant of CTI in this Agreement; provided, however, that no such notice shall be deemed to amend or otherwise modify the Disclosure Schedule delivered on the date hereof or the representations and warranties of CTI contained herein, have any effect on the satisfaction of the conditions to Buyer’s obligations to consummate the Closing hereunder, or limit Buyer’s right to indemnification under any applicable provision of this Agreement;

(g)conduct its cash management customs and practices in the ordinary course of business consistent with past practice (including, without limitation, with respect to maintenance of normalized working capital balances and normalized inventory levels taking into account seasonal fluctuations, collection of accounts receivable, payment of accounts payable, accrued liabilities and other Liabilities and pricing and credit policies);

(h)continue planning circulation and investment in any associated prepaid expenses in the ordinary course in a manner consistent with past practice taking into account seasonal fluctuations;

(i)continue placing orders for inventory, receiving inventory, and liquidating inventory in the ordinary course in a manner consistent with past practice taking into account seasonal fluctuations;

(j)promptly process all customer refunds; and

(k)otherwise report periodically to Buyer concerning the status of the business, operations and finances of the Company and each Subsidiary.

7.2Negative Covenants Pending Closing.  From the date hereof until the Closing, except as expressly contemplated by any of the Transaction Documents or as set forth in Section 7.2 of the Disclosure Schedule, without the prior written consent of Buyer, CTI shall cause the Company and each of the Subsidiaries not to, and with respect to Sections 7.2(j), (o) and (p), CTI also shall not and shall cause each of its Affiliates not to:

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(a)(i) make any change in the Company’s or any Subsidiary’s authorized or issued capital stock or other securities; (ii) grant any stock option or other right to purchase shares of the Company’s or any Subsidiary’s capital stock or other securities; (iii) issue or make any commitment to issue any equity security of the Company or any Subsidiary, including any security convertible into the Company’s or any Subsidiary’s capital stock; (iv) grant any registration rights with respect to the Company’s or any Subsidiary’s capital stock or other securities; or (v) purchase, redeem, retire or make any other acquisition of any shares of the Company’s or any Subsidiary’s capital stock or other securities;

(b)adopt or propose any change in the certificate or articles of incorporation or bylaws (or equivalent governing documents) of the Company or any Subsidiary;

(c)merge or consolidate with any other Person, acquire any equity securities of any other Person, or acquire assets from any other Person, other than (i) the acquisition of inventory in the ordinary course of business in accordance with past practice, (ii) capital expenditures of not more than those set forth in the capital expenditure budget for the current fiscal year previously provided to Buyer;

(d)sell, lease, license or otherwise dispose of any material assets or property (including any Intellectual Property but excluding the Excluded Assets) of the Company and the Subsidiaries, considered as a whole, except the sale of inventory and customer list rentals and exchanges, in each case in the ordinary course of business consistent with past practice;

(e)make any material change in the Company’s or any Subsidiary’s inventory policies or procedures, operating policies or procedures, or advertising and promotional policies or procedures;

(f)enter into or materially modify or amend any financing arrangements, including any financings with respect to the receivables of the Company and the Subsidiaries, or create any Encumbrance on any assets or properties (including any Intellectual Property) of the Company other than Permitted Encumbrances;

(g)enter into or materially modify or amend any lease or sublease of real property (excluding any lease included in the Excluded Assets) or enter into or materially modify or amend any agreement, plan and other document that is required to be disclosed in Section 5.11 of the Disclosure Schedule or terminate or cause or permit the extension of the term of any such lease, agreement, or plan or other document;

(h)make any loan, advance or capital contribution to or investment in any Person, other than (i) loans, advances or capital contributions to a Subsidiary, (ii) travel and similar advances to employees, and (iii) advances and extended payment terms to suppliers, in each case in the ordinary course of business consistent with past practice;

(i)change the independent accountants of the Company or its Subsidiaries or the accounting methods, principles or change in any material respect the practices followed

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by the Company or any Subsidiary (except for any such change required by reason of a change in GAAP or Law);

(j)(i) adopt, amend or modify an Employee Benefit Plan other than an amendment or modification to comply with applicable Laws and adoptions, amendments and modifications that do not apply to any Listed Employee or any officer, employee or consultant of the Company or any Subsidiary, (ii) grant any severance or termination pay or any other compensation of any kind or nature payable, in whole or in part, by reason of the transactions contemplated by this Agreement to any Listed Employee or any officer, employee or consultant of the Company or any Subsidiary, (iii) make any change in employment terms, including, compensation or other benefits for any Listed Employee or any officer, employee or consultant of the Company or any Subsidiary or increase the contingent or non-contingent compensation of, or pay any bonus to, any Listed Employee or any officer, employee or consultant of the Company or any Subsidiary, and (iv) hire, commit to hire or terminate any Listed Employee or any employee of the Company or any Subsidiary, except, in the case of clauses (iii) and (iv), in the ordinary course of business consistent with past practice with respect to any non-management Listed Employee;

(k)cancel, discharge, waive, compromise or release any debts, Liabilities or other amounts owed to the Company and the Subsidiaries that are material to the Company and the Subsidiaries, taken as a whole, by a Person other than a Related Party, or amend, terminate, or waive any other material rights of value to the Company or any Subsidiary;

(l)settle any claim or lawsuit for an amount involving in excess of $25,000 in the aggregate or involving equitable or injunctive relief;

(m)write down or write off the value of any asset material to the Company and the Subsidiaries, taken as a whole, except as required by GAAP and for write downs and write offs of accounts receivable and inventory in the ordinary course of business consistent with past practice;

(n)except as specifically permitted by this Agreement and the other Transaction Documents, take any other action or engage in any other practice that would reasonably be expected to cause the Company and its Subsidiaries to be delivered at the Closing with more Liabilities or fewer assets than they would have been had the Company and its Subsidiaries operated their respective businesses in the ordinary course in a manner consistent with past practice taking into account seasonal fluctuations;

(o)take, or omit to take, any action with respect to the Business, that if taken or omitted on or prior to the date hereof, would have been required to be disclosed on Schedule 5.8 hereof; or

(p)make any commitment to do any of the foregoing with respect to the Business.

7.3Governmental Authorizations; Consents.  Promptly after the date of this Agreement, CTI shall use its commercially reasonable efforts to (i) obtain (and cooperate with the other parties hereto in obtaining) all Governmental Authorizations necessary for or

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required in connection with the consummation of the transactions contemplated by the Transaction Documents, (ii) obtain (and cooperate with the other parties hereto in obtaining) the Consents set forth in Section 7.3 of the Disclosure Schedule in connection with the consummation of the transactions contemplated by the Transaction Documents and (iii) make (and cooperate with the other parties hereto in making) all filings required to be made by CTI pursuant to applicable Laws in order to consummate the transactions contemplated by the Transaction Documents.

7.4Access to Information.

(a)From the date hereof to the Closing, CTI shall cause the Company and the Subsidiaries to, (i) give Buyer and its Representatives (collectively, “Buyer’s Representatives”) reasonable access to the books, records, plants, offices and other facilities and properties and personnel (including independent accountants and outside counsel) of the Company and the Subsidiaries, and, to the extent related to the Company and the Subsidiaries, to the books and records of CTI and its Affiliates, during normal business hours and upon reasonable prior notice, (ii) permit Buyer and Buyer’s Representatives to make such inspections thereof as such Persons may reasonably request, (iii) furnish to Buyer and Buyer’s Representatives such financial, operating data and other information regarding the respective businesses, agreements, commitments, liabilities, personnel and properties of the Company and the Subsidiaries as such Person may reasonably request, and (iv) instruct the Representatives of CTI, the Company and each Subsidiary to reasonably cooperate with Buyer and Buyer’s Representatives in their investigation of the Company and the Subsidiaries.  Buyer shall request that its Affiliates and Representatives agree to comply with Buyer’s undertakings in Section 8.1 with respect to any confidential information of or relating to CTI, its Affiliates, the Company and the Subsidiaries obtained pursuant to this Section 7.4; provided that Buyer shall be responsible for any breach of this Section 7.4 by its Affiliates and Representatives to whom or to which such confidential or proprietary information was disclosed by Buyer or any Buyer Representative.  Any inspections pursuant to this Section 7.4 shall be conducted in such a manner as not to interfere unreasonably with the conduct of the business of CTI, the Company, the Subsidiaries or any of their Affiliates.  Notwithstanding the foregoing, from the date hereof until the Closing, Buyer shall not have access to personnel records of any Listed Employee relating to individual performance or evaluation records, medical histories, any Personally Identifiable Data or other information the disclosure of which, in CTI’s good faith judgment, would subject CTI, the Company, the Subsidiaries or any of their Affiliates to any risk of liability, and Buyer shall not have access to the personnel records of any employee of CTI or its Affiliates who is not a Listed Employee.

(b)From and after the Closing Date, CTI and its Affiliates will afford promptly to Buyer and its counsel, auditors and other authorized representatives reasonable access to its books of account, financial and other records, employees and auditors to the extent they relate to the Company or its Subsidiaries or the Transferred Employees and to the extent necessary to permit Buyer to determine any matter relating to its rights and obligations in connection with any audit, investigation, dispute or litigation involving any Governmental Body or other third Person or any other reasonable business purpose relating to the Company or its Subsidiaries or the Transferred Employees; provided that any such access by Buyer and

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its counsel, auditors and other authorized representatives shall not unreasonably interfere with the conduct of the business of CTI or any of its Affiliates.

7.5Confidential Information.  

(a)From and after the date of this Agreement until the third anniversary of the date of this Agreement, CTI acknowledges and agrees that neither it nor any of its Affiliates shall use for any purpose, other than in connection with the transactions contemplated hereby, or shall disclose, any confidential or proprietary information of or relating to Buyer to any Person (other than its Representatives and Affiliates) without the prior written consent of Buyer; provided, however, that the foregoing restriction shall not apply to (i) any information which is or becomes publicly known without violation of this Agreement by CTI or its Representatives, (ii) any information which is lawfully obtained from a third party that, to CTI’s Knowledge, is not bound by a contractual, legal or other confidentiality obligation to Buyer or its Affiliates, (iii) any information that is independently developed by CTI and its Affiliates without reference to such confidential or proprietary information, (iv) any disclosure required by applicable Law, any final order or judgment of a Governmental Body, any rule or regulation of the Nasdaq Stock Market (“Nasdaq”) or another securities exchange applicable to CTI or its Affiliates (so long as it promptly notifies Buyer of such requirement and reasonably cooperates with Buyer’s efforts to obtain a protective order or other assurance that confidential treatment will be afforded to such information), or (v) in connection with the enforcement of CTI’s rights under the Transaction Documents.

(b)From and after the Closing Date until the third anniversary of the date of this Agreement, CTI acknowledges and agrees that neither it nor any of its Affiliates shall use for any purpose, other than in connection with the transactions contemplated hereby, or shall disclose, any confidential or proprietary information of or relating to the Company or any Subsidiary or the Transferred Employees to any Person (other than its Representatives and Affiliates) without the prior written consent of Buyer; provided, however, that the foregoing restriction shall not apply to (i) any information which is or becomes publicly known without violation of this Agreement by CTI or its Representatives, (ii) any information which is lawfully obtained from a third party that, to CTI’s Knowledge, is not bound by a contractual, legal or other confidentiality obligation to Buyer or its Affiliates, (iii) any information that is independently developed by CTI and its Affiliates without reference to such confidential or proprietary information, (iv) any disclosure required by applicable Law, any final order or judgment of a Governmental Body, any rule or regulation of Nasdaq or another securities exchange applicable to CTI or its Affiliates (so long as it promptly notifies Buyer of such requirement and reasonably cooperates with Buyer’s efforts to obtain a protective order or other assurance that confidential treatment will be afforded to such information), or (v) in connection with the enforcement of CTI’s rights under the Transaction Documents.  For the avoidance of doubt, the confidential information protected by this Section 7.5(b) shall include the names and addresses and other information relating to the customers of the Business, and such information shall be the exclusive property of the Company following the Closing, recognizing that certain of such customers may also have made purchases from the other businesses of CTI and its Affiliates and the names and addresses and other information relating to such customers, to the extent such information

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relates to such other businesses, shall be the exclusive property of CTI or its Affiliates following the Closing.  In furtherance of the foregoing, CTI and its Affiliates shall not solicit any customer of the Business, through the mailing of catalogs or otherwise, regardless of whether CTI or its Affiliates have previously solicited such customers or included such customers on its mailing lists, unless either (x) such customers have also made purchases from CTI’s and its Affiliates’ businesses other than the Business and are therefore customers of CTI and its Affiliates, or (y) CTI and its Affiliates have received the name and address of such customers from a third party that, to CTI’s and its Affiliates’ knowledge, is not bound by a contractual, legal or other confidentiality obligation to the Company and its Affiliates with respect to such customer information.

(c)CTI shall use commercially reasonable methods to ensure its Representatives comply with the undertakings in this Section 7.5; provided that, in any event, CTI shall be responsible for any breach of the terms hereof by any of its Representatives to whom or to which such confidential or proprietary information was disclosed by CTI.

7.6Non-Solicitation.  

(a)Commencing from and after the date of this Agreement until the expiration of 18 months from the date of this Agreement, CTI shall not, and shall cause its Affiliates not to, without the prior written approval of Buyer, directly or indirectly, solicit for employment (as an employee, consultant or otherwise) any employee of Buyer or any of its Affiliates with whom CTI, its Affiliates or its Representatives had contact at any time during the process of Buyer considering, investigating, negotiating and consummating the transactions contemplated by this Agreement; provided that the foregoing restrictions on solicitation shall not prohibit solicitation conducted through an independent employment or recruitment firm (so long as the firm was not directed to solicit such person or the personnel of Buyer or its Affiliates) or as a result of the use of a general solicitation (such as an advertisement) not specifically directed to such person or the personnel of Buyer or its Affiliates.

(b)Commencing from and after the Closing until the expiration of 18 months from the date of the Closing, CTI shall not, and shall cause its Affiliates not to, without the prior written approval of Buyer, directly or indirectly solicit for employment  or hire (as an employee, consultant or otherwise) any Transferred Employee; provided, however, that the foregoing shall not prevent CTI from soliciting or hiring any Transferred Employee whose employment with the Company was terminated by the Company as part of a general reduction in force during such period.

7.7Elimination of Intercompany Accounts.  Prior to the Closing, CTI shall cause all intercompany accounts between CTI and any of its Affiliates, on the one hand, and the Company and its Subsidiaries on the other, to be collected, paid, eliminated or otherwise settled without any further liability or obligation of any kind or natures to the Company and its Subsidiaries.

7.8Exclusivity.  Prior to the first to occur of the Closing or the termination of this Agreement in accordance with its terms, CTI shall not, and shall cause each of its Affiliates

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and each of its and its Affiliates’ respective Representatives not to discuss or pursue or enter into any agreement regarding a possible sale, recapitalization or other disposition of the Company or its Subsidiaries or a substantial portion of the assets or securities of the Company or its Subsidiaries or any interest therein with any Person (other than Buyer and its Affiliates) or provide any information to any Person (other than Buyer and its Affiliates) in connection therewith.  CTI represents that it has suspended (and has caused each of its Affiliates and each of its and its Affiliates’ respective Representatives to suspend), and shall cease until the termination of this Agreement in accordance with its terms, all contacts, discussions and negotiations with third parties (other than Buyer and its Affiliates) regarding any proposal to acquire the Company or its Subsidiaries or a substantial portion of the assets or securities of the Company or its Subsidiaries.  

7.9Financial Information.  CTI shall provide, and shall cause its Affiliates to provide, all reasonable cooperation in connection with facilitating the Closing, including, without limitation, (a) furnishing to Buyer any information or documents requested by Buyer which is in CTI’s and its Affiliates’ possession or to which CTI and its Affiliates have reasonable access, (b) providing Buyer such other assistance as Buyer may reasonably request in connection with Buyer’s preparation of any audited financial statements of the Company and its Subsidiaries in a form complying with Regulation S-X with respect to pre-Closing periods, (c) assisting Buyer in the completion of inventory appraisals and a physical inventory, and (d) assisting Buyer in obtaining landlord waivers and other documentation required by Buyer’s financing sources.  Buyer shall reimburse CTI and its Affiliates for all costs incurred in furnishing such information or documents or providing such assistance pursuant to this covenant.

7.10Maintenance of Insurance Policies.  Prior to the Closing, CTI and its Affiliates will use reasonable efforts to maintain insurance policies for the Company and the Subsidiaries and their assets, properties and employees in an amount and scope consistent with any such insurance policies in effect as of the date hereof.

SECTION 8.   COVENANTS OF BUYER

8.1Confidential Information.  

(a)From and after the date of this Agreement until the first to occur of the Closing or the third anniversary of the date of this Agreement, Buyer acknowledges and agrees that neither it nor its Affiliates shall use for any purpose, other than in connection with the transactions contemplated hereby, or shall disclose, any confidential or proprietary information provided to it by CTI, its Affiliates, the Company or any Subsidiary to any Person (other than its Representatives) without the prior written consent of CTI; provided, however, that the foregoing restriction shall not apply to (i) any information which is or becomes publicly known without violation of this Agreement by Buyer or its Representatives, (ii) any information which is lawfully obtained from a third party that, to Buyer’s Knowledge, is not bound by a contractual, legal or other confidentiality obligation to CTI or its post-Closing Affiliates, (iii) any information that is independently developed by Buyer or its Affiliates without reference to such confidential or proprietary information, (iv) any disclosure required by applicable Law, any final order or judgment of a Governmental Body (so long as it

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promptly notifies CTI of such requirement and reasonably cooperates with CTI’s efforts to obtain a protective order or other assurance that confidential treatment will be afforded to such information), or (v) in connection with the enforcement of Buyer’s rights under the Transaction Documents.  For the avoidance of doubt, the confidential information protected by this Section 8.1(a) shall include the names and addresses and other information relating to the customers of the businesses of CTI and its Affiliates other than the Business, and such information shall be the exclusive property of CTI and its Affiliates following the Closing, recognizing that certain of such customers may also have made purchases from the Business and the names and addresses and other information relating to such customers, to the extent such information relates to the Business, shall be the exclusive property of the Company and its Subsidiaries following the Closing.  In furtherance of the foregoing, the Buyer and its Affiliates (including the Company and its Subsidiaries) shall not solicit any customer of CTI and its post-Closing Affiliates, through the mailing of catalogs or otherwise, regardless of whether the Company and its Subsidiaries have previously solicited such customers or included such customers on their mailing lists, unless either (x) such customers have also made purchases from the Business and are therefore customers of the Business, (y) the Company and its Subsidiaries have received the name and address of such customers from a third party that, to Company’s and its Subsidiaries’ knowledge, is not bound by a contractual, legal or other confidentiality obligation to CTI or its post-Closing Affiliates with respect to such customer information or (z) such customers are customers of the Buyer and its Affiliates or the Buyer and its Affiliates were otherwise in possession the name and address of such customers prior to the Closing.

(b)Commencing from and after the Closing until the third anniversary of the date of this Agreement, Buyer acknowledges and agrees that neither it nor its Affiliates shall use for any purpose, other than in connection with the transactions contemplated hereby, or shall disclose, any confidential or proprietary information provided to it by CTI, its Affiliates, the Company or any Subsidiary that relates to CTI and its post-Closing Affiliates and not the Company, the Subsidiaries or the Transferred Employees (the “CTI Confidential Information”) to any Person (other than its Representatives) without the prior written consent of CTI; provided, however, that the foregoing restriction shall not apply to (i) any information which is or becomes publicly known without violation of this Agreement by Buyer or its Representatives, (ii) any information which is lawfully obtained from a third party that, to Buyer’s Knowledge, is not bound by a contractual, legal or other confidentiality obligation to CTI or its post-Closing Affiliates, (iii) any information that is independently developed by Buyer or its Affiliates without reference to the CTI Confidential Information, (iv) any disclosure required by applicable Law, any final order or judgment of a Governmental Body (so long as it promptly notifies CTI of such requirement and reasonably cooperates with CTI’s efforts to obtain a protective order or other assurance that confidential treatment will be afforded to such information), or (v) in connection with the enforcement of Buyer’s rights under the Transaction Documents.

(c)Buyer shall use commercially reasonable methods to ensure its Representatives comply with the undertakings in this Section 8.1; provided that, in any event, Buyer shall be responsible for any breach of the terms of this Section 8.1 by any of its Representatives.

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8.2Governmental Authorizations.  Promptly after the date of this Agreement, Buyer shall use its commercially reasonable efforts to (i) obtain (and cooperate with the other parties hereto in obtaining) all Governmental Authorizations necessary for or required in connection with the consummation of the transactions contemplated by the Transaction Documents, (ii) make (and cooperate with the other parties hereto in making) all filings required to be made by Buyer pursuant to applicable Laws in order to consummate the transactions contemplated by the Transaction Documents, and (iii) obtain the release of CTI and/or its Affiliates, as applicable, under the guarantees set forth in Section 8.2 of the Disclosure Schedule.  

8.3Notice of Breach; Failure to Satisfy Closing Condition.  From the date hereof until the Closing, Buyer shall promptly advise CTI upon obtaining Knowledge of (a) any threat or commencement of any material dispute, claim, action, suit, proceeding, arbitration or investigation by, against or affecting Buyer or any of its Affiliates or any of their properties, operations or assets that would have a Buyer Material Adverse Effect, (b) the existence of any fact or condition that would constitute a breach in any material respect of any of Buyer’s representations or warranties contained herein, or (c) the occurrence of any breach in any material respect of any covenant of Buyer in this Agreement that, in all cases, would be reasonably likely to make the satisfaction of the conditions in Section 12.2 impossible or unlikely.

8.4Non-Solicitation.  Commencing from and after the date of this Agreement until the expiration of 18 months from the date of this Agreement, Buyer shall not, and shall cause its Affiliates not to, without the prior written approval of CTI, directly or indirectly solicit for employment (as an employee, consultant or otherwise) any employee of CTI or its Affiliates (other than the Listed Employees) with whom Buyer had contact at any time during the process of Buyer considering, investigating, negotiating and consummating the transactions contemplated by this Agreement; provided that the foregoing restrictions on solicitation shall not prohibit solicitation conducted through an independent employment or recruitment firm (so long as the firm was not directed to solicit such person or the personnel of CTI or its Affiliates) or as a result of the use of a general solicitation (such as an advertisement) not specifically directed to such person or the personnel of CTI or its Affiliates.  

SECTION 9.   ADDITIONAL COVENANTS OF BUYER, THE COMPANY AND CTI

9.1Further Assurances.  Subject to the terms and conditions of this Agreement and the other Transaction Documents, each party hereto shall use its commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable under applicable Laws to consummate the transactions contemplated by the Transaction Documents (including each party hereto using its commercially reasonable efforts to cause the Closing to occur on or prior to September 30, 2008) and shall, from time to time and without further consideration, either before or after the Closing, execute such further instruments and take such other actions as any other party hereto shall reasonably request in order to fulfill its obligations under any of the Transaction

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Documents, to effectuate the purposes of the Transaction Documents and to provide for the orderly and efficient transition of the ownership of the Company and its Subsidiaries to Buyer.

9.2Certain Filings and Consents.  Each party to this Agreement shall cooperate with one another (i) in determining whether any action by or in respect of, or filing with, any Governmental Body is required, or whether any Consents are required to be obtained from parties to any material contracts, in connection with the consummation of the transactions contemplated by the Transaction Documents, and (ii) subject to the terms and conditions of this Agreement and the other Transaction Documents, in taking such commercially reasonable actions or making any such filings, furnishing information required in connection therewith and seeking timely to obtain any such Consents; provided that no party shall be obligated to expend any money or grant any other consideration or compensation to obtain any such Consent.  Buyer and CTI shall use their respective reasonable best efforts to keep the other party informed in all material respects with respect to any communication given or received in connection with any filing, submission, investigation or proceeding relating to the transactions contemplated by the Transaction Documents.

9.3Public Announcements.  Each party hereto agrees that no public release or announcement concerning the transactions contemplated by this Agreement and the other Transaction Documents shall be issued by any such party without the prior written consent of the other parties hereto (which consent shall not be unreasonably withheld or delayed), except any release that may be required by applicable Laws or the rules or regulations of Nasdaq (including on Form 8-K of the Securities and Exchange Commission); provided however, in such case, the party required to make the release or announcement shall, to the extent practicable, allow the other parties reasonable time to comment on such release or announcement in advance of such issuance and shall use commercially reasonable efforts to incorporate such other party’s comments into such release or announcement.  Notwithstanding the foregoing, no provision of this Agreement shall relieve Buyer or any of its Representatives or Affiliates from any of their obligations under Section 8.1 or CTI or any of its Representatives or Affiliates from any of their obligations under Section 7.5.

9.4Excluded Subsidiaries and Excluded Assets.  

(a)Buyer acknowledges that the outstanding capital stock and other equity securities of, or equity interests in, the Excluded Subsidiaries owned of record and beneficially by the Company and all of the Excluded Assets have been or will be transferred to CTI or an affiliate of CTI on or prior to the Closing Date, and that CTI is not selling, and Buyer is not acquiring, any interest in the Excluded Subsidiaries or in any asset thereof or any other Excluded Asset as a result of the transactions contemplated in this Agreement or otherwise.

(b)The representations and warranties of CTI made in Sections 4 and 5 of this Agreement and the Disclosure Schedules, as of the Closing Date, assume that the transfer of assets and assumption of liabilities contemplated by the Assignment and Assumption shall have been consummated prior to the Closing pursuant to the terms of such Assignment and Assumption, so that, as of the Closing, (i) the Excluded Assets shall no longer be held by the Company or it Subsidiaries, (ii) the Company and its Subsidiaries shall no longer have any

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Liabilities with respect to any Excluded Liabilities, (iii) the Acquired Assets shall be held by the Company or one of it Subsidiaries, and (iv) the Company and its Subsidiaries shall be liable with respect to the Assumed Liabilities; provided, however, the disclosure of any Excluded Liabilities or Excluded Assets on the Disclosure Schedules shall not be deemed to limit or impair in any manner whatsoever the right of Buyer, the Company and their Affiliates to seek indemnification pursuant to Section 14.2(a)(iii).

9.5Transition Services.  At the Closing, Charming Shoppes of Delaware, Inc. and the Company will enter into a Transition Services Agreement (the “Transition Services Agreement”), the form of which is attached as Exhibit 9.5.

9.6Mutual Release.  

(a)Effective immediately prior to the Closing, CTI hereby irrevocably waives, releases and discharges the Company and its Subsidiaries from any and all Liabilities and obligations to CTI and its Affiliates of any kind or nature whatsoever (including, without limitation, in respect of rights of contribution or indemnification), in each case whether absolute or contingent, liquidated or unliquidated, known or unknown, and whether arising under any agreement or understanding, or the limited liability agreement, articles, bylaws or other constitutive documents of the Company or any of its Subsidiaries or otherwise at law or equity, and CTI and its Affiliates shall not seek to recover any amounts in connection therewith or thereunder from Buyer, the Company or its Subsidiaries.  The foregoing waiver, release and discharge shall not apply in respect of any liability or obligation arising under (i) any of the Transaction Documents or (ii) any agreement entered into on or after the Closing Date.

(b)At the Closing, Buyer shall cause the Company and its Subsidiaries to irrevocably waive, release and discharge CTI and its Affiliates from any and all liabilities and obligations to the Company and its Subsidiaries of any kind or nature whatsoever (including, without limitation, in respect of rights of contribution or indemnification), in each case whether absolute or contingent, liquidated or unliquidated, known or unknown, and whether arising under any agreement or understanding, or the articles, bylaws or other constitutive documents of the Company or any of its Subsidiaries or otherwise at law or equity, and Buyer, the Company or its Subsidiaries shall not seek to recover any amounts in connection therewith or thereunder from CTI and its Affiliates.  The foregoing waiver, release and discharge shall not apply in respect of any liability or obligation arising under (i) any of the Transaction Documents or (ii) any agreement entered into on or after the Closing Date.

(c)CTI shall cause all Related Party Agreements to be cancelled as of the Closing Date, and neither CTI or its Affiliates nor the Company or its Subsidiaries shall have any further liability or obligation with respect thereto.  From and after the Closing, all transactions between the Company or any Subsidiary, on the one hand, and CTI or its Affiliates, on the other hand, shall be governed by the Transaction Documents.

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SECTION 10.   TAX MATTERS

10.1Tax Representations of CTI.  CTI hereby represents and warrants to Buyer that, except as set forth in Section 10.1 of the Disclosure Schedule attached hereto:

(a)All Tax Returns, or extensions relating thereto, required to be filed by or with respect to the Company and its Subsidiaries have been timely and properly filed, and all such Tax Returns are correct and complete in all respects.

(b)All liabilities for Taxes of the Company and its Subsidiaries (including any Tax liabilities relating to other consolidated group members under Treasury Regulation Section 1.1502-6 and any estimated Taxes) with respect to taxable periods ending on or before, and the portion of any interim period up to and including, the Closing Date have been properly and timely paid (to the extent due and payable) or, in the case of Taxes not yet due, properly provided for on the Balance Sheet or, in the case of Taxes accruing after the date thereof, on the books and records of the Company and its Subsidiaries in accordance with past practice and such amounts accrued for Taxes are sufficient to pay any Taxes of the Company and its Subsidiaries through the Closing Date.  Notwithstanding anything to the contrary in this Agreement, no representation or warranty is made with respect to the tax effects of any transactions entered into after the time of Closing based on instructions of the Buyer and its agents.  There are no Encumbrances relating to Taxes, other than Permitted Encumbrances, existing or, to the Knowledge of CTI, threatened or pending with respect to any asset of the Company and its Subsidiaries.

(c)No issues have been raised in writing with the Company and its Subsidiaries (or are currently pending) by the Internal Revenue Service (“IRS”) or any other taxing authority in connection with any of the Tax Returns (including any assertion by a taxing authority that a required Tax Return was not filed), and no waivers of statutes of limitations have been given with respect to any such Tax Returns or with respect to any Taxes.

(d)Section 10.1(d) of the Disclosure Schedule identifies all Tax Returns of or with respect to the Company or any of its Subsidiaries that are currently under examination by the IRS or by other taxing authorities.  There are no unpaid deficiencies asserted or assessments made by any taxing authority against the Company or any of its Subsidiaries.

(e)Neither the Company nor any Subsidiary (i) has made any transfer of any intangible property with respect to which Code Section 367(d) or 482 will require the recognition of additional income after the Closing Date or (ii) owns stock in a “passive foreign investment company” within the meaning of Code Section 1297(a).

(f)Neither the Company nor any Subsidiary (i) is a party to any agreement, with any Person other than any Affiliate providing for the allocation or sharing of Taxes, or (ii) has been included in any “consolidated,” “unitary” or “combined” Tax Return with any such Person since October 30, 2002.

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(g)Neither the Company nor any Subsidiary is a party to any agreement, contract, arrangement or plan that has resulted or will result, separately or in the aggregate, in the payment of any “excess parachute payment” within the meaning of Code Section 280G.

(h)The Company and each of its Subsidiaries has properly withheld and paid all Taxes required to have been withheld and paid in connection with amounts paid or owing to any shareholder, employee, creditor, independent contractor, or other third party.

(i)The representations made by CTI in this Section 10.1 are the only representations and warranties made in this Agreement with respect to Taxes and Tax matters and are made only with respect to taxable periods that end on or prior to the Closing Date and the pre-Closing Date portion of any taxable period that includes the Closing Date and ends after such date.  CTI makes no representations or warranties regarding any Tax positions taken on or after the Closing Date.  Neither the Company nor any Subsidiary (A) has been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which was Parent) since October 30, 2002 and (B) has any liability for the Taxes of any Person (other than any of the Company or its Subsidiaries) under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local, or non-US law), as a transferee or successor, by contract, or otherwise.

10.2Tax Covenants of CTI and the Company.  

(a)Neither Buyer nor the Company shall amend any Tax Return filed on or before the Closing Date without the written consent of CTI, except for the purpose of claiming a refund resulting from a carryback from a period ending after the Closing Date.

(b)Refunds of Taxes of the Company (net of any Taxes or costs incurred with respect thereto) with respect to taxable years ended on or before the Closing Date, aside from any refunds resulting from carrybacks from periods ending after the Closing Date, shall be for CTI’s account and, if received by Buyer or the Company, shall be paid over to CTI within 10 Business Days of receipt thereof.

(c)CTI shall provide to Buyer at Closing (i) a certification of non-foreign status, in accordance with Treas. Reg. Section 1.1445-2(b)(2), that CTI is not a foreign person for United States federal income tax purposes and (ii) a certification issued by the Company in accordance with Treas. Reg. Section 1.1445-2(c), that stock in the Company is not a United States real property interest.

10.3Tax Indemnification.  

(a)CTI shall indemnify Buyer, the Company and its Subsidiaries and hold them harmless from and against (A) all Taxes (or the non-payment thereof) of the Company and its Subsidiaries for all taxable periods ending on or before the Closing Date and the portion through the end of the Closing Date for any taxable period that includes (but does not end on) the Closing Date (each such taxable period, a “Pre-Closing Tax Period”), (B) any and all Taxes of any member of an affiliated, consolidated, combined, or unitary group of which the Company or any Subsidiaries (or any of their predecessors) is or was a member on or prior to the Closing Date, including pursuant to Treasury Regulation Section 1.1502-6 or any

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analogous or similar state, local, or foreign law or regulation, and (C) any and all Taxes of any Person (other than the Company and its Subsidiaries) imposed on the Company and its Subsidiaries as a transferee or successor, by contract or pursuant to any law, rule or regulation, which Taxes relate to an event or transaction occurring before the Closing, except in each case, to the extent such Taxes were taken into account in the final determination of Final Closing CTI Borne Expenses.  Except as otherwise provided in this Agreement, CTI shall not indemnify Buyer, the Company or its Subsidiaries for Taxes resulting from actions taken after the time of Closing based on instructions of the Buyer and its agents.  CTI shall reimburse Buyer for any Taxes of the Company and its Subsidiaries which are the responsibility of CTI pursuant to this Section 10.3 no later than five business days prior to payment of such Taxes by Buyer or the Company.

(b)In the case of any taxable period that includes (but does not end on) the Closing Date (a “Straddle Period”), the amount of any Taxes based on or measured by income or receipts of the Company and its Subsidiaries for the Pre-Closing Tax Period shall be determined based on an interim closing of the books as of the close of business on the Closing Date, and the amount of other Taxes of the Company and its Subsidiaries for a Straddle Period which relate to the Pre-Closing Tax Period shall be deemed to be the amount of such Tax for the entire Taxable period multiplied by a fraction the numerator of which is the number of days in the Taxable period ending on the Closing Date and the denominator of which is the number of days in the Straddle Period.

10.4Tax Contest.  Notwithstanding Section 14.3, if Buyer receives any written claim or notification which involves the assertion of any claim, or the commencement of any investigation, examination, audit, suit, action or proceeding relating to a matter that is the subject of the representations or covenants set forth in this Section 10 (a “Tax Contest”), Buyer shall, within ten days of receiving notice of such claim, notify CTI in writing of such Tax Contest and shall give CTI such information with respect to the Tax Contest as CTI may reasonably request.  Except as otherwise provided in this Section 10.4, CTI shall, at its own expense, participate in and control any Tax Contest for which CTI is providing indemnification pursuant to Section 10.3 or Section 14.2(a), and may, at its own expense, participate in and, assume control over the defense of any matter at issue in such Tax Contest.  In connection with any Tax Contest with respect to which CTI elects to assume control, CTI shall, except with respect to items indirectly affecting Taxes of the Company or any Subsidiary for which CTI has not agreed to be liable and subject to Buyer’s right to consent contained in this Section 10.4, have the exclusive power to contest, settle, prosecute, defend and make decisions and elections in respect of such Tax Contest, and determine the manner in which the prosecution or defense is conducted, the contest or settlement occurs, or the decisions or elections are made.  Buyer may, at its own expense, participate in any such Tax Contest other than a Tax Contest that involves the consolidated, combined or unitary group that includes CTI.  At no time shall Buyer or the Company settle or otherwise compromise, prosecute or defend without the prior written consent of CTI, any Tax Contest of which CTI assumes control in accordance with this Section 10.4 and any settlement or compromise made by Buyer or the Company with respect to such Tax Contest shall not be effective and shall be null and void with respect to CTI to the extent CTI is prejudiced by such action.  Each of the parties hereto and their respective Representatives shall cooperate with each other party hereto and their respective Representatives, as reasonably requested thereby, in the prosecution,

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defense, settlement or contest of any Tax Contest.  Buyer shall promptly provide CTI with copies of all notices and other correspondence and information received by Buyer or the Company with respect to any Tax Contest.  Buyer hereby grants any Tax practitioner retained by CTI, in connection with any Tax Contest of which CTI assumes or continues control in accordance with this Section 10.4, with power of attorney to act on behalf of Buyer and the Company in respect of such Tax Contest; provided, however, that the terms of any settlement or agreement, to the extent such settlement or agreement (i) provides that Buyer or the Company take or refrain from taking any actions or make any payments for which Buyer is not fully indemnified pursuant to Section 14.2 or (ii) would cause any material detriment to the Buyer or the Company in any period ending after the Closing Date, shall be on terms and conditions reasonably acceptable to Buyer and, if applicable, the Company and subject to Buyer’s consent to such Settlement, not to be unreasonably withheld.  Buyer shall provide, or cause the Company to provide, to CTI a separate power of attorney granting CTI the power to control a particular Tax Contest in the manner set forth in this Agreement in form and substance reasonably satisfactory to Buyer and CTI.

10.5Tax Sharing Agreements.  All tax sharing agreements or similar agreements with respect to or involving the Company and its Subsidiaries shall be terminated as of the Closing Date, and, after the Closing Date, the Company and its Subsidiaries shall not be bound thereby or have any Liability thereunder.

10.6Transfer Taxes.  All transfer, documentary, sales, use, stamp, registration and other such Taxes, and all conveyance fees, recording charges and other fees and charges (including any penalties and interest) incurred in connection with the consummation of the transactions contemplated by this Agreement shall be borne 50% by Buyer and 50% by CTI.  Each of Buyer and CTI agree to take any reasonable action to reduce such Taxes incurred in connection with the consummation of the transactions contemplated by this Agreement.  

10.7Section 338(h)(10) Election.  At or before the Closing, Buyer and CTI shall cause to be prepared, executed and exchanged between the parties IRS Form 8023 and any other forms necessary to make a joint election under Section 338(h)(10) of the Code with respect to the purchase of the Shares of the Company and under any similar provisions of state, local or foreign law (the “Election”).  CTI shall timely cause such Election to be filed.  Neither Buyer nor CTI shall take any action or file any document inconsistent with the Election.

10.8Purchase Price Allocation .  Within 60 days of the Closing Date, Buyer shall provide CTI with an allocation of the Purchase Price and the liabilities of the Company (plus other relevant items) to the assets of the Company for all purposes (including Tax and financial accounting) (the “Purchase Price Allocation”). Buyer shall permit CTI to review and comment on the Purchase Price Allocation and shall make such revisions as are reasonably requested by CTI.  Buyer, the Company, and CTI shall file all Tax Returns (including amended returns and claims for refund) and information reports in a manner consistent with the Purchase Price Allocation.

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SECTION 11.   EMPLOYEE BENEFITS

11.1Listed Employees; Transferred Employees.  On the Closing Date, CTI and its Affiliates shall terminate the employment of, and Buyer shall offer employment with Buyer or one of Buyer’s Affiliates, to each of the employees listed on Schedule 11.1 hereto (each, a “Listed Employee” and collectively, the “Listed Employees”), at a rate of pay comparable to, and with severance entitlements not less favorable than, the rate of pay and severance entitlements, respectively, provided to the Listed Employee immediately prior to the Closing Date.  For this purpose, “pay” shall include base salary or wages, but exclude any equity-based or incentive compensation.  Buyer, at the time it extends such employment offers, shall provide appropriate information regarding employment terms and conditions to the Listed Employees, which shall conform in all respects to the provisions of this Section 11.1.  Each Listed Employee who accepts such offer of employment shall become an employee of the Buyer or its Affiliates on the Closing Date and is referred to as a “Transferred Employee,” and all such employees are collectively referred to as the “Transferred Employees.”  Buyer shall, or shall cause its Affiliates to, continue to provide each Transferred Employee with the pay (while such Transferred Employees remain employed by Buyer or its Affiliates) and severance entitlements described in this Section at least until January 1, 2009.  On and after January 2, 2009, the severance program applicable to such employees shall be comparable to that provided to similarly situated employees of Buyer.

11.2Comparability of Benefits.  For the period commencing on the Closing Date and ending on the first anniversary of the Closing Date, Buyer shall, or shall cause its Affiliates (including the Company or the Subsidiaries), to provide employee benefits (other than equity-based compensation arrangements) to each Transferred Employee as of the Closing Date that are no less favorable in the aggregate than the employee benefits (other than equity-based compensation arrangements) provided to similarly situated employees of Buyer; provided, however, that with respect to the period beginning on the Closing Date and ending immediately prior to January 1, 2009 or such earlier date that Buyer provides medical coverage, dental coverage, vision coverage and health-care flexible spending accounts to Transferred Employees through one or more group health plans maintained by Buyer or its Affiliates (the “Buyer Group Health Plan Effective Date”), CTI and its Affiliates shall provide medical, dental, vision and/or health-care flexible spending accounts (as elected by a Transferred Employee or the Transferred Employee’s beneficiaries) to Transferred Employees (and their beneficiaries) provided that Buyer pays the “Required Amount” to CTI within three Business Days of the date the Transferred Employee would have been required to pay the COBRA premium for such coverage (without regard to any grace period) if CTI had required the Transferred Employee (and not the Buyer) to pay the COBRA premium.  With respect to medical, dental and vision coverage, the Required Amount shall be the applicable COBRA premium required for terminating employees (and their beneficiaries) to receive COBRA coverage under the applicable plan maintained by CTI’s Affiliate.  With respect to health-care flexible spending accounts, the “Required Amount” shall be the amount that the Transferred Employee (or his or her beneficiary) would have been required to pay for COBRA coverage with respect to health-care flexible spending accounts if CTI had required the Transferred Employee (and not the Buyer) to pay the COBRA premium.

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11.3Welfare Plans.  With respect to any Transferred Employee who was covered by a medical, dental or health plan maintained by CTI or any of its Affiliates on the day before the Closing Date (and beneficiaries thereof) (each, a “Covered Individual”), if such coverage (the “Old Coverage”) is changed on or after the Closing Date and before the first anniversary of the Closing Date, Buyer shall, or shall cause its Affiliates, to use commercially reasonable efforts (i) to waive all pre-existing conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to each Covered Individual under the new group health coverage, other than conditions, exclusions or waiting periods that are already in effect with respect to any such Covered Individual under the Old Coverage that have not been satisfied as of the date such new coverage is put in place, and (ii) if the Old Coverage is changed prior to January 1, 2009, to provide each such Covered Individual with credit for any deductibles and co-payments applied or made with respect to him or her under the Old Coverage (to the same extent that such credit was given under such Old Coverage prior to the date such new coverage was put in place) in satisfying any applicable deductible or out-of-pocket requirements under any such plans in which such individuals may be eligible to participate after the Closing Date; provided, however, that the foregoing shall not apply to the extent it would result in duplication of benefits. For the period commencing on the Closing Date and ending immediately prior to January 1, 2009, Buyer shall, or shall cause its Affiliates (including the Company or the Subsidiaries), to limit the participant contribution required for Covered Individuals to obtain such medical, dental and vision coverage to no more than the participant contribution required of Covered Individuals for similar coverage under the Employee Benefit Plans immediately prior to the Closing Date.

11.4Service Credit.  Buyer shall give each Transferred Employee full credit for purposes of eligibility and vesting under the employee benefit plans and arrangements (including, but not limited to, employee benefit plans within the meaning of Section 3(3) of ERISA, vacation and severance plans or arrangements) maintained or sponsored by Buyer or any of its Affiliates (including the Company and the Subsidiaries) in which such Transferred Employees participate after the Closing for services rendered by such Transferred Employees to CTI, the Company or the Subsidiaries prior to the Closing, except to the extent such credit would result in an unintended duplication of benefits.

11.5Rollovers and Transfers.  Effective as of the Closing Date, CTI shall cause its Affiliates to fully vest all account balances of each Transferred Employee under the Charming Shoppes, Inc. Employees’ Retirement Savings Plan and the Charming Shoppes Variable Deferred Compensation Plan for Executives.  As soon as practicable after the “Buyer Plan Effective Date,” Buyer shall, or shall cause its Affiliates (including the Company and the Subsidiaries), to take the following actions with respect to each Transferred Employee who continues to be employed by the Company, a Subsidiary or an Affiliate of Buyer on the date of the rollover (with respect to rollovers described in subsection (a)) and the date of the transfer (with respect to transfers described in subsection (b)):  (a) permit each such Transferred Employee to make rollovers (in the form of cash and notes associated with plan loans) from the Charming Shoppes, Inc. Employees’ Retirement Savings Plan to a 401(k) plan sponsored by Buyer or one of its Affiliates (including the Company and the Subsidiaries) after the Closing Date, provided such distributions are eligible rollover distributions as defined in Section 402(c)(4) of the Code, and (b) accept transfers from the health-care and dependent-care flexible spending accounts in which such Transferred Employees participated

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immediately prior to the Buyer Plan Effective Date to comparable flexible spending accounts maintained by Buyer or one of its Affiliates (including the Company and the Subsidiaries) of an amount equal to the positive excess of (A) over (B), determined separately for each such employee and separately for the health-care flexible spending account and the dependent-care flexible spending account, where (A) is the total salary reduction contributions made by such employee before the Buyer Plan Effective Date with respect to such account for 2008, and (B) is the total expenses paid from such account before the Buyer Plan Effective Date with respect to expenses incurred in 2008.  As soon as practicable after the Buyer Plan Effective Date, CTI shall pay to Buyer the aggregate amount of the account transfers credited pursuant to clause (b) of the preceding sentence.  Buyer (or an Affiliate thereof, as applicable) will make appropriate adjustments to their respective cafeteria plans to reflect this transfer.  Buyer (or an Affiliate thereof, as applicable) shall upon such transfer be responsible to reimburse for all eligible claims under the terms of Buyer’s (or the Affiliate’s) plan, including claims incurred during 2008 and before Closing, up to the amount of such employee’s election in the case of a health-care flexible spending account, and up to the amount of such employee’s 2008 contributions in the case of a dependent-care flexible spending account, reduced by amounts previously reimbursed by CTI, if any.  For purposes of this Section 11.5, “Buyer Plan Effective Date” shall mean (a) with respect to rollovers from the Charming Shoppes, Inc. Retirement Savings Plan and transfers of dependent-care flexible spending accounts, the Closing Date, or (b) with respect to health-care flexible spending accounts, the Buyer Group Health Plan Effective Date. Notwithstanding the foregoing, in the event the Buyer Group Health Plan Effective Date is January 1, 2009, there shall be no transfer with respect to health-care flexible spending accounts under this Section 11.5. CTI and its Affiliates shall not place any Transferred Employee’s 401(k) plan loan into default unless the Transferred Employee fails to elect a rollover to Buyer’s (or an Affiliate’s) 401(k) plan within 55 days of the Closing Date.  Buyer and CTI shall take (or cause to be taken) all actions necessary and desirable to effect this Section 11.5.

11.6Continuation Coverage.  Effective as of the Buyer Group Health Plan Effective Date, Buyer shall, or shall cause its Affiliates (including the Company and its Subsidiaries), to (a) assume sole responsibility for any liabilities and obligations arising under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, and applicable state continuation coverage rights laws (collectively, “Continuation Coverage Laws”) on or after the Buyer Group Health Plan Effective Date resulting from the actions (or inactions) of the Buyer or its Affiliates on or after the Buyer Group Health Plan Effective Date with respect to Buyer’s group health plans.  CTI and its Affiliates shall continue to provide coverage under the Continuation Coverage Laws for former employees (and their beneficiaries) of, and eligible beneficiaries of employees of, CTI, the Company or any Subsidiary who are receiving such coverage or are eligible to elect to receive such coverage prior to the Buyer Group Health Plan Effective Date.

11.7Retained Liabilities.  Except to the extent taken into account in the final determination of Final Closing CTI Borne Expenses with respect to accrued payroll, bonus payments and vacation, personal days, sick pay and other paid time off or otherwise expressly assumed by the Company pursuant to Section 3.4 hereof, CTI and its post-Closing Affiliates, including Parent, will retain and be responsible for the satisfaction of, and shall indemnify and hold Buyer, the Company and its Subsidiaries harmless from, all liabilities and obligations

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relating to the Employee Benefit Plans and all such other employee compensation or benefit plans, programs, agreements and arrangements that have been sponsored, maintained or contributed to by Parent, CTI or any other entity that, together with Parent, CTI, the Company or any Subsidiary, is or was treated as a single employer under Section 414 of the Code.  For the avoidance of doubt, Buyer, the Company and their Affiliates shall not be required to pay or otherwise be responsible for (whether as a variable cost under the Transition Services Agreement or otherwise) the amount of any severance payments or any change-of-control, retention or similar payments or bonuses payable to any employee of Parent, CTI or any of their post-Closing Affiliates (other than such amounts payable to Transferred Employees, if any, to the extent such amounts are taken into account in the final determination of Final Closing CTI Borne Expenses).

11.8Paid Time Off.  From and after the Closing Date, Buyer shall, or shall cause its Affiliates, to assume, honor and be solely responsible for paying, providing and satisfying when due all vacation, personal days, sick pay and other paid time off for Transferred Employees accrued but unused as of the Closing Date, on terms and conditions not less favorable than the terms and conditions in effect immediately prior to the Closing Date.

11.9Third Party Beneficiaries; Other Limitations.  Nothing contained in this Agreement, express or implied, (a) shall be construed to establish, amend, or modify any benefit plan, program, agreement or arrangement, (b) shall alter or limit the ability of Buyer, the Company or its Subsidiaries to amend, modify or terminate any benefit plan, program, agreement or arrangement at any time established, sponsored or maintained by any of them, (c) is intended to confer upon any Person any right to employment or continued employment for any period of time by reason of this Agreement, or any right to a particular term or condition of employment, or (d) is intended to confer upon any Person any other rights as a third-party beneficiary of this Agreement.

SECTION 12.   CLOSING CONDITIONS

12.1Conditions to Obligation of Buyer.  The obligation of Buyer to purchase the Shares and to take the other actions required to be taken by Buyer at Closing is subject to the satisfaction or waiver by Buyer at the Closing of each of the following conditions:

(a)Performance.  CTI shall have (i) executed and delivered to Buyer this Agreement and the other Seller Transaction Documents and (ii) delivered to Buyer certificates representing all of the Shares, duly endorsed for transfer or with stock powers affixed thereto executed in blank in proper form for transfer.

(b)Representations and Warranties.  The representations and warranties of CTI contained in this Agreement shall have been true and correct as of the date of this Agreement and shall be true and correct as of the Closing Date, as if made at and as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case they shall have been true and correct as of such earlier date), except in both cases for such breaches of representations and warranties which, individually or in the aggregate, would not have or, would not reasonably be expected to have, a Material Adverse

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Effect; provided, however, the representations and warranties of CTI in Section 4.2, Section 4.4 and Section 5.3 shall each then be true and correct in all respects.

(c)Performance of Covenants.  CTI shall have performed or complied in all material respects with all of the agreements and covenants required by this Agreement to be performed or complied with by it before or at the Closing.

(d)Legal Matters.  No temporary, preliminary, permanent or final order, injunction or judgment of a court of competent jurisdiction or other Governmental Body shall have been issued or rendered that would prevent or render unlawful the consummation of the transactions contemplated by this Agreement or any other Transaction Document.

(e)Resignation of Directors.  Buyer shall have received resignations from all of the directors of the Company and each Subsidiary.

(f)Indebtedness, Liens.  The Company and each Subsidiary shall have been fully and unconditionally released as parties to the Wachovia Facility, and any liens or Encumbrances (other than Permitted Encumbrances) on the assets or properties of the Company or the Subsidiaries, whether or not related to the Wachovia Facility, shall have been released and Buyer shall have received satisfactory evidence of the foregoing.

(g)Tax Certifications.  Buyer shall have received each certification described in Section 10.2(c).

(h)CTI’s Delivery of Transition Services Agreement.  Charming Shoppes of Delaware, Inc. shall have executed and delivered the Transition Services Agreement to Buyer.

(i)Consents.  CTI and its Affiliates shall have received all Consents listed on Schedule 7.3.

(j)Proprietary Credit Card Program Agreements.  Each of the following agreements shall be in full force and effect: (i) that certain Private Label Credit Card Plan Agreement, dated as of the date hereof, between Spirit of America National Bank and Buyer, the Company and its Subsidiaries; (ii) that certain Private Label Credit Card Plan Agreement, dated as of the date hereof, between World Financial Network National Bank and Buyer; and (iii) that certain Purchase Agreement, dated as of the date hereof, by and between Spirit of America National Bank and World Financial Network National Bank, provided in the case of clauses (i) and (ii), this condition shall be deemed satisfied if the failure of such agreements to be in full force and effect is primarily related to or arises from any breach or violation of such agreements by Buyer or any of its Affiliates.

(k)Assignment and Assumption.  The transactions contemplated by the Assignment and Assumption shall have been consummated.

12.2Conditions to Obligation of CTI.  The obligation of CTI to sell the Shares and to take the other actions required to be taken by CTI at Closing is subject to the satisfaction or waiver by CTI at the Closing of each of the following conditions:

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(a)Performance.  Buyer shall have executed and delivered to CTI this Agreement and the other Buyer Transaction Documents and Buyer shall have made the payments required to have been made by Buyer pursuant to Section 2.2.

(b)Representations and Warranties.  The representations and warranties of Buyer contained in this Agreement shall have been true and correct as of the date of this Agreement and shall be true and correct as of the Closing Date (except to the extent such representations and warranties expressly relate to an earlier date, in which case they shall have been true and correct as of such earlier date), except in both cases for such breaches of representations and warranties which, individually or in the aggregate, would not have, or would not reasonably be expected to have, a Buyer Material Adverse Effect; provided, however, the representations and warranties of Buyer in Section 6.2, shall then be true and correct in all respects.

(c)Performance of Covenants.  Buyer shall have performed or complied in all material respects with all of the agreements and covenants required by this Agreement and each other Buyer Transaction Document to be performed or complied with by it before or at the Closing.

(d)Legal Matters.  No temporary, preliminary, permanent or final order, injunction or judgment of a court of competent jurisdiction or other Governmental Body shall have been issued or rendered that would prevent or render unlawful the consummation of the transactions contemplated by this Agreement or any other Transaction Document.

(e)Buyer’s Delivery of Transition Services Agreement.  The Company shall have executed and delivered the Transition Services Agreement to Charming Shoppes of Delaware, Inc.

12.3Frustration of Closing Conditions.  None of the parties hereto may rely on the failure of any condition set forth in this Section 12 to be satisfied if such failure was caused by such party’s failure to act in good faith or to use its commercially reasonable efforts to cause the Closing to occur, in each case as required hereunder.

SECTION 13.   TERMINATION AND ABANDONMENT

13.1Termination.  This Agreement may be terminated and the transactions contemplated herein may be abandoned at any time before the Closing:

(a)by Buyer or CTI, if the Closing has not occurred by October 1, 2008; provided, however, that neither Buyer nor CTI may terminate this Agreement pursuant to this clause if the Closing shall not have been consummated by October 1, 2008 by reason of the failure of such party to perform in all material respects any of its covenants or agreements contained in this Agreement;

(b)by the mutual consent of Buyer and CTI;

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(c)by Buyer, upon a material breach of any pre-Closing covenant or agreement on the part of CTI or the Company set forth in this Agreement, or if any representation or warranty of CTI herein shall be or become untrue in any case such that the conditions set forth in Section 12.1 would not be satisfied (any such breach or occurrence, a “Terminating Seller Breach”); provided, however, that, if such Terminating Seller Breach is curable by CTI through the exercise of its commercially reasonable efforts, CTI shall have been given a period of 10 days to cure such Terminating Seller Breach;

(d)by CTI, upon a material breach of any pre-Closing covenant or agreement on the part of Buyer set forth in this Agreement, or if any representation or warranty of Buyer herein shall be or become untrue in any case such that the conditions set forth in Section 12.2 would not be satisfied (any such breach or occurrence, a “Terminating Buyer Breach”); provided, however, that, if such Terminating Buyer Breach is curable by Buyer through the exercise of its commercially reasonable efforts, Buyer shall have been given a period of 10 days to cure such Terminating Buyer Breach; or

(e)by either Buyer or CTI, if any court of competent jurisdiction or other Governmental Body shall issue any final non-appealable judgment, order or decree or take such other action permanently enjoining, restraining or otherwise prohibiting the consummation of the transactions contemplated hereby or under any other Transaction Document.

13.2Procedure for Termination.  A party terminating this Agreement pursuant to Section 13.1 shall give written notice thereof to each other party hereto, whereupon this Agreement shall terminate and the transactions contemplated hereby shall be abandoned without further action by any party.  If this Agreement is terminated as permitted by this Section 13, such termination shall be without liability of any party (or any of its Affiliates, Representatives or Representatives of its Affiliates) to any other party to this Agreement; provided, however, that if such termination is by Buyer pursuant to Section 13.1(c) as a result of a material breach by CTI or the Company, as applicable, of any representation, warranty or covenant contained in this Agreement, or if such termination is by CTI pursuant to Section 13.1(d) as a result of a material breach by Buyer of any representation, warranty or covenant contained in this Agreement, nothing herein shall affect the non-breaching party’s right to damages on account of such other party’s breach (subject to the limitations set forth in Section 14.7).  Except to the extent required in connection with enforcing or preserving any rights or obligations it may have arising out of such termination, in the event that this Agreement and the transactions contemplated hereby are terminated pursuant to Section 13.1, this Agreement shall terminate, each party hereto shall return or destroy all documents and other materials received from the other parties hereto relating to this Agreement and the other Transaction Documents and the transactions contemplated hereby and thereby; provided, however, that the provisions set forth in Section 7.5, Section 7.6(a), Section 8.1, Section 8.4, Section 9.3, Section 14.7, Section 15 and this Section 13.2 shall survive any such termination.

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SECTION 14.   SURVIVAL; INDEMNIFICATION

14.1Survival.  None of the representations and warranties of CTI or Buyer contained in this Agreement shall survive the Closing Date, except that the representations and warranties contained in (i) Section 4.1, Section 4.2, Section 4.3, Section 4.4, Section 5.1, Section 5.2, Section 5.3, Section 6.1, Section 6.2, Section 6.3, and Section 10.1 shall survive until the latest date permitted by Law, and (ii) Section 5.4, Section 5.5, Section 5.6, Section 5.10(a), Section 5.13, Section 5.15(b), and Section 5.19 shall survive until the first anniversary of the Closing Date (the representations and warranties listed in clauses (i) and (ii), the “Surviving Representations and Warranties”). Except as specifically set forth in the preceding sentence, no other representation or warranty of any party set forth in this Agreement will survive the Closing, and no party will have any rights or remedies after the Closing with respect to any misrepresentation of or inaccuracy in any such representation or warranty.  The covenants and agreements of Buyer, CTI and the Company contained in this Agreement shall survive Closing and shall continue in full force and effect indefinitely or for the shorter period specified in this Agreement. Any breach of representation, warranty, covenant or agreement in respect of which indemnity may be sought under this Agreement shall survive the time at which it would otherwise terminate pursuant to Section 14.1 if notice of the inaccuracy or breach thereof giving rise to such right of indemnity shall have been given to the party against whom such indemnity may be sought prior to such time.  Notwithstanding any provision in this Agreement to the contrary, an Indemnified Party shall be entitled to the indemnification or other remedies provided in this Agreement by reason of any breach of any surviving representation, warranty, covenant or agreement by the Indemnifying Party notwithstanding whether any employee, representative or agent of the Indemnified Party seeking to enforce a remedy knew or had reason to know of such breach and regardless of any investigation by such Person.

14.2Indemnification.

(a)From and after Closing, CTI shall indemnify Buyer and its Affiliates against and hold each of them harmless from any and all damage, loss, liability and expense (including, without limitation, reasonable expenses of investigation and reasonable attorneys’ fees and expenses in connection with any action, suit or proceeding) (“Damages”) actually incurred or suffered by Buyer or any of its Affiliates arising out of or resulting from (i) any inaccuracy or breach of any Surviving Representation and Warranty (each such inaccuracy and breach, a “Warranty Breach”) or breach of a covenant, in each case of CTI or the Company, as applicable, contained in this Agreement (it being agreed that, in the case of the inaccuracy or breach of the representation and warranty contained in Section 5.19, in addition to any other rights that CTI may have under this Agreement or under applicable Law, CTI shall first have ten Business Days following delivery of notice by Buyer of an alleged breach thereof to cure such breach to the reasonable satisfaction of Buyer), (ii) any failure by CTI to pay any investment banker, broker, finder or other intermediary that might be entitled to any fee or other compensation in connection with the transactions contemplated hereby as a result of any actual or alleged agreement by any of CTI, the Company, its Subsidiaries or their Affiliates; (iii) the assertion against Buyer, the Company or any of their Affiliates of any Excluded Liability; (iv) any claims, actions, suits or proceedings alleging the Company or any

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of the Subsidiaries has infringed, diluted, misappropriated or otherwise conflicted with Intellectual Property of Leisure Shoe Co., Inc. prior to the Closing, including any claims, actions, suits or proceedings by Leisure Shoe Co., Inc. based upon, arising from or in any way related to or in consequence of the circumstances cited in the June 6, 2008 complaint of Leisure Shoes Co., Inc., as plaintiff, v. Arizona Mail Order Co., Inc., Crosstown/Traders, Inc. and Charming Shoppes, Inc., as defendants, in the United States District Court, Central District of California, case number CV08-03731SJO; and (v) any claims, actions, suits or proceedings alleging the Company or any of the Subsidiaries has infringed, diluted, misappropriated or otherwise conflicted with Intellectual Property of Grupo Denim CA and its affiliates prior to the Closing, including any claims, actions, suits or proceedings based upon, arising from or in any way related to or in consequence of the circumstances cited in the letter from McDermott Will & Emery dated May 21, 2008 regarding claim of patent infringement with respect to Secret Slimmer pants and jeans.

(b)From and after Closing, Buyer shall indemnify CTI and its Affiliates against and hold them harmless from any and all Damages actually incurred or suffered by them arising out of or related in any way to (i) any Warranty Breach or breach of a covenant, in each case of Buyer contained in this Agreement, (ii) any failure by Buyer to pay any investment banker, broker, finder or other intermediary that might be entitled to any fee or other compensation in connection with the transaction contemplated hereby as a result of any actual or alleged agreement by Buyer or its pre-Closing Affiliates, (iii) the assertion against CTI and its Affiliates of any Assumed Liability or (iv) any amounts required to be paid by CTI or its Affiliates in its or their capacity as a surety, as applicable, in connection with any guarantee or other credit support provided for the benefit of the Company and/or its Subsidiaries.

(c)Notwithstanding anything to the contrary herein, (i) Buyer and its Affiliates shall not be indemnified for Damages pursuant to this Section 14.2 (in the absence of fraud or intentional misrepresentation) with respect to any Warranty Breach of the representations and warranties contained in Section 5.4, Section 5.5, Section 5.6, Section 5.10(a), Section 5.13, Section 5.15(b), and Section 5.19 unless and until the aggregate amount of all such Damages exceeds $350,000, and then only to the extent of such excess, and (ii) the total liability of CTI to indemnify and hold Buyer and its Affiliates harmless in respect of Damages arising as a result of a Warranty Breach of the representations and warranties contained in Section 5.4, Section 5.5, Section 5.6, Section 5.10(a), Section 5.13, Section 5.15(b), and Section 5.19 shall be limited (in the absence of fraud or intentional misrepresentation) to $3,500,000 in the aggregate.

(d)Notwithstanding any of the provisions of this Section 14, the procedures set forth in Section 10.3 shall govern any claim for indemnification based on any breach by CTI of the representations set forth in Section 10.1.

14.3Procedures.

(a)The party seeking indemnification under Section 14.2 (the “Indemnified Party”) shall give prompt notice to the party against whom indemnity is sought (the “Indemnifying Party”) of the assertion of any claim, or the commencement of any suit,

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action or proceeding (“Claim”) in respect of which indemnity may be sought under such section and will provide the Indemnifying Party such information with respect thereto as the Indemnifying Party may reasonably request. The failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder, except to the extent such failure shall have adversely prejudiced the Indemnifying Party.

(b)The Indemnifying Party shall be entitled to participate in the defense of any Claim asserted by any third party (“Third Party Claim”) and, subject to the limitations set forth in this Section 14.3(b), shall be entitled to control the defense of such Third Party Claim and appoint lead counsel for such defense, in each case at its own expense. Notwithstanding the foregoing, the Indemnifying Party shall not have the right to assume control of such defense if the claim of which the Indemnifying Party seeks to assume control (i) to the extent such claim seeks non-monetary relief, (ii) involves criminal allegations, or (iii) involves a claim which would be reasonably like to result in Damages to the Indemnified Party in excess of the amount of Damages the Indemnified Party is entitled to recover from the Indemnifying Party hereunder.

(c)If the Indemnifying Party shall assume the control of the defense of any Third Party Claim in accordance with the provisions of this Section 14.3, (i) the Indemnifying Party shall obtain the prior written consent of the Indemnified Party (which shall not be unreasonably withheld, conditioned or delayed) before entering into any settlement of such Third Party Claim, if the settlement does not release the Indemnified Party from all liabilities and obligations with respect to such Third Party Claim or the settlement imposes injunctive or other equitable relief against the Indemnified Party, and (ii) the Indemnified Party shall be entitled to participate in the defense of such Third Party Claim and to employ separate counsel of its choice for such purpose. The fees and expenses of such separate counsel shall be paid by the Indemnified Party unless the Indemnifying Party has been advised by counsel that a reasonable likelihood exists of a conflict of interest between the Indemnifying Party and the Indemnified Party.

(d)Each party shall cooperate, and cause its respective Affiliates to cooperate, in the defense or prosecution of any Third Party Claim and shall furnish or cause to be furnished such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials or appeals, as may be reasonably requested in connection therewith.

(e)Each Indemnified Party shall use commercially reasonable efforts to  mitigate in accordance with applicable Law any loss for which such Indemnified Party seeks indemnification under this Agreement. If such Indemnified Party mitigates its loss after the Indemnifying Party has paid the Indemnified Party under any indemnification provision of this Agreement in respect of that loss, the Indemnified Party shall notify the Indemnifying Party and pay to the Indemnifying Party the extent of the value of the benefit (or, if less, the amount of any such loss previously paid by the Indemnifying Party) to the Indemnified Party of that mitigation (less the Indemnified Party’s reasonable costs of mitigation) within two Business Days after the benefit is received.

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(f)Each Indemnified Party shall use commercially reasonable efforts to collect any amounts available under insurance coverage, or from any other Person alleged to be responsible, for any Damages payable under Section 14.2.

14.4Limitation on Damages.

(a)The amount of any Damages payable under Section 14.2 by the Indemnifying Party shall be net of (i) any amounts actually recovered by the Indemnified Party under applicable insurance policies (determined after giving effect to any increase in premiums resulting therefrom and other costs of collection and enforcement) and (ii) the amount of any Net Tax Benefit, as and when realized, as a result of such Damages and indemnification with respect thereto.

(b)The Indemnifying Party shall not be liable under Section 14.2 for any (i) Damages relating to any matter to the extent that such Damages are taken into account in the final determination of Final Closing CTI Borne Expenses or (ii) punitive (except to the extent paid or payable to an unrelated third party), special, indirect or consequential Damages (including diminution in the value of the Shares and Damages for lost profits).

14.5Assignment of Claims. If the Indemnified Party receives any payment from an Indemnifying Party in respect of any Damages pursuant to Section 14.2 and the Indemnified Party could have recovered all or a part of such Damages from a third party (other than from the Company, any Subsidiary, any Affiliate of the Company or any current or former employee or agent of any such Persons (a “Potential Contributor”) based on the underlying Claim asserted against the Indemnifying Party, the Indemnified Party shall assign such of its rights to proceed against the Potential Contributor as are necessary to permit the Indemnifying Party to recover from the Potential Contributor the amount of such payment.

14.6Exclusivity. Except as specifically set forth in this Agreement, Buyer hereby irrevocably waives any rights and claims it may have against CTI or any of its Affiliates, whether in law or in equity, relating to the Company or any of its Subsidiaries or any of their respective assets, business or operations, the Shares or the transactions contemplated hereby, and CTI waives any such rights and claims CTI and its Affiliates may have against Buyer or any of its Affiliates (including the Company and any of its Subsidiaries), except in either case, any claim for fraud.  The rights and claims waived hereby include, without limitation, claims for contribution or other rights of recovery arising out of or relating to any Environmental Law, claims for breach of contract, breach of representation or warranty, negligent misrepresentation and all other claims for breach of duty other than fraud or intentional misrepresentation.  After the Closing, Section 10 and Section 14 shall provide the sole and exclusive remedy for any misrepresentation, breach of warranty, covenant or other agreement contained in this Agreement (other than any claim for fraud or intentional misrepresentation).  Notwithstanding the foregoing, it is understood that, subject to Section 14.7, below, nothing herein shall prohibit any party hereto from exercising its rights to seek equitable relief with respect to a breach of covenant or agreement under any Transaction Document.

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14.7Limitation on Liability.  In the event that the Closing does not occur for any reason, Buyer (and, for the avoidance of doubt, Orchard) shall not be liable to CTI for any damages in excess of $10,000,000 for any breach by Buyer of any representation, warranty or covenant contained in this Agreement. Prior to the Closing, CTI’s right to damages (subject to the limitation set forth in the preceding sentence) shall be CTI’s sole remedy for any breach by Buyer of any representation, warranty or covenant contained in this Agreement (other than a breach of Section 8.1, Section 8.4 or Section 9.3).

SECTION 15.  MISCELLANEOUS

15.1Costs and Expenses.  Except to the extent otherwise expressly provided herein, all costs and expenses incurred in connection with the Transaction Documents shall be paid by the party incurring such cost or expense.

15.2Notices.  All notices or other communications permitted or required under this Agreement shall be in writing and shall be sufficiently given if and when hand delivered to the persons set forth below or if sent by documented overnight delivery service or registered or certified mail, postage prepaid, return receipt requested, or by telegram, telex or telecopy, receipt acknowledged, addressed as set forth below or to such other Person or Persons and/or at such other address or addresses as shall be furnished in writing by any party hereto to the other parties hereto.  Any such notice or communication shall be deemed to have been given as of the date received, in the case of personal delivery, or on the date shown on the receipt or confirmation therefor in all other cases.

To Buyer:

c/o Golden Gate Private Equity, Inc.

One Embarcadero Center, Suite 3900

San Francisco, CA 94111

Attention:  Stefan Kaluzny and Joshua Olshansky

Facsimile:  415-983-2701

with a copy to (which shall not constitute notice):

Kirkland & Ellis LLP

200 East Randolph Drive, 58th Floor

Chicago, IL 60601

Attention:  Gary M. Holihan, P.C.

Telecopy:  (312) 861-2200

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To CTI:

c/o Charming Shoppes, Inc.

3750 State Road

Bensalem, PA 19020

Attention:  General Counsel

Fax:  215-638-6648

With a copy to (which shall not constitute notice):

Drinker Biddle & Reath LLP

One Logan Square

18th and Cherry Streets

Philadelphia, PA  19103-6996

Attention:  F. Douglas Raymond, III, Esq.

Fax:  (215) 988-2757

15.3Assignment.  Neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned, by operation of Law or otherwise, by any party hereto to any other Person without the prior written consent of Buyer and CTI, and any such attempted assignment shall be null and void; provided, however, that (i) Buyer may, without the prior written consent of CTI, assign its rights and obligations under this Agreement and the other Transaction Documents (A) in whole or in part to any Affiliates (provided that Buyer shall remain primarily liable hereunder following any such assignment), (B) for collateral security purposes to any lender providing financing to Buyer, the Company or any of the Subsidiaries and (C) to any subsequent purchaser of Buyer, the Company, the Subsidiaries or any of their divisions or any material portion of their assets (whether such sale is structured as a sale of stock, sale of assets, merger, recapitalization or otherwise) (provided that Buyer shall remain primarily liable hereunder following any such assignment) and (ii) CTI may assign its rights and obligations under this Agreement to any of its Affiliates without the prior written consent of Buyer (provided that CTI shall remain primarily liable hereunder).  Any purported assignment effected without consent shall be void.  Subject to the foregoing, this Agreement and the rights and obligations set forth herein shall inure to the benefit of, and be binding upon, the parties hereto, and each of their respective successors, heirs, and assigns.

15.4Amendment, Modification and Waiver.  Any provision of this Agreement may be amended, modified, waived or extended if, but only if, such amendment, modification, waiver or extension is in writing and is signed by Buyer and CTI.  The waiver by a party of any breach of any provision of this Agreement shall not constitute or operate as a waiver of any other breach of such provision or of any other provision hereof, nor shall any failure to enforce any provision hereof operate as a waiver of such provision or of any other provision hereof.  

15.5Governing Law.  This Agreement is made pursuant to, and shall be construed and enforced in accordance with, the laws of the State of New York (and the United States federal law, to the extent applicable), irrespective of the principal place of busi­ness,

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residence or domicile of the parties hereto, and without giving effect to otherwise applicable principles of conflicts of Law.  Nothing contained herein or in any Transaction Document shall prevent or delay any party hereto from seeking, in any court of competent jurisdiction, specific performance or other equitable remedies in the event of any breach or intended breach by another party of any of its obligations hereunder.

15.6Waiver of Jury Trial.  EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT ENTERED INTO IN CONNECTION HEREWITH OR ANY TRANSACTION CONTEMPLATED HEREBY OR THEREBY. EACH PARTY (A) CERTIFIES THAT NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF ANY CLAIM, ACTION OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER AGREEMENTS CONTEMPLATED HEREBY, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 15.6.

15.7Consent to Jurisdiction.  Each party hereto irrevocably submits to the exclusive jurisdiction of (a) the Supreme Court of the State of New York, New York County and (b) the United States District Court for the Southern District of New York, for purposes of any claim, action or proceeding arising out of this Agreement or any transaction contemplated hereby.  Each party hereto agrees to commence any such claim, action or proceeding only in the United States District Court for the Southern District of New York or, if such claim, action or proceeding cannot be brought in such court for jurisdictional reasons, in the Supreme Court of the State of New York, New York County.  Each of the parties hereby waives, and agrees not to assert in any such dispute, to the fullest extent permitted by applicable Law, any claim that (a) such party is not personally subject to the jurisdiction of such courts, (b) such party and such party’s property is immune from any legal process issued by such courts or (c) any claim, action or proceeding commenced in such courts is brought in an inconvenient forum.  Each party hereto further agrees that service of any process, summons, notice or document by United States registered mail to such party’s address set forth in Section 15.2 above shall be effective service of process for any claim, action or proceeding with respect to any matters to which it has submitted to jurisdiction in this Section 15.7 or otherwise.

15.8Section Headings and Defined Terms.  The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.  The terms defined herein and in any other Transaction Document include the plural as well as the singular and the singular as well as the plural.  Except as otherwise indicated, all agreements defined herein refer to the same as from time to time amended or supplemented or the terms thereof waived or modified in accordance herewith and therewith.  All references to “$” or “dollars” shall be to United States dollars and all references to “days” shall be to calendar days unless otherwise specified.

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15.9Severability.  If any term or other provision of this Agreement (or portion thereof) or the application of any such term or other provision (or portion thereof) to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, illegal or incapable of being enforced pursuant to any applicable Law or public policy, all other terms and provisions of this Agreement (or remaining portion of such term or other provision) will nevertheless remain in full force and effect. Upon such determination by a court of competent jurisdiction that any term or other provision (or portion thereof) of this Agreement is invalid, illegal or incapable of being enforced, the parties hereto will negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.

15.10Counterparts; Third-Party Beneficiaries.  This Agreement may be executed in two or more counterparts, including by facsimile transmission, each of which shall be deemed an original; and any Person may become a party hereto by executing a counterpart hereof, but all of such counterparts together shall be deemed to be one and the same agreement.  This Agreement will be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or will confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

15.11Entire Agreement.  This Agreement, together with the Disclosure Schedule and the agreements, exhibits, schedules and certificates referred to herein or delivered pursuant hereto, constitute the entire agreement between the parties hereto with respect to the purchase and sale of the Shares and supersede all prior and contemporaneous agreements and understandings, both written and oral, with respect to the subject matter hereof and thereof.

15.12Waiver of Conflicts Regarding Representation; Nonassertion of Attorney-Client Privilege.

(a)Buyer waives and will not assert, and, after the Closing, will cause the Company and the Subsidiaries to waive and not to assert, any conflict of interest arising out of or relating to the representation, after the Closing (the “Post-Closing Representation”), of CTI, or any officer or employee of the Company or of any of the Subsidiaries, or any Affiliate of any of the foregoing (any such Person, a “Designated Person”) in any matter involving this Agreement, the Transaction Documents or any other agreements or transactions contemplated thereby, by any legal counsel currently representing CTI, the Company or any Subsidiary in connection with this Agreement, the Transaction Documents or any other agreements or transactions contemplated thereby (the “Current Representation”).

(b)Buyer waives and will not assert, and after the Closing, will cause the Company and the Subsidiaries to waive and not to assert, any attorney-client privilege with respect to any communication between any legal counsel and any Designated Person occurring during the Current Representation in connection with any Post-Closing Representation, including in connection with a dispute with Buyer, and following the Closing, with the Company or any of the Subsidiaries, it being the intention of the parties hereto that

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all such rights to such attorney-client privilege and to control such attorney-client privilege shall be retained by CTI; provided that the foregoing waiver and acknowledgment of retention shall not extend to any communication not involving this Agreement, the Transaction Documents or any other agreements or transactions contemplated thereby, or to communications with any Person other than the Designated Persons.

15.13Orchard Guaranty.

(a)Orchard hereby, jointly and severally, unconditionally and irrevocably, guarantees (the “Orchard Pre-Closing Guaranty”) by way of an independent obligation to CTI, the due and punctual payment of the obligations of Buyer under this Agreement up to the amount of the limitation on damages specified in Section 14.7, when and as the same shall arise and become due and payable in accordance with the terms of and subject to the conditions contained in this Agreement (the “Orchard Pre-Closing Guaranteed Obligations”).  This Section 15.13(a) shall automatically terminate without any action on the part of any Person immediately upon the payment of the Purchase Price to CTI at the Closing.

(b)Orchard hereby, jointly and severally, unconditionally and irrevocably, guarantees (the “Orchard Post-Closing Guaranty”, and together with the “Orchard Pre-Closing Guaranty”, the “Orchard Guaranty”) by way of an independent obligation to CTI and its Affiliates, (i) the due and punctual payment by the Company of the amounts invoiced by Charming Shoppes of Delaware, Inc. to the Company for services actually rendered by Charming Shoppes of Delaware, Inc., its Affiliates and other third-parties to the Company under and in accordance with the terms of the Transition Services Agreement (and not of any other Liabilities thereunder) when and as the same shall arise and become due and payable in accordance with the terms of and subject to the conditions contained in the Transition Services Agreement, and (ii) the due and punctual payment of the obligations of the Company and its Subsidiaries as Recipients (as defined in the Assignment and Assumption) under Section 2 of the Assignment and Assumption, when and as the same shall arise and become due and payable in accordance with the terms of and subject to the conditions contained in the Assignment and Assumption (collectively, the “Orchard Post-Closing Guaranteed Obligations”, and together with the “Orchard Pre-Closing Guaranteed Obligations”, the “Orchard Guaranteed Obligations”).

(c)This is a guaranty of payment and performance and not of collection only.  If for any reason whatsoever Buyer (in the case of the Orchard Pre-Closing Guaranteed Obligations) or the Company (in the case of the Orchard Post-Closing Guaranteed Obligations) shall fail or be unable to perform or comply with its Orchard Guaranteed Obligation, Orchard will promptly upon receipt of notice thereof from CTI forthwith pay or cause to be paid in lawful money of the United States the unpaid Orchard Guaranteed Obligation then due and payable (at the place specified and in the amounts and to the extent required of the Buyer or the Company, as applicable).

(d)Orchard waives any and all notice of the creation, renewal, extension or accrual of the Orchard Guaranteed Obligation and notice of or proof of reliance by CTI and its Affiliates upon this Orchard Guaranty or acceptance of this Orchard Guaranty; the Orchard Guaranteed Obligation shall conclusively be deemed to have been created, contracted or

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incurred, or renewed, extended, amended or waived, in reliance upon this Orchard Guaranty; and all dealings between Buyer and, after the Closing, the Company and its Subsidiaries, on the one hand, and CTI and its Affiliates (other than the Company and its Subsidiaries), on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon this Orchard Guaranty.  Orchard agrees that (i) any notice provided under this Agreement (including any demand for payment or notice of default or non payment) shall be deemed to constitute notice to Orchard for purposes hereof and (ii) any knowledge of Buyer and, after the Closing, the Company and its Subsidiaries shall be deemed knowledge of Orchard for purposes hereof.  Nothing in this Section 15.13 shall be deemed to constitute a waiver of, or prevent Orchard from asserting, any valid defense that may be asserted by Buyer and, after the Closing, the Company or its Subsidiaries.  When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against Orchard, CTI and its Affiliates may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and remedies as it may have against Orchard or any other person, and any failure by CTI or its Affiliates to make any such demand, to pursue such other rights or remedies or to collect any payments from Buyer and, after the Closing, the Company and its Subsidiaries or any other person shall not relieve Orchard of any obligation or liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of CTI or its Affiliates against Orchard.  For the purposes hereof “demand” shall include the commencement and continuance of any legal proceedings

15.14Parent Guaranty.

(a)Parent hereby, unconditionally and irrevocably, guarantees (the “Parent Guaranty”) by way of an independent obligation to Buyer, the due and punctual payment of (i) the obligations of CTI and its Affiliates under this Agreement, when and as the same shall arise and become due and payable in accordance with the terms of and subject to the conditions contained in this Agreement, (ii) the obligations of Charming Shoppes of Delaware, Inc. and its Affiliates under the Transition Services Agreement, when and as the same shall arise and become due and payable in accordance with the terms of and subject to the conditions of such agreement, and (iii) the obligations of CTI and its Affiliates (other than the Company and its Subsidiaries) as Recipients (as defined in the Assignment and Assumption) under Section 2 of the Assignment and Assumption, when and as the same shall arise and become due and payable in accordance with the terms of and subject to the conditions contained in this the Assignment and Assumption (the “Parent Guaranteed Obligation”).

(b)This is a guaranty of payment and performance and not of collection only.  If for any reason whatsoever CTI or one of its Affiliates shall fail or be unable to perform or comply with its Parent Guaranteed Obligation, Parent will promptly upon receipt of notice thereof from the Buyer, the Company or its Subsidiaries forthwith pay or cause to be paid in lawful money of the United States the unpaid Parent Guaranteed Obligation then due and payable (at the place specified and in the amounts and to the extent required of CTI or one of its Affiliates, as applicable).

(c)Parent waives any and all notice of the creation, renewal, extension or accrual of the Parent Guaranteed Obligation and notice of or proof of reliance by the Buyer,

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the Company or its Subsidiaries upon this Parent Guaranty or acceptance of this Parent Guaranty; the Parent Guaranteed Obligation shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon this Parent Guaranty; and all dealings between CTI and its Affiliates (other than the Company and its Subsidiaries), on the one hand, and Buyer and, after the Closing, the Company and its Subsidiaries, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon this Parent Guaranty.  Parent agrees that (i) any notice provided under this Agreement to CTI or its Affiliates (including any demand for payment or notice of default or non payment) shall be deemed to constitute notice to Parent for purposes hereof and (ii) any knowledge of CTI or its Affiliates shall be deemed knowledge of Parent for purposes hereof.  Nothing in this Section 15.14 shall be deemed to constitute a waiver of, or prevent Parent from asserting, any valid defense that may be asserted by CTI or one of its Affiliates.  When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against Parent, Buyer and, after the Closing, the Company and its Subsidiaries may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and remedies as it may have against CTI, one of its Affiliates (other than the Company and its Subsidiaries) or any other person, and any failure by the Buyer, the Company or its Subsidiaries to make any such demand, to pursue such other rights or remedies or to collect any payments from CTI, its Affiliates or any other person shall not relieve Parent of any obligation or liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of the Buyer, the Company or its Subsidiaries against Parent.  For the purposes hereof “demand” shall include the commencement and continuance of any legal proceedings.

[Signature Page Follows]

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-

IN WITNESS WHEREOF, the parties hereto have caused this Agreement, to be signed the day and year first above written.

CROSSTOWN TRADERS, INC.

By:

      Name:

      Title:

NORM THOMPSON OUTFITTERS, INC.

By:

      Name:

      Title:

Solely for the purposes of Section 15.14:

CHARMING SHOPPES, INC.

By:

      Name:

      Title:

[signatures continued on next page]

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Solely for the purposes of Section 15.13:

DRAPER’S & DAMON’S, INC.

By:

      Name:

      Title:

HABAND COMPANY LLC

By:

      Name:

      Title:

JOHNNY APPLESEED’S INC.

By:

      Name:

      Title:

BLAIR LLC

By:

      Name:

      Title:

ORCHARD BRANDS CORPORATION

By:

      Name:

      Title:

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EX-10.2

EXHIBIT 10.2

PURCHASE AGREEMENT

THIS PURCHASE AGREEMENT (this “Agreement”) executed August ___, 2008 (the “Execution Date”) between SPIRIT OF AMERICA NATIONAL BANK, a national bank (“Seller”), with a principal place of business in Milford, Ohio and an address at 450 Winks Lane, Bensalem, PA 19020, and World Financial Network National Bank (“Purchaser”), with an address at 3100 Easton Square Place, Columbus, OH  43219.

W I T N E S S E T H:

WHEREAS, Seller and Arizona Mail Order Company, Inc. (“Company”), a subsidiary of Crosstown Traders, Inc. (“Crosstown”), are parties to the Existing Merchant Services Agreement (as hereafter defined) pursuant to which Seller issues Credit Cards;

WHEREAS, in connection with Crosstown’s sale of the Company to Norm Thompson Outfitters, Inc. or one of its affiliates (“Golden Gate”), Seller is willing to sell and Purchaser, is willing to purchase, the Assets to be Sold (as hereafter defined) on the terms and subject to the conditions set forth herein;

NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Purchaser and Seller, each intending to be legally bound, hereby agree as follows:

1.           Definitions    For purposes of this Agreement, the following terms shall have the meanings indicated:

           “Account” means a credit account on which a purchase transaction may be or has been made by (or by a person authorized by) the Cardholder pursuant to a Credit Card.

           “Account Balance” means, as to any Eligible Account, any and all amounts owing to Seller in respect of such Account by the Cardholder (including principal amounts for the payment of goods and services, accrued interest, periodic finance charges, late charges, fees and other finance and service charges) whether or not billed.

           “Account Duties” means the duties to the Cardholders of Eligible Accounts under the applicable Cardholder Agreements to bill, administer and collect the Assets to be Sold other than any duties associated with Credit Balances existing as of the Transfer Date.

           “Action” has the meaning set forth in Section 7.3(a) hereof.

“Adjusted Closing Statement” has the meaning set forth in Section 3.2(b).

“Adjusted Payment Amount” means an amount calculated in the same manner as the Payment Amount, except that such amount shall be calculated to take into account (w) transactions occurring between the Valuation Date and the Transfer Date, (x) any transactions that were unposted or unaccounted for as of the Transfer Date, including without limitation payments, credits, unallocated items, errors and other similar items relating to periods ending on or prior to the Transfer Date but posted to the Accounts after the Transfer Date, (y) the resolution on or after the Transfer Date of Cardholder Disputes, provided, however, that nothing herein shall limit Seller’s ability to pursue its chargeback rights against the Company as set forth in the Existing Merchant Services Agreement related to disputes (other than credit disputes) pending on the Transfer Date,and (z) information which became known to the parties which would (i) cause an Account to be classified as of the Transfer Date as an Ineligible Account or (ii) cause any portion of an Account Balance to be classified as Ineligible Account Dollars as of the Adjustment Date due to matters arising on or before the Transfer Date.  It is understood that the Transfer Date will occur in the middle of a Cycle for most Accounts.  In order to determine the Adjusted Payment Amount as contemplated by this definition, Purchaser and Seller will, prior to the Adjustment Date, cooperate and in good faith mutually determine whether the circumstances giving rise to such adjustment (each, an “Adjustment Event”) occurred on or prior to the Transfer Date.  Purchaser and Seller shall each provide such documentation as the other may reasonably request to validate its determination with respect to the timing of any disputed Adjustment Event hereunder.

 “Adjustment Amount” has the meaning set forth in Section 3.2(b).

“Adjustment Date” means the sixtieth (60th) day after the Closing Date (or, if such day is not a Business Day, the next succeeding Business Day).

“Adjustment Event” shall have the meaning given in the definition of “Adjusted Payment Amount”.

           “Agreement” means this Purchase Agreement, including all schedules and exhibits hereto, and, if amended, modified or supplemented, as the same may be so amended, modified or supplemented from time to time.

           “Assets to be Sold” shall have the meaning set forth in Section 2.1.

           “Assignment and Bill of Sale” means that document delivered by Seller to Purchaser on the Closing Date which provides for, among other things, the assignment and transfer to Purchaser of all of Seller’s rights, title and interest in the Assets to be Sold in substantially the form of Exhibit 2.

“Assumed Liabilities” means the Account Duties of Seller first arising from and after the Transfer Date to the extent related to the Assets to be Sold.

“Assumption Agreement” means an assumption agreement from Purchaser to Seller substantially in the form of Exhibit 3, pursuant to which, among other things, Purchaser confirms its assumption and agreement to perform and discharge the Assumed Liabilities.

“Books and Records” means, to the extent in Seller’s possession or control as of the Transfer Date, the additional information delivered pursuant to Schedule 8.3, all applications for Eligible Accounts, all Cardholder Agreements related to Eligible Accounts, all sales orders under Eligible Accounts, all customer service information (commonly referred to as “memo screens”) and copies thereof relating to Eligible Accounts, and any written correspondence pertaining to pending Cardholder inquiries in respect of the Eligible Accounts; provided, that “Books and Records” shall not include any comments or text entered onto Seller’s proprietary systems or hard copy prints of such information which are commonly referred to as “collections comments,” or any hardcopy formats containing Seller’s system screen formats.

“Business Day” means a day (not being a Saturday or Sunday) on which banks are open for normal banking business in Ohio.

           “Cardholder” means a person to whom a Credit Card is issued and in whose name the Account, in connection with which the Credit Card may be used, is established.

           “Cardholder Agreement” means an agreement between Seller and a Cardholder under which one or more Credit Cards are issued or utilized.

           “Cardholder Dispute” means, as to any Eligible Account, any billing dispute raised by a Cardholder which arises out of or relates to the business or operations of any of the Assets to be Sold prior to the Transfer Date.

           “Cardholder List” means the Cardholders’ names, telephone numbers, e-mail addresses and physical addresses for the Eligible Accounts which shall be set forth in the Closing Tapes delivered to Purchaser on the Transfer Date.

           “Charged Off Account” means any Account as to which the related account balance has been written off, or should have been written off, by Seller on Seller’s books on or prior to the Transfer Date in accordance with Seller’s normal and customary policies as in effect on the date of this Agreement including, without limitation, any Account which is more than one hundred seventy nine (179) days contractually past due as of the Transfer Date.

           “Closing” shall have the meaning set forth in Section 4.

           “Closing Date” means the Transfer Date.

           “Closing Statement” means a statement prepared by one party hereto (subject to confirmation by the other party hereto) with respect to the Assets to be Sold as of the Transfer Date in the same form, and on the same basis, as the statement attached hereto as Exhibit 1.

“Closing Tape” means an Account and Cardholder master file tape or tapes  including such information which exists on Seller’s system as of up to one (1) Business Day prior to the Transfer Date  and including with respect to all Eligible Accounts: (i) Cardholder customer service notes; (ii) the Cardholder List; (iii) transactions since last cycle dates; (iv) current and historical (at least twelve (12) months) transaction and transaction detail; (v) library of layouts; (vi) balancing report; and (vii) cycle to date history file, in a mutually agreed format; provided, that in preparing the Closing Tape, Seller shall only be required to include such information as is maintained by Seller and/or its servicer and available pursuant to Seller and or its servicer’s ordinary course system capabilities.

           “Company” means Arizona Mail Order Company, Inc., a Delaware corporation.

           “Company Purchase Agreement” means that certain Asset Purchase Agreement dated of even date herewith pursuant to which Crosstown Traders, Inc. has agreed to sell the Company to Golden Gate.

           “Conversion Schedule” means (i) the plan and schedule for the Closing as agreed upon in writing by the Purchaser and Seller and (ii) Annex I, TSYS Support; as the same may be amended from time to time by mutual written agreement of the Purchaser and Seller.

           “Conveyance Documents” shall have the meaning set forth in Section 10.4(a).

           “Credit Balance” means, as to any Eligible Account, any and all amounts owing by Seller to the Cardholder in respect of such Account as a credit balance whether or not billed.

           “Credit Card” means a card issued by Seller or its Predecessor in Interest and bearing one or more of the Trade Names, including without limitation all credit cards subject to the Existing Merchant Services Agreement and commonly known as a credit card but expressly excluding any credit cards bearing the name Lane Bryant, Lane Bryant Catalog or Lane Bryant Woman.

           “Cycle” shall mean each monthly billing cycle for an Account, as determined by Seller or Purchaser (as applicable) in accordance with its normal practice (or as otherwise mutually agreed).

“Domain Name Assignment” means those certain transfer authorization codes necessary to effectuate the transfer and assignment to Purchaser’s parent company Alliance Data Systems Corporation of the Domain Names.

“Domain Names” means the following domain names:

STATEMENT-BEDFORDFAIRCARD.COM;

STATEMENT-BROWNSTONESTUDIOCARD.COM;

STATEMENT-COWARDSHOECARD.COM;

STATEMENT-INTIMATEAPPEALCARD.COM;

STATEMENT-LEWMAGRAMCARD.COM;

STATEMENT-OLDPUEBLOTRADERSCARD.COM;

STATEMENT-REGALIAONLINECARD.COM;

STATEMENT-SHOPTHEBAYCARD.COM;

STATEMENT-WILLOWRIDGECATALOGCARD.COM;

AMOCARD.COM;

BEDFORDFAIRCARD.COM;

BROWNSTONE-STUDIOCARD.COM;

BROWNSTONESTUDIOCARD.COM;

COWARDSHOECARD.COM;

INTIMATEAPPEALCARD.COM;

LEW-MAGRAMCARD.COM;

LEWMAGRAMCARD.COM;

OLDPUEBLOTRADERSCARD.COM;

REGALIAONLINECARD.COM;

SHOPTHEBAYCARD.COM; and

WILLOWRIDGECATALOGCARD.COM

“Eligible Account” means any Account which is not an Ineligible Account.

“Estimated Payment Amount” has the meaning set forth in Section 3.2(a).

“Execution Date” shall have the meaning set forth in the first paragraph of this Agreement.

“Existing Merchant Services Agreement” means the agreement between Seller (or its affiliate) and Golden Gate (or its affiliate) dated as of the Execution Date pursuant to which Seller will provide credit card servicing for the Company prior to the Transfer Date.

           “Financial Information Computation Date” shall have the meaning set forth in Section 8.3 hereof.

           “Ineligible Account” means any of the following:

(a)Any Account the Cardholder of which has, prior to the Transfer Date, filed a petition or a petition has been filed against the Cardholder seeking relief under the federal bankruptcy law or any other law dealing with the insolvency of a consumer or the inability of a consumer to pay his/her debt, in either case for which notice of the same has been received by Seller or Purchaser not later than sixty (60) days after the Transfer Date;

(b)Any Account which, on the Transfer Date represents a Charged Off Account on Seller’s books;

(c)Any Account as to which Seller shall, at any time prior to the Adjustment Date, have received notification, not thereafter rescinded, of any actual or possible fraud loss or lost or stolen Credit Card occurring prior to the Transfer Date, except to the extent the Account has been reaffirmed;

(d)Any Account that as of the Transfer Date is subject to pending litigation (unless Purchaser and Seller elect to transfer such Account prior to the Transfer Date);

(e)Any Account for which Seller has been notified prior to the Transfer Date that the Cardholder thereof has died;

(f)Accounts in which the Cardholder’s address as of the Transfer Date is not within the United States, District of Columbia, Puerto Rico or another United States territory, Mexico or Canada or is not a U.S. APO or U.S. F.P.O. account;

(g)Accounts in which the Cardholder as of the date the Account was opened had not attained the age of eighteen (unless the Cardholder subsequently affirmed the Account after attaining the age of eighteen, it being agreed that use of the Credit Card by the Cardholder after attaining the age of eighteen shall be deemed an affirmation of the  Account). If an Account is a joint account, such Account shall be an Ineligible Account only if no Cardholder of the Account has attained the age of eighteen;

(h)Accounts in which as of the Transfer Date the Cardholder is a business or which, to Seller’s knowledge, otherwise represent a commercial receivable; and

(i)           Accounts which have a zero balance and which had a date of last purchase greater than eighteen (18) months  preceding the Transfer Date and are classified by Seller, in the ordinary course of Seller’s business, as “inactive” accounts.

“Ineligible Account Dollars” means the dollar amounts associated with the Cardholder Disputes that are not resolved by the Transfer Date as specified in Section 6.1.

 “Interested Parties” means with respect to any securitization or other transfer of the Account Balances attributable to the Accounts, brokers, placement agents, rating agencies, certificate holders, investors, credit enhancement providers and other persons that may acquire an interest in the Account Balances (whether or not evidenced by securities), and their respective affiliates, accountants, attorneys and other representatives.

“Interim Period” means the interval from the Execution Date to and including the Transfer Date.

“Liens” means all assignments, security interests, claims, liens, encumbrances or rights or other interests of third parties whatsoever including, without limitation, the liens of any Securitization Agreements.

“Loss” has the meaning set forth in Section 7.1 hereof.

“New Merchant Services Agreement” has the meaning set forth in Section 9.8 hereof.

           “Payment Amount” shall have the meaning set forth in Section 3.2.

           “Predecessor in Interest” means Arizona Mail Order Company, Inc., Bedford Fair Apparel, Inc., LM&B Catalog, Inc., Monterey Bay Clothing Company, Inc., Crosstown Traders, Inc. and any special purpose entities created or administered by Seller or any of the foregoing, which in any case is in the chain of title of the Assets to be Sold.

           “Purchased Account” means, from and after the Transfer Date, an Eligible Account which is actually purchased by Purchaser pursuant to the terms of this Agreement.

           “Repurchase Price” means, for any Ineligible Account, an amount equal to (i) 100% of the Payment Amount originally paid for such Account by Purchaser, plus (ii) the aggregate amount of any purchases made on such Account after the Transfer Date, plus (iii) all fees and accrued interest on such Account from the Transfer Date to the date of repurchase (whether or not billed) less (iv) the aggregate amount of any payments received by Purchaser relating to such Account, less (v) the aggregate amount of any credits posted to such Account after the Transfer Date.

           “Securitization Agreement” shall mean any agreement between Seller and a third party pursuant to which any part of the Assets to be Sold is transferred, assigned, pledged or subject to a security interest.

“Tax” (and, with correlative meaning, “Taxes”) shall mean any federal, state, local or foreign net income, gross income, gross receipts, windfall profit, property, production, sales, use, license, excise, franchise, employment, payroll, withholding, alternative or add-on minimum, ad valorem, goods and services, value added, transfer, stamp, or environmental tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or penalty, additional tax or additional amount imposed by any governmental authority.

“Trade Names” mean the following names, symbols and/or logos associated with the AMO credit program: AMO, Arizona Mail Order, Old Pueblo Traders, BFA, Bedford Fair Lifestyles, Willow Ridge, Lew Magram, Brownstone Studios and Monterey Bay clothing company. Trade Names do not include the tradenames Home, Etc., Lane Bryant Woman, Lane Bryant Catalog, or Lane Bryant.

           “Transfer Date” means the close of business on October 31, 2008 or such other date as the parties may mutually agree.

“Valuation Date” means a mutually agreeable date not less than one (1) Business Day nor more than four (4) Business Days prior to the Transfer Date.

2.   Assets to be Sold

2.1   Sale and Purchase

On the Transfer Date, Seller agrees to sell, assign and transfer to Purchaser, and Purchaser agrees to purchase from Seller, all rights, titles and interests of Seller in and to the following assets and properties as in existence on the Transfer Date (collectively, the “Assets to be Sold”):

(i)   All Eligible Accounts (including the Account Balances thereunder);

(ii)   All Cardholder Agreements relating to Eligible Accounts;

(iii)   All Books and Records relating to Eligible Accounts; and

(iv)   All Credit Cards related to the Eligible Accounts.

The sale of the Eligible Accounts (including the Account Balances thereunder) and the other Assets to be Sold is made without recourse to Seller, subject only to Seller’s representations and warranties and indemnification set forth in this Agreement.

2.2   Transfer and Assumption

On the Transfer Date Purchaser agrees to assume, and Seller agrees to assign and transfer to Purchaser, the Assets to be Sold and the Assumed Liabilities, including without limitation the Account Duties by execution and delivery to Purchaser on the Transfer Date of the Assignment and Bill of Sale (and such other documents as are required to effectuate such sale) and Purchaser agrees to confirm such assumption by execution and delivery to Seller on the Transfer Date, of the Assumption Agreement.

2.3   Consents

Seller shall obtain all consent(s) required to be obtained by Seller in connection with the sale, transfer and assignment to Purchaser of the Assets to be Sold including, without limitation, the consents specified in Section 5.5 hereof.

2.4   Books and Records

Seller shall deliver to Purchaser on the Transfer Date the Books and Records; provided, however, that Seller may retain any part of the Books and Records directly relating to Ineligible Accounts (provided that if such part of the Books and Records also relate to Eligible Accounts, Seller may retain the original thereof and deliver a copy to Purchaser) and provided further that Seller may retain copies of any part of the Books and Records for regulatory compliance purposes or pursuant to Seller’s bona fide document retention policies, subject to the confidentiality obligations and use restrictions otherwise set forth in this Agreement (except with respect to those portions of the Books and Records retained by Seller as relating to Ineligible Accounts).

2.5   Excluded Assets

Nothing contained in this Agreement, or in any document executed in connection herewith, shall be deemed to transfer any of Seller’s right, title and interest in, and the Assets to be Sold shall not include, the Ineligible Accounts, the Credit Balances, any other credit card accounts owned by Seller, Seller’s names or marks used in association with the Accounts, or any other asset of Seller not specifically identified in Section 2.1 (the “Excluded Assets”) and Purchaser shall have no obligations or liabilities with respect to any Excluded Assets.

3.   Transfer Date, Conversion and Consideration for Assets to be Sold

3.1   Transfer Date and Conversion

During the Interim Period, Seller and Purchaser shall mutually cooperate and take all action reasonably necessary to plan for and effectuate the orderly conversion and delivery on the Transfer Date by Seller to Purchaser’s processing system of the Closing Tape and the Books and Records.  The parties agree to use commercially reasonable efforts to comply (and in the case of Seller to cause its service provider, TSYS, to comply) with the Conversion Schedule and Seller shall use commercially reasonable efforts to deliver (and cause TSYS to deliver) to Purchaser the support and information specified therein on the dates specified in the Conversion Schedule (as the same may be revised by mutual agreement).  Purchaser agrees that it will (x) conduct the conversion of Assets to be Sold onto its systems, including without limitation, the processing of Cardholder change in terms and other notifications, and (y) administer the Assets to be Sold from and after the Closing Date, each in compliance with all applicable laws, rules, regulations and orders. Seller will pay the costs associated with the de-conversion of the applicable Assets to be Sold from its and/or its servicer’s systems, and Purchaser will pay the costs associated with the conversion onto its designated processing system of the applicable Assets to be Sold.

3.2   Payment Amount; Adjustments

(a)           The amount to be paid by Purchaser to Seller for the Assets to be Sold shall be an amount equal to (x) one hundred percent (100%) of the total of the Account Balances on all Eligible Accounts less (y) the Ineligible Account Dollars as of the Transfer Date (the “Payment Amount”).  At least two (2) Business Days before the Transfer Date, Seller shall deliver a Valuation Date Closing Statement (the “Preliminary Closing Statement”) to Purchaser setting forth the estimated Payment Amount as of the Valuation Date (the “Estimated Purchase Price”) and specifying in reasonable detail the calculation thereof including the aggregate number of Eligible Accounts and the aggregate dollar amount of the Account Balances and all other information set forth in the form of Preliminary Closing Statement attached hereto as Exhibit 1.  At the Closing, Purchaser will pay Seller or Seller’s assignee by wire transfer in immediately available funds to an account designated by Seller an amount equal to the Estimated Purchase Price (subject to mutually agreed adjustments).  Within sixty (60) days after the Transfer Date, the parties shall perform a “true-up” of the Payment Amount, as set forth in clause (b) below to determine the Adjusted Payment Amount, which Adjusted Payment Amount shall be the Payment Amount hereunder.  For the avoidance of doubt, Purchaser is not acquiring or assuming liability with respect to, and the calculation of the Payment Amount set forth in this Section 3.2(a) shall not take into account, any Credit Balances on Eligible Accounts, the refund of which shall remain the responsibility of the Seller following the Closing Date as set forth in Section 6.4.  Seller shall refund all Credit Balances known as of the Valuation Date on or before the Closing Date and any remaining Credit Balances as of the Closing Date shall be refunded within ten (10) days after the Adjustment Date.

(b)           Within five (5) Business Days after finalization of the Adjusted Closing Statement as set forth in this Section 3.2(b), the Payment Amount shall be adjusted and either Purchaser or Seller, as the case may be, shall pay to an account designated by the other party, by wire transfer in immediately available funds, the Adjustment Amount.  On the Adjustment Date, Purchaser shall prepare and deliver to Seller an adjusted Closing Statement relating to and specifying in reasonable detail the calculation of the Adjustment Amount and the Adjusted Payment Amount, together with the total Account Balance for each of the Eligible Accounts as of the Transfer Date and all other information set forth in the form of Preliminary Closing Statement attached hereto as Exhibit 1 (as modified by mutual agreement of the Purchaser and Seller, the “Adjusted Closing Statement”) and shall provide Seller and its authorized representatives reasonable access to its books and records relating to same as necessary to verify such calculation.  The “Adjustment Amount” shall be the difference between (i) the Estimated Payment Amount, and (ii) the Adjusted Payment Amount as set forth on the Adjusted Closing Statement, together with interest on such difference calculated at the federal funds rate (at weighted average daily rates reported by the Federal Reserve System) from the Transfer Date to the date of payment.  A positive Adjustment Amount shall be payable by Seller to Purchaser; a negative Adjustment Amount shall be payable by Purchaser to Seller.

(c)           Dispute Resolution.   In the event Seller shall disagree with any item on the Adjusted Closing Statement provided by Purchaser, and if, after good faith discussion, the parties are not able to agree to such modification, adjustment or other change, then such dispute shall be handled in accordance with Section 14.1 of this Agreement.   Any such request related thereto shall be in writing, with a copy provided simultaneously to Purchaser, and shall specify with particularity the adjustment, modification or other change requested.  The determination of the Adjustment Amount rendered thereby shall be final.  Any payment (including interest) required by either Seller or Purchaser based on the final determination of the Adjustment Amount shall be made no later than five (5) Business Days following receipt of notice of the final determination. The net amount due by either party shall be accompanied by interest on such amount calculated on the basis of the federal funds rate, for each day commencing on the later of the Transfer Date or the Closing Date, as the case may be, through and including the date of such payment. The fees and disbursements relating to any such determination by the Accountant shall be borne by the non-prevailing party or allocated proportionately between the parties in the event that each party prevails as to some disputed items.

(d)           For a period of ninety (90) days following the Closing Date (the “Repurchase Period”), in the event any Purchased Account is discovered by Purchaser or Seller to have been an Ineligible Account as of the Transfer Date (and to the extent such Ineligible Account has not been returned and accounted for in the Adjusted Closing Statement), Purchaser may request that Seller repurchase such Ineligible Account and Seller shall repurchase such Ineligible Account for an amount equal to the Repurchase Price.  To the extent Purchaser has discovered that any Purchased Account is an Ineligible Account prior to completion of the Adjusted Closing Statement, Purchaser shall submit such Ineligible Account to Seller for repurchase under this Section 3.2(d) as part of the Adjusted Closing Statement in accordance with Section 3.2(b)). Purchaser may submit to Seller an additional list of any Ineligible Accounts subsequently identified by Purchaser or Seller prior to the expiration of the Repurchase Period.  Following its receipt of the Repurchase Price from Seller in respect of an Ineligible Account, Purchaser shall promptly return to Seller all Assets to be Sold in its possession or control in respect of such Ineligible Account, and the Parties shall thereafter take such action as is reasonably necessary to ensure that title to such Ineligible Account is fully vested in Seller free and clear of all liens and encumbrances.

4.           Closing

The closing in respect of the sale and purchase of the Assets to be Sold (the “Closing”) shall take place on the Transfer Date (or such other date as may be mutually agreed to by the parties, it being agreed that in the absence of agreement, the Closing shall take place on the Transfer Date) and shall take place through the wire transfer of the Estimated Purchase Price, and facsimile exchange, together with subsequent overnight courier exchange, of the required closing documents and upon receipt by Seller of such payment and facsimile documents, hand-delivery to Purchaser’s representative of two (2) copies of the Closing Tape.

5.           Agreements of Seller During Interim Period

During the Interim Period:

5.1   Information

Seller shall provide Purchaser with such information related to the Eligible Accounts as agreed by the parties in good faith that is reasonably required by the Purchaser to facilitate the conversion of the Accounts by the Transfer Date in accordance with the Conversion Schedule.

5.2   Communications with Cardholders

During the Interim Period, Purchaser shall be entitled to communicate with and deliver information and other communications to Cardholders of the Eligible Accounts concerning the transactions contemplated by this Agreement and the business and operations of Purchaser and the Company as approved in advance by Seller in its reasonable discretion (including written correspondence and messages on Seller’s customer website). In furtherance thereof, Seller, if so requested by Purchaser, shall on behalf of Purchaser, and subject to Seller’s normal insertion and review and approval requirements, insert a communication from Purchaser to the Cardholders of the Eligible Accounts in all periodic billing statements (mail or electronic) advising of the purchase and of any terms or changes which Purchaser proposes to make.  In addition to the foregoing, Seller will at the written request of Purchaser deliver a file of the names and address of Cardholders of the Eligible Accounts to Purchaser for the sole purpose of enabling Purchaser to effect a single, simultaneous blanket mailing to all Cardholders, informing such Cardholders of the expected Transfer Date and of any terms or changes which will be imposed or made by Purchaser effective as of the Transfer Date.  Except for costs such as envelopes and postage (except for excess postage caused by the insertion of any such communications which shall be borne by Purchaser) which would otherwise be incurred by Seller in connection with the billing statement referred to in the second sentence of this Section 5.2, Purchaser shall pay all of the costs of communications referred to in this Section.  All notices and forms provided by Purchaser shall comply with all applicable laws and regulations.

5.3   Conduct of Business During the Interim Period

Except as may be otherwise required by law or regulatory requirement (including the rules of any national securities exchange on which Seller’s affiliates’ securities are listed), or unless Purchaser otherwise consents in writing (which consent shall not be unreasonably withheld), during the Interim Period:

a.Seller will manage, administer and operate the Assets to be Sold (including, without limitation, performing collection activities thereon) in the ordinary course of business consistent with past practices (except as otherwise required hereunder) and in accordance with the Existing Merchant Services Agreement;

b.Seller will keep and maintain records and books of all revenues relating to the Assets to be Sold and shall pay all expenses relating to the Assets to be Sold, in the same manner as it has in the past and as in effect on the date of this Agreement;

c.Seller will duly comply in all material respects with all laws, rules and regulations as the same relate to the Assets to be Sold and Seller’s administration thereof;

d.Seller will not transfer, assign, encumber or otherwise dispose of, or enter into any contract, agreement or understanding to transfer, assign, encumber or otherwise dispose of, any Eligible Accounts or Assets to be Sold, except for assignments of Eligible Accounts for collection in the ordinary course of business consistent with past practices or activities in connection with the securitization of Eligible Accounts pursuant to the Securitization Agreements consistent with past practices;

e.Seller will promptly advise Purchaser in writing of any material actions, suits or proceedings which, to Seller’s knowledge, are commenced, threatened or arise against or affecting the Assets to be Sold and will promptly advise Purchaser in writing of any other actual or, to the extent known by Seller, prospective material adverse change in the Assets to be Sold;

f.Notwithstanding the prior provisions of this Section 5.3, commencing on the date seven (7) days prior to the Transfer Date, Seller shall not accept or process any applications for new Accounts. In the event Seller receives any such applications for new Accounts following such date, Seller shall, to the extent permitted by applicable law, rule or regulation, promptly deliver the same to Purchaser.  During such period, Seller shall not be restricted from issuing Credit Cards with respect to applications that were processed by Seller prior to ceasing to accept or process new applications; and

g.           If Seller maintains any toll free customer service telephone numbers or toll free authorizations numbers which, in each case, are dedicated solely to servicing the Accounts, Seller shall execute and deliver to Purchaser or such other party as appropriate such documents as are necessary to enable Purchaser to acquire the customer service toll-free numbers associated with the Accounts by the Transfer Date.

5.4           Debt Cancellation.

Seller represents that it does not maintain any debt cancellation or credit insurance programs with respect to the accounts.

5.5           Securitization Agreements.

On and prior to the Transfer Date Seller shall take all actions required pursuant to its Securitization Agreements in order to enable Seller to transfer the Assets to Be Sold to Purchaser free and clear of all liens and security interests on the Transfer Date. Seller shall be responsible for all filing costs and fees necessary to terminate any security interest in the Assets to be Sold prior to transfer.  On the Transfer Date Seller shall provide Purchaser evidence of termination of any such security interest.  On the Transfer Date Seller shall provide to Purchaser fully executed and in full force and effect UCC-3 amendments with respect to each financing statement filed against Seller in Delaware or in Ohio, in each case releasing the Assets to be Sold from the collateral covered by such financing statement.

5.6           Lockbox/Payments During Interim Period

Commencing on the date specified in the Conversion Schedule, and thereafter during the Interim Period, Seller shall revise the billing remittance address on all periodic statements for (i) Eligible Accounts and (ii) Ineligible Accounts to Purchaser’s lockbox account address held by ADS Alliance Data Systems, Inc. at the address specified by Purchaser in writing. During the Interim Period, Purchaser shall direct ADS Alliance Data Systems, Inc. to overnight all correspondence and remittances received at such lockbox (unopened) directly to Seller on a daily basis at such single address as Seller may designate from time to time on not less than three (3) days’ prior notice to Purchaser.  On the date specified in the Conversion Schedule Seller will revise the billing remittance address on all periodic statements for Ineligible Accounts retained by Seller to any address selected by Seller.

6.           Certain Agreements of Purchaser and Seller

6.1   Cardholder Disputes

Subject to its chargeback rights against Company pursuant to the Existing Merchant Services Agreement(which chargeback rights shall survive the termination of the Existing Merchant Services Agreement), Seller shall be responsible for final resolution of all Cardholder Disputes (involving matters within Seller’s control) of which Seller receives notice on or before the Transfer Date.  Seller shall either resolve such Cardholder Disputes prior to the Transfer Date in accordance with its normal procedures and applicable law and regulations, or if it is unable to so resolve the Cardholder Dispute, mail such acknowledgements as are required by law or regulation, and promptly furnish to Purchaser all materials relating to the Cardholder Dispute.  To the extent any such Cardholder Disputes are not resolved by the Transfer Date, the dollar amount associated with the Cardholder Dispute shall be Ineligible Account Dollars. Subject to adjustment for Cardholder Disputes received between the Transfer Date and the Adjustment Date relating to matters existing prior to the Transfer Date, Purchaser shall be responsible for the final resolution of all Cardholder Disputes for which notice is received after the Transfer Date; provided that Seller will, during the 90-day period following the Transfer Date, use commercially reasonable efforts to assist Purchaser in resolving such other Cardholder Disputes.  

6.2Purchaser’s Securitization of Accounts.

The Seller shall make available such additional information regarding the Assets to be Sold as is reasonably requested by Purchaser or Purchaser’s potential investors and their representatives in connection with a securitization by Purchaser of the Eligible Accounts and Purchaser may disclose information regarding the Seller and the origination and servicing of the Accounts (and performance information on the Assets to be Sold) to rating agencies, representatives and such potential investors without the requirement of execution of a confidentiality agreement provided such disclosure is consistent with normal and customary standards with respect to securitization offerings of asset backed securities. Notwithstanding the foregoing, Purchaser shall advise such potential investors and their representatives of the confidential nature of the information.   Purchaser may assign its rights and remedies under this Agreement and the Conveyance Documents to subsequent holders of the Assets to be Sold in conjunction with Purchaser’s securitization of the Eligible Accounts.

6.3   Confidentiality of Information

(a)           Purchaser’s affiliateADS Alliance Data Systems, Inc. (“ADS”) and Seller are parties to that certain Mutual Non-Disclosure Agreement effective as of May 21, 2008 (the “Confidentiality Agreement”).  Purchaser agrees to be bound by the terms and conditions of the Confidentiality Agreement on the same terms and conditions applicable to ADS as if Purchaser had originally executed the Confidentiality Agreement. Except as otherwise set forth herein, the Confidentiality Agreement shall survive and continue in full force and effect on its terms following the execution and delivery of this Agreement, and the parties hereto shall continue to be bound by their respective obligations thereunder.  Notwithstanding the foregoing, Purchaser shall be entitled to share Confidential Information of the Seller to (i) Interested Parties as necessary in connection with Purchaser’s securitization of the Assets to be Sold and (ii) with Golden Gate and/or its affiliate as may be necessary in connection with performing Purchaser’s obligations under the New Merchant Services Agreement and this Agreement.

(b)           Except for those portions of the Books and Records retained by Seller as relating to Ineligible Accounts pursuant to Section 2.4, from and after the Transfer Date, the Books and Records (including, without limitation, the Cardholder List) shall constitute Confidential Information of Purchaser and shall not be used by Seller for any purpose other than as contemplated by this Agreement and in connection with Seller’s internal administration of its business related to the Accounts.

6.4   Payments Received by Seller and Purchaser; Credit Balances

(a)           Seller will hold in trust for and promptly remit to Purchaser all monies on Purchased Accounts which are received by Seller after the Transfer Date, in accordance with the following procedures.

(i)           from the Transfer Date through the date ninety (90) days after the Transfer Date, Seller shall, on each Business Day, (x) wire transfer to an account designated by Purchaser an amount equal to the aggregate of all sums received by Seller on account of the Purchased Accounts during such Business Day and any non-Business Day occurring since Seller’s previous wire transfer and (y) provide to Purchaser by encrypted email to an address specified by Purchaser in writing (in an industry standard encrypted, password protected file) an electronic common deliminated file in the format agreed to by the parties (the “File”) setting forth all payments received by Seller and the Account number to which such payment relates in respect of the Purchased Accounts during such Business Day and any non-Business Day occurring since Seller’s previous submission of a File to Purchaser hereunder;

(ii)           from the date ninety-one (91) days after the Transfer Date through the date one hundred eighty (180) days after the Transfer Date, Seller shall, within five (5) Business Days after receipt of payment, (x) wire transfer to an account designated by Purchaser an amount equal to the aggregate of all sums received by Seller on account of the Purchased Accounts during such Business Day and any other day occurring since Seller’s previous wire transfer and (y) provide to Purchaser by encrypted email to an address specified by Purchaser in writing the File listing all payments received by Seller in respect of the Purchased Accounts during such Business Day and any other day occurring since Seller’s previous submission of a File to Purchaser hereunder;

 (iii)           commencing on the date one hundred eighty-one (181) days after the Transfer Date, and thereafter, Seller shall return any payment received on account of any Purchased Account to the sender together with a letter setting forth Purchaser’s remittance address.  Purchaser acknowledges and agrees that Seller shall have no obligation to remit payments in respect of Eligible Accounts to Purchaser after more than one hundred eighty-one (181) days after the Transfer Date.

Notwithstanding the foregoing, Seller shall have the right to offset against such monies due to Purchaser the amounts due to Seller from any payments related to Purchased Accounts which are returned, refused or rejected for payment by the issuing bank after the Transfer Date and Seller shall provide Purchaser with reasonable documentation thereof.

(b) Commencing on the Transfer Date, Seller hereby authorizes and empowers Purchaser to sign and endorse Seller’s name on all checks, drafts, money orders or other forms of payment relating to the Purchased Accounts.  In addition, Seller shall within thirty (30) days after the Transfer Date cease accepting payment by credit card on the Purchased Accounts.

(c)           Purchaser agrees that it will use commercially reasonable efforts to forward or remit to Seller any payment or the amount of any payment, as the case may be, on any Ineligible Account, and will promptly forward any other document pertaining to any Ineligible Account received after the Closing Date.   In performing its obligations under the preceding sentence, Purchaser will adhere to the following payment method until the date ninety (90) days after the Transfer Date or such earlier date as Seller and Purchaser reasonably determine that the volume of remittals no longer justifies it and thereafter may lengthen the remittance period or discontinue forwarding payments and return payments to the sender:  Within two (2) Business Days after receipt of the payment, Purchaser will (i) provide to Seller by encrypted email to an address specified by Seller in writing a File  listing all payments received by Purchaser in respect of the Ineligible Accounts during such Business Days and any non-Business Day occurring since Purchaser’s previous submission of a File to Seller hereunder, and (ii) remit to Seller by wire transfer pursuant to the instructions applicable to Purchaser as provided in writing by Seller the aggregate amount of such payments as set forth therein.  Anything in this Section 6.4 (b) to the contrary notwithstanding, Seller acknowledges and agrees that Purchaser shall have no obligation to remit payments in respect of Ineligible Accounts to Seller after the date which is six (6) months after the Transfer Date, and that Purchaser shall thereafter return any such payment or amount to the sender.

(d)           Seller shall use commercially reasonable efforts to refund to Cardholders all Credit Balances known by Seller ten (10) days prior to the Closing Date by the Closing Date and, in any event, Seller shall refund to Cardholders all Credit Balances existing as of the Closing Date no later than ten (10) Business Days following the Closing Date.

6.5   Collection of Purchased Accounts

Purchaser shall have the right to take, or cause to be taken, such action to enforce Purchaser’s rights with respect to any Purchased Account as Purchaser may deem necessary or appropriate in the circumstances.  Upon Purchaser’s request, Seller shall execute in favor of Purchaser such Account-specific assignment documents as may be reasonably necessary to allow Purchaser to pursue, in Purchaser’s own name, collection or enforcement action on the Purchased Accounts.  Seller hereby constitutes and appoints Purchaser its true and lawful attorney-in-fact for such purpose, with full power of substitution in the premises, which appointment shall include (but shall not be limited to) the power to demand, sue for, collect and receive any and all amounts owing at any time on any Purchased Account and owed to Purchaser, and to endorse checks, drafts, orders and other instruments tendered in payment of any Account and to settle, compromise, prosecute or defend any claims Purchaser or Seller may have with respect to such instruments.  This power of attorney shall be deemed to be a power coupled with an interest.  Any collection of such Accounts by Purchaser shall be performed in accordance with all applicable laws and regulations.

6.6   Further Assurances/Post Closing Covenants

The parties hereto hereby covenant as follows, which covenants shall survive the Transfer Date:

(a)On and after the Transfer Date, Seller shall (for itself and for its Predecessor(s) in Interest) (i) execute, acknowledge and deliver all such acknowledgements, certificates, assignments and other instruments and take such further action as may be reasonably necessary and appropriate effectively to vest in Purchaser the full legal and equitable title to the Assets to be Sold, free and clear of all Liens, and (ii) use reasonable efforts to assist Purchaser in the orderly transition of the operations acquired by Purchaser.  In addition, to the extent transferable, on or before the Transfer Date, Seller shall assist in the acquisition by Purchaser (or relinquish for the benefit of Purchaser) of any toll-free customer service telephone numbers maintained by Seller exclusively for the purpose of servicing the Accounts.

(b)On and after the Transfer Date, Purchaser shall execute, acknowledge and deliver all such acknowledgements and other instruments and take such further action as may be necessary and appropriate to relieve and discharge effectively Seller from any obligations remaining under those liabilities and obligations assumed by Purchaser pursuant to the terms hereof.

(c)           Within thirty (30) days after the Transfer Date, Seller shall provide to the credit reporting agencies used by Seller in connection with the Eligible Accounts a letter of closure or deletion of the Seller’s trade line records with respect to such Eligible Accounts.

(d)           Seller shall, for a period of ninety (90) days after the Transfer Date, for no additional consideration, reasonably cooperate with the Purchaser in connection with the conversion of the Eligible Accounts to Purchaser’s processor by answering questions regarding the Closing Tape and the Books and Records to the extent within Seller’s knowledge.

(e)           Seller agrees that Seller will at all times comply with Seller’s privacy policy regarding the Cardholder List and will comply with Seller’s obligations under the Company Purchase Agreement and Existing Merchant Services Agreement with respect thereto.

(f)           Seller agrees that Company shall be entitled to continue accepting the existing Credit Cards issued to Eligible Accounts following the Transfer Date for a reasonable period of time following the Transfer Date. Not more than sixty (60) days following the Transfer Date Purchaser shall either issue new credit cards to the Cardholders associated with all active Purchased Accounts or notify such Cardholders of account termination.  In the event the Cardholder of inactive or never active Eligible Account desires to activate their Eligible Account following the Transfer Date, Purchaser shall either issue a new credit card to such Cardholder or notify such Cardholder of account termination.

(g)           Between the Execution Date and the Transfer Date, subject to the terms and conditions of this Agreement, each party shall use its commercially reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary or appropriate hereunder to consummate the transactions contemplated by this Agreement.  Each party further agrees to use its commercially reasonable efforts to obtain consents of all third parties and governmental agencies necessary for the consummation of the transactions contemplated by this Agreement.

(h)           During the period beginning on the Transfer Date and ending on the date two (2) years after the Transfer Date, to the extent the requested information is in Seller’s possession or control, Seller will provide to Purchaser within ten (10) Business Days after Purchaser’s request from time to time the following information related to the Purchased Accounts (in each case for the twenty-five (25) month period immediately preceding the Transfer Date), (i) historical billing statements, (ii) transaction history, (iii) completed applications, (iv) customer service correspondence from and to Cardholders, (v) any applicable consumer credit counseling agreements with Cardholders, and (vi) customer service notes. In addition, Seller will, for the ninety (90) day period immediately following the Transfer Date, forward to Purchaser any document or correspondence pertaining to any Purchased Account received after the Transfer Date.  Seller shall maintain all documents in its possession and control in accordance with its normal and customary document retention policies and as required by all applicable laws.

(i)           For a period of ninety (90) days after the Transfer Date, Seller will cause its “customer service department” to direct telephone inquiries received from any Cardholder on any Purchased Account to the applicable cardholder customer service telephone number(s) designated by Purchaser.

                      (j)   Through and until the date ninety (90) days after the Transfer Date, Seller shall continue to maintain its existing Cardholder electronic customer service websites for Company’s businesses operating under the Trade Names and shall direct Cardholders to Purchaser’s website as set forth on Schedule 5.2 through such date.

                      (k)          If at anytime during the period beginning on the Transfer Date and ending on the date five (5) years after the Transfer Date Seller desires or intends to sell, assign or otherwise transfer the Charged-Off Accounts to any third party (other than assignments to Seller’s collection agencies and affiliates in the ordinary course as a part of Seller’s collection efforts), then Purchaser shall have the first right and/or option of purchasing the Charged-Off Accounts on the same terms otherwise available to such third party. In the event Seller shall obtain a bona fide written offer from the third party to purchase the Charged-Off Accounts on terms which Seller is willing to accept (the “Offer”), Seller shall promptly notify Purchaser of the Offer (together with a copy of the Offer) and Purchaser shall have the option for a period of thirty (30) days after receipt of the Offer to elect to purchase the Charged-Off Accounts on the same terms as are otherwise set forth in the Offer, except that closing thereunder shall not occur until the later of the date set forth in the Offer or sixty (60) days after Purchaser’s receipt of the notice of the Offer.  Failure on the part of Purchaser to elect to purchase the Charged-Off Accounts pursuant to the Offer shall be deemed a waiver of this option right as to such particular Offer only and if a sale is not consummated pursuant to such Offer, Purchaser shall have the right to purchase the Charged-Off Accounts under this section (k) if subsequent Offers are received by Seller.  In addition to the foregoing, prior to offering the Charged-Off Accounts for sale, Seller shall first contact Purchaser and provide to Purchaser the right of first negotiation as to the purchase of the Charged-Off Accounts.   If Purchaser elects not to purchase the Charged-Off Accounts Purchaser shall have no further rights to purchase the Charged-Off Accounts under this Section and Seller shall have no further obligations to offer to sell to Purchaser.

           6.7           Taxes.  Each of Purchaser and Seller shall promptly pay in full and when due any Tax imposed upon it under applicable law on the sale of the Assets to be Sold from Seller to Purchaser under this Agreement.

6.8           Public Announcements

(a)           The parties shall consult with each other before they or any of their respective affiliates or agents issue any press releases or otherwise make, any public statements with respect to this Agreement and the transactions contemplated hereby, and none of them nor any affiliate of any of them shall issue any such press release or make any such public statement prior to receiving express written approval of the other party except, in each case, as may be required by applicable law or regulation (including a reporting requirement of the Securities Exchange Commission or as reasonably required in connection with Purchaser’s securitization of the Accounts).

(b)           Section 6.8 (a) to the contrary notwithstanding, if either party or its affiliates (for the purposes of this Section 6.8 (b) the “Filing Party”) are obligated to file periodic reports with the Securities and Exchange Commission, then the filing party shall have the right to file a copy of this Agreement with the applicable commission or governmental agency to the extent necessary, in such party’s reasonable opinion, to comply with any applicable disclosure laws or regulations (including any reporting requirement of the Securities Exchange Commission), or any listing requirement of any stock exchange applicable to the Filing Party.

6.9           Transfer of Domain Names

           Seller shall transfer to Purchaser’s parent company Alliance Data Systems Corporation, simultaneously with the Closing, all right, title and interest in and to the Domain Names and provide the Domain Name Assignment.

7.           Indemnification

7.1   Indemnification by Seller

Subject to Section 7.4, Seller will defend and indemnify Purchaser and its successors and assigns and hold Purchaser, its successors and assigns harmless for, from and against any claim, demand, liability, loss, cost or expense, including reasonable attorneys’ fees, (collectively, “Losses”) which shall result from or arise out of or be incurred in connection with (i) the untruthfulness of any of Seller’s representations or warranties contained in this Agreement, (ii) the breach by Seller of any of its covenants or agreements herein contained, (iii) the breach by Seller of any of its covenants or agreements in the Assignment or Bill of Sale,  (iv) any liability or obligation, contingent or otherwise, of Seller relating to the Assets to be Sold that is not assumed by Purchaser pursuant to this Agreement or the Assumption Agreement and which exists on, or arises out of any event or condition occurring or existing at any time prior to, the Transfer Date (including without limitation liabilities arising from any Account Duties existing as of the Transfer Date which have not been fulfilled by Seller prior to the Transfer Date or which relate to periods prior to the Transfer Date), or (v) any and all Taxes which are the responsibility of Seller pursuant to Section 6.7 (collectively, “Purchaser Indemnified Losses”); provided, however, in no event shall Seller be obligated under this Section 7.1 to defend, indemnify and hold Purchaser harmless, for, from and against any Losses to the extent the same shall result from Purchaser’s willful misconduct or gross negligence.

7.2   Indemnification by Purchaser

Subject to Section 7.4, Purchaser will defend and indemnify Seller and its successors and assigns and hold it and its successors and assigns harmless for, from and against any Losses which shall result from or arise out of or be incurred in connection with (i) the untruthfulness of any of Purchaser’s representations or warranties in this Agreement, (ii) the breach by Purchaser of any of its covenants or agreements herein contained, (iii) the breach by Purchaser of any of its covenants or agreements in the Assumption Agreement, (iv) any liabilities, contingent or otherwise, assumed by Purchaser pursuant to this Agreement or the Assumption Agreement; (v) any liabilities or obligations, contingent or otherwise, of Seller arising from or relating to Purchaser’s communications with the Cardholders of the Eligible Accounts prior to the Transfer Date pursuant to Section 5.2, (vi) any and all Taxes which are the responsibility of Purchaser pursuant to Section 6.7, or (vii) the operation by Purchaser of the Assets to be Sold from and after the Transfer Date; provided, however, that in no event shall Purchaser be obligated under this Section 7.2 to defend and indemnify Seller and hold Seller harmless for, from and against any Losses to the extent the same shall result from Seller’s willful misconduct or gross negligence.

7.3           Indemnification Procedures.

(a)           In case any claim, suit, action or proceeding (any “Action”) is made or commenced against either Seller or Purchaser in respect of which indemnification may be sought under Section 7.1 or 7.2 (the “Indemnitee”), the Indemnitee shall promptly give the other party (the “Indemnitor”) written notice thereof provided that the Indemnitor shall not be relieved of its obligation to indemnify the Indemnitee as a result of the Indemnitee’s failure to promptly give such prompt notice, except to the extent that the defense of such Action is materially and irrevocably prejudiced by such failure.  The Indemnitor shall be entitled to participate in (or, if the Indemnitee does not desire to defend, to conduct) the defense thereof with counsel reasonably acceptable to the Indemnitee at the Indemnitor’s expense.  The Indemnitor may (but need not) defend or participate in the defense of any Action, but the Indemnitor shall promptly notify the Indemnitee if the Indemnitor shall not desire to defend or participate in the defense of any such Action.  If the Indemnitor fails to provide a defense of any such claim and the Indemnitee provides the defense, the Indemnitor shall be responsible for payment of the reasonable legal fees incurred by the Indemnitee in connection with such participation.  If, within fifteen (15) days of receipt of such notice the Indemnitor notifies the Indemnitee in writing of its intent to assume the defense of such Action, the Indemnitor shall not be liable to the Indemnitee under this Section 7.3 for any legal or other expenses subsequently incurred by the Indemnitee in connection with the defense thereof. Notwithstanding the foregoing, the Indemnitee shall have the right to engage its own counsel if the Indemnitee elects to assume the defense of the Action, but the fees and expenses of such counsel shall be at the Indemnitee’s expense unless (i) the employment of such counsel shall have been authorized in writing by the Indemnitor, (ii) the Indemnitor shall not have employed counsel to take charge of the defense of such Action within thirty (30) days after receiving electing to assume the defense of such Action or (iii) there is a reasonable basis on which the Indemnitee’s interests may differ from those of the Indemnitor, in any of which events the Indemnitor will be responsible for the reasonable fees and expenses incurred by the Indemnitee in connection with defending such Action.

The Indemnitee shall notify the Indemnitor of its intention to settle or compromise any Action against the Indemnitee in respect of which payments may be sought by the Indemnitee hereunder (and in the defense of which the Indemnitor has not previously elected to participate), and the Indemnitee may settle or compromise any such Action unless the Indemnitor notifies the Indemnitee in writing (within ten (10) Business Days after the Indemnitee has given the Indemnitor written notice of its intention to settle or compromise) that the Indemnitor intends to conduct the defense of such Action.  Any such settlement or compromise of, or any final judgment or decree entered into or in, any Action which the Indemnitee defended or participated in the defense in accordance herewith shall be deemed to have been consented to by, and shall be binding upon, the Indemnitor as fully as if the Indemnitor had assumed the defense thereof and a final judgment or decree had been entered in or with regard to such Action by a court of competent jurisdiction for the amount of such settlement, compromise, judgment or decree. In the event that the Indemnitor reimburses the Indemnitee for any third party claim, the Indemnitee shall promptly remit to the Indemnitor any reimbursement the Indemnitee subsequently received for such third party claim.

(b)           Without limiting their respective rights and obligations as set forth elsewhere in this Article 7, and subject to the procedures for indemnification claims set forth in this Article 7, Seller or Purchaser as an Indemnitee, as the case may be, will act in good faith, will use commercially reasonable efforts to mitigate any losses, will use similar discretion in the use of personnel and the incurring of expenses as the Indemnitee would use if they were engaged and acting entirely at their own cost and for their own account, will render to the Indemnitor such assistance as Indemnitor may reasonably require in order to insure prompt and adequate defense of any Action, and will consult regularly with the Indemnitor regarding the conduct of any proceedings or the taking of any action for which indemnification may be sought.

(c)           In calculating the amount of any Losses of any Indemnitee under this Article 7, there will be subtracted the amount of any third-party payments (including insurance payments) actually received by the Indemnitee with respect to such Losses; provided, however that nothing herein shall limit such third party's rights to pursue recovery against the Indemnitor for any such payments made by such third party. In the event that the Indemnitor reimburses the Indemnitee for any Losses prior to the occurrence of the events contemplated above, the Indemnitee will remit to the Indemnitor any such amounts that the Indemnitee subsequently receives in reimbursement of such Losses (not to exceed the amount previously reimbursed in respect thereof).

(d)           After the Closing Date, except for those matters expressly addressed in Article 3, this Article 7 will constitute Purchaser’s and Seller’s exclusive remedy for any of the matters set forth in this Agreement or with respect to any document or instrument delivered in connection herewith; provided, however, that nothing contained herein shall prevent an Indemnitee from pursuing remedies as may be available to such party under applicable law in the event of an Indemnitor’s failure to comply with its indemnification obligations hereunder.

7.4           Limitation of Liability.

Notwithstanding anything to the contrary contained in this Agreement, except for Losses arising from a breach of Seller’s representations set forth in Sections 8.7 (Condition of Assets to be Sold) and 8.11 (Conveyance of Assets to be Sold), and 8.12 (Securitization) each of which shall not be subject to the Floor or Ceiling (as hereafter defined), following the Transfer Date (and subject to the provisions of this Section 7.4): (i) neither party shall have any obligation with respect to any indemnification payments payable pursuant to this Article 7 except to the extent that the aggregate of all of such obligations (including all costs and reasonable attorneys fees incurred in connection therewith as otherwise provided above) exceed One Hundred Thousand Dollars ($100,000.00) (the “Floor”); in which case Indemnitor shall be responsible for all obligations in excess of the Floor; (ii) the indemnification provided for herein shall not cover, and in no event shall any party hereto be liable for, any indirect damages claimed by the Indemnitee, including consequential, incidental, exemplary or punitive damages claimed by the Indemnitee (except that the indemnification provided for herein shall cover reasonable attorneys fees incurred by the Indemnitee as otherwise provided above and shall also cover judgments awarded to third parties for indirect damages, including consequential and punitive damages); and (iii) the aggregate amount of indemnification either party is obligated to provide under this Agreement shall not exceed the Payment Amount (the “Ceiling”) unless the claim arises from the willful misconduct of the Indemnitor.  Notwithstanding the foregoing limits or any other provision of this Section 7.4 to the contrary, (i) any claims arising from a breach of Seller’s representations set forth in Sections 8.7, 8.11 or 8.12 shall not be subject to the Floor or the Ceiling and Seller shall be responsible for the full amount of any such claim. In addition, if as a result of a party’s breach of a representation of this Agreement the Closing does not occur and this Agreement is terminated, all of the non-breaching party’s direct costs incurred as a direct result of breach of the representation and termination of the Agreement shall be deemed direct damages of the non-breaching party not subject to the Floor.

7.5           Deadline for Claims for Indemnification

Neither party shall have any obligation with respect to any indemnification payments payable pursuant to this Article 7 hereof with respect to any Losses resulting from any Action arising or asserted by any Indemnitee or any other person more than three (3) years after the Closing Date (provided, that the foregoing three (3) year limitation shall not apply to any Losses of any Indemnitee arising from the failure of Seller or Purchaser to satisfy any of its respective obligations under Sections 6.3, 6.7, 6.8 and hereof).   Seller shall have no liability to Purchaser with respect to or resulting from Purchaser, Company or their third party vendors’ conversion of the Assets to be Sold except for Seller’s limited liability to Purchaser under this Agreement solely with respect to Seller’s obligations to comply with its obligations under this Agreement including, without limitation, its obligations set forth on the Conversion Schedule.

8.           Warranties and Representations of Seller

           Seller represents and warrants to Purchaser as follows:

8.1   Organization

Seller is a national bank duly organized and validly existing under the laws of the United States and is authorized to conduct its business under those laws.  Seller’s “main office”, as that term is used in Comptroller of the Currency Interpretive Letter #913 dated August 3, 2001, is located at 1103 Allen Drive, Milford, Ohio 45150.

8.2   Authority

Seller has full corporate power and authority to enter into and perform this Agreement and to effect the transactions contemplated hereby and to sell the Assets to be Sold to Purchaser.  The execution, delivery and performance by Seller of this Agreement (and all documents, agreements, and instruments contemplated hereby) have been approved by all requisite corporate action on the part of Seller.  This Agreement constitutes, (and each such document, agreement, and instrument when executed and delivered will constitute) a valid and binding obligation of Seller enforceable against it in accordance with their respective terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship and other laws relating to or affecting creditors’ rights generally and by general principles of equity.  No consents are required for the execution and performance of Seller’s obligations hereunder except such consents as have been or will be obtained prior to the Closing Date.

8.3   Financial Information

Seller has provided to Purchaser financial information relating to the Assets to be Sold, computed with information as of June 30, 2008 (the “Financial Information Computation Date”), which (i) includes as of the Financial Information Computation Date the number of Accounts, together with the additional Account information set forth on Schedule 8.3 hereof (collectively, the “Financial Information”), (ii) is accurate in all material respects as of the respective date thereof, (iii) does not, to Seller’s knowledge, as of such date, contain any untrue statement of a material fact, and (iv) does not, as of such date, omit to state any material fact relating to the Financial Information.  The Preliminary Closing Statement will be accurate in all material respects as of the date thereof.  All charge or credit transactions (including payments) as to which the records thereof shall have been received by Seller on or before the Transfer Date shall have been posted to the appropriate Account as of the close of business on the Transfer Date.  The Closing Tapes when delivered by Seller to Purchaser shall set forth in all material respects the true, correct and complete list of the Eligible Accounts and Account Balances as of the date of their preparation.

8.4   Legal Proceedings

As of the date of this Agreement there are no Actions (including without limitation governmental or regulatory violations, proceedings or investigations) which are pending or to the knowledge of Seller threatened against or affecting the Assets to be Sold or Seller’s ability to consummate the transactions contemplated by this Agreement.

8.5   Finders or Brokers

Seller has not agreed to pay any fee or commission to any agent, broker, finder or other person for or on account of services rendered as a broker or finder in connection with this Agreement or the transactions contemplated which would give rise to any valid claim against Purchaser for any brokerage commission or finder’s fee or like payment.

8.6   Compliance with Law and Other Instruments

The execution and delivery of this Agreement by Seller and the consummation of the transactions contemplated hereby by Seller will not constitute a violation of or be in conflict with any applicable law or regulation in any material respect.  The Cardholder Agreements for the Eligible Accounts and the monies collected under the Accounts comply in all material respects with all applicable laws, rules and regulations.  Seller’s operation and administration of the Assets to Sold (including without limitation all origination procedures, credit approval procedures, finance charges, late fee calculation methodologies, disclosures, collection practices and marketing practices) has complied with (and during the Interim Period will comply with) all applicable laws, rules, regulations and regulatory directives in all material respects (including, without limitation, guidelines of the FFIEC) and the Assets to be Sold are not subject to any claims arising from any violation thereof.

The execution and delivery by Seller of, and performance by Seller of its obligations pursuant to, this Agreement (and the documents, agreements, and instruments contemplated hereby) will not violate or be in conflict with Seller’s charter or by-laws or any contract or other instrument to which it is a party or by which it is bound, except as would not have a material adverse effect on the Assets to be Sold, or Seller’s ability to consummate the transactions contemplated hereby; excluding, however, (i) any matter, condition or event that (x) is within the sole control of Company or (y) affects the credit card services, consumer credit or banking industry generally first arising after the date of this Agreement, or (ii) any changes in laws, generally accepted accounting principles or regulatory accounting principles first arising after the date of this Agreement.  Seller’s fulfillment of all Account Duties has been performed in all material respects in accordance with all applicable laws, rules and regulations.

8.7.   Condition of Assets to be Sold

With respect to all Eligible Accounts sold to Purchaser hereunder, the obligation of the Cardholder to pay the unpaid Account Balance thereunder owing as of the close of business on the Valuation Date, if any, as shown on the Preliminary Closing Statement, is legal, valid and binding and enforceable except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship and other laws relating to or affecting creditors’ rights generally, by general principles of equity and Cardholder Disputes (which are specifically addressed in Section 6.1 of this Agreement) and is not subject to any offsets or other defenses existing as of the Transfer Date.

On the Transfer Date, Seller will be the owner of all right, title and interest in and to all of the Assets to be Sold, free and clear of all Liens (including, without limitation, any Lien related to the Securitization Agreements); and immediately after such sale, such ownership interest will be vested in Purchaser. Each Account Balance is, or as of the Transfer Date will be, freely assignable and transferable to Purchaser.  

                8.8 Seller Agreements and Accounts

The form of Seller’s Cardholder Agreements in effect with respect to Eligible Accounts on the date of this Agreement, and Seller’s related form of periodic statement forms in effect on the date of this Agreement, are attached as Schedule 8.8.1 and Schedule 8.8.2 respectively.  There are no other Cardholder Agreements or periodic statement forms in use by Seller or otherwise in effect, with respect to any Eligible Account on the date of this Agreement. The form of Cardholder Agreement and form of periodic statement comply in all material respects with all applicable laws and accurately represent the agreements between Seller and Cardholders and the methods of computing balances and finance charges.  None of the Cardholder Agreements, periodic statement forms or Accounts includes a provision for annual fees and there are no obligations to Cardholders except as set forth in the Cardholder Agreements and those agreements made in the ordinary course of Seller’s business (which agreements taken as a whole would not have a materially adverse effect on the Assets to be Sold) and as noted in the Books and Records and/or Closing Tape. There are no leases, contracts or other agreements that are material to the Assets to be Sold that would affect the purchase or operation thereof by the Purchaser.  Seller is not in breach of any contract or agreement to be sold or transferred to the Purchaser hereunder in any material manner.

8.9   Assets to be Sold

Since the Financial Information Computation Date, Seller has not, solely with respect to the Eligible Accounts, (i) effected any material or significant change in the accounting practices, procedures or methods employed in connection with the Eligible Accounts, or (ii) effected any material or, significant change in its business, credit or, collection policies, re-aging policies, practices or procedures relating to the Eligible Accounts.  Since the Financial Information Computation Date, there has not occurred any material adverse change (financial or otherwise) in the condition of the Eligible Accounts or Seller’s continued operation thereof and ability to operate the same in accordance with past practices and the terms of the Existing Merchant Services Agreement excluding, however, (i) any matter, condition or event that affects the credit card services, consumer credit or banking industry generally first arising after the date of this Agreement, (ii) any changes in laws, generally accepted accounting principles or regulatory accounting principles first arising after the date of this Agreement or (iii) any action, change, effect circumstance or condition contemplated or required by this Agreement or attributable solely to the announcement of this Agreement or the transactions contemplated hereby made in accordance with the provisions of this Agreement.

8.10   Accounts Not Business Accounts

To Seller’s knowledge, none of the Accounts sold to Purchaser hereunder are with business entities or otherwise represent commercial receivables.

8.11   Conveyance of Assets to be Sold

Seller is not insolvent at the time of the conveyance of title and the sale of the Assets to be Sold by Seller hereunder is a conveyance for reasonably equivalent value to Purchaser.  It is the intention of the Seller that the transfer of the Assets to be Sold hereunder shall constitute a sale, which sale is absolute and irrevocable and provides Purchaser with the full benefits of ownership of the Accounts.  The transfer by Seller of the Assets to be Sold is not made for or on account of an antecedent debt, and Seller will not be insolvent on the date of (nor will it become insolvent as a result of) such transfer.  No transfer by Seller of any Asset to be Sold hereunder is voidable under any law dealing with bankruptcy, insolvency, creditors’ rights or similar laws.  Seller is the originator of all Accounts included in the Assets to be Sold.

8.12   Securitization Agreements

As of the Transfer Date Seller will remove the Assets to be Sold from the Securitization Agreements and cause the lien of all Securitization Agreements (and all UCC financing statements filed in connection therewith), to the extent they affect the Assets to be Sold, to be released and discharged, such that the Account Balances will be sold to Purchaser free of the Liens of any Securitization Agreements.  All transfers of receivables included in the Assets to Be Sold out of the Seller’s securitization program pursuant to the Securitization Agreements (i) will be made in full compliance with the Securitization Agreements and (ii) will be made in full compliance with applicable law, and at the time each entity involved in such securitization program conveyed title to the Assets to be Sold to Seller, or another predecessor in interest of Seller under such Securitization Agreements, such entity was not insolvent and such conveyance was for reasonably equivalent value to such entity.

8.13           Accuracy of Statements

No statement contained in any document provided or delivered by Seller to Purchaser in connection with the transaction contemplated hereby, as of the date of such statement, contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statement contained therein not misleading in any material respect.

8.14           Service Provider SAS 70 Review by Seller

Seller has reviewed the Type II SAS 70 report for its service provider TSYS dated September 30, 2007 and a letter from TSYS dated January 22, 2008 with respect to such SAS 70 report and, in Seller’s judgment, such SAS 70 report has not indicated any material weaknesses in controls.

9.           Warranties and Representations of Purchaser

Purchaser hereby represents and warrants to Seller as follows:

9.1   Organization

Purchaser is a national bank duly organized and validly existing under the laws of the United States and is authorized to conduct its business under those laws.

9.2   Authority

Purchaser has full corporate power and authority to enter into and perform this Agreement and to effect the transactions contemplated hereby.  The execution, delivery and performance by Purchaser of this Agreement (and all documents, agreements, and instruments contemplated hereby) have been approved by all requisite corporate action on the part of Purchaser.  This Agreement constitutes (and each such document, agreement and instrument when executed and delivered will constitute) a valid and binding obligation of Purchaser, enforceable against it in accordance with their respective terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, receivership, conservatorship and other laws relating to or affecting creditors’ rights generally and by general principles of equity. As of the Execution Date, the Company has duly assigned to Purchaser all of the Company’s rights to purchase the Assets to be Sold. No consents are required for the execution and performance of Purchaser’s obligations hereunder except such consents as have been or will be obtained prior to the Closing Date.

9.3   Legal Proceedings

There are no actions, suits or proceedings or governmental or regulatory violations or investigations which are pending or, to the knowledge of Purchaser, threatened, against or affecting Purchaser’s ability to consummate this Agreement or the transactions contemplated hereby. Purchaser shall promptly notify Seller of any actions, suits or proceedings commenced or, to Purchaser’s knowledge, threatened against or affecting Purchaser’s ability to consummate the transactions contemplated by this Agreement during the Interim Period.

9.4   Finders or Brokers

Purchaser has not agreed to pay any fee or commission to any agent, broker, finder or other person for or on account of services rendered as a broker or finder in connection with this Agreement or the transactions contemplated hereby which would give rise to any valid claim against Seller for any brokerage commission or finder’s fee or like payment.

9.5   Governmental Notices

Purchaser has not received notice from any federal or state governmental agency indicating that it would oppose or not grant or issue its consent or approval, if required, with respect to the transactions contemplated by this Agreement.

9.6   Compliance with Law and Other Instruments

The execution and delivery of this Agreement by Purchaser and the consummation of the transactions contemplated hereby by Purchaser will not constitute a violation of or be in conflict with any applicable law or regulation. The execution and delivery by Purchaser of, and the performance by Purchaser of its obligations pursuant to, this Agreement (and the documents, instruments, and agreements contemplated hereby) will not violate or be in conflict with Purchaser’s charter or by-laws or any material contract or other instrument to which it is a party or by which it is bound except as would not have a material adverse effect on the Purchaser’s ability to consummate the transactions contemplated hereby; excluding, however, (i) any matter, condition or event that (x) is within the sole control of Seller or (y) affects the credit card services, consumer credit or banking industry generally, or (ii) any changes in laws, generally accepted accounting principles or regulatory accounting principles.

9.7           Adjusted Closing Statement

The Adjusted Closing Statement delivered by Purchaser to Seller pursuant to Section 3.2(b) will to Purchaser’s knowledge be accurate in all material respects as of the date thereof.

9.8           Golden Gate Merchant Services Agreement

As of the date of this Agreement, Purchaser has entered into a Merchant Services Agreement with Golden Gate or its affiliate (the “New Merchant Services Agreement”) to provide for the administration and servicing of the Eligible Accounts following the Transfer Date, which New Merchant Services Agreement is in full force and effect.

10.           Conditions Precedent to Purchaser’s Obligations

           The obligations of Purchaser to consummate the purchase provided for herein are subject to the fulfillment (except to the extent, if any, waived by Purchaser) of the following conditions at or prior to the Transfer Date:

10.1   Absence of Litigation

There shall not be pending on the Transfer Date any action or proceeding instituted by any person, entity or governmental authority against Seller or Purchaser to prevent the consummation of the sale of the Assets to be Sold and, on the Transfer Date, there shall be no injunction, decree or similar legal restraint preventing the consummation of such sale and there shall be no statute, rule or regulation in effect which would prevent Seller from selling or Purchaser from purchasing the Assets to be Sold as contemplated by this Agreement.

10.2   Truth of Representations, Delivery of Lien Releases

The representations and warranties of Seller set forth in Section 8 of this Agreement shall be true in all material respects as though made again on and as of the Transfer Date (except for those representations and warranties made as of a particular date, which such representations and warranties shall be true in all material respects as of such particular date), and Seller has caused to be delivered on or before the Transfer Date all applicable Lien releases and termination statements as required under this Agreement.

10.3   Performance of Covenants

The covenants and agreements of Seller set forth in this Agreement and to be performed on or before the Transfer Date shall have been performed in all material respects.

10.4   Items to be Delivered by Seller

Seller shall have delivered to Purchaser:

(a)           The Assignment and Bill of Sale together with the Domain Name Assignment, UCC terminations or assignments, and such other instruments and documents as are reasonably necessary for confirming the transfer, assignment and conveyance of title to the Assets to be Sold to Purchaser (together, the “Conveyance Documents”), duly issued or signed by a duly authorized officer of Seller, as applicable.

 (b)           A certificate signed by a duly authorized officer of Seller to the effect that (i) the warranties and representations of Seller in Section 8 are true as of the Closing Date (except for those representations and warranties made as of a particular date, which such representations and warranties shall be true in all material respects as of such particular date) as if made on the Closing Date or, if any such warranties and representations are not then true, specifying the deficiency in reasonable detail; and (ii) the covenants and agreements of Seller to be performed hereunder on or before the Transfer Date have been performed in all material respects, or, if any such covenants have not been so performed, specifying the deficiency in reasonable detail.

           (c)           The Preliminary Closing Statement; and

           (d)           The Assumption Agreement.

10.5   UCC Financing Statement

Seller hereby confirms that, for purposes of the UCC, it is “located” in the State of Ohio, and hereby authorizes Purchaser to file in such location financing statements in favor of Purchaser, as secured party, against Seller, as debtor, reflecting the sale of the Assets to be Sold hereunder.

10.6   Absence of Matters which Materially Adversely Affect the Assets to be Sold

On the Closing Date there shall not exist any matter, condition or event that materially adversely affects the Assets to be Sold taken as a whole, excluding, however, (i) any matter, condition or event that (x) is within the sole control of Company or (y) affects the credit card services, consumer credit or banking industry generally first arising after the Execution Date, (ii) any changes in laws, generally accepted accounting principles or regulatory accounting principles first arising after the Execution Date,  or (iii) any action, change, effect circumstance or condition contemplated or required by this Agreement or attributable solely to the announcement of this Agreement or the transactions contemplated hereby.

10.7           Expiration or Termination of Existing Merchant Services Agreement

The Existing Merchant Services Agreement shall have expired or been terminated by Seller and Company as of or prior to the Closing Date, except for such obligations which pursuant to the terms of the Existing Merchant Services Agreement survive expiration or termination.

10.8           Closing under the Company Purchase Agreement

Closing shall have occurred under the Company Purchase Agreement.

10.9   New Merchant Services Agreement

The New Merchant Services Agreement shall be in full force and effect and Purchaser shall not have taken any action or exercised any right to terminate such agreement due to an event of default by Golden Gate or its affiliate; provided, however, that this Section 10.9 shall be null and void if the New Merchant Services Agreement is terminated or otherwise not in full force and effect as a result of a default of Purchaser thereunder.

11.           Conditions Precedent to the Obligations of Seller

The obligation of Seller to consummate the sale provided for herein is subject to the fulfillment (except to the extent, if any, waived by Seller) of the following conditions at or prior to the Transfer Date, each of which, to the extent within Seller’s control, Seller shall pursue satisfying in good faith:

11.1   Absence of Litigation

There shall not be pending on the Transfer Date any action or proceeding instituted by any governmental authority against Seller or Purchaser to prevent the consummation of the sale of the Assets to be Sold by Seller to Purchaser pursuant hereto, and on the Transfer Date there shall be no injunction, decree or similar legal restraint preventing the consummation of such sale.

11.2   Truth of Representations

The representations and warranties of Purchaser set forth in Section 9 shall be true in all material respects as though made again on and as of the Transfer Date (except for those representations and warranties made as of a particular date, which representations and warranties shall be true in all material respects as of such particular date).

11.3   Performance of Covenants

The covenants and agreement of Purchaser set forth in this Agreement and to be performed on or before the Transfer Date shall have been performed in all material respects.

11.4   Items to be Delivered by Purchaser

Purchaser shall have delivered to Seller:

(a)           A payment to Seller of the Payment Amount set forth in the Preliminary Closing Statement by transfer of funds immediately available.

(b)           The Assignment and Bill of Sale signed by a duly authorized officer of Purchaser.

(c)           The Assumption Agreement signed by a duly authorized officer of Purchaser.

           (d)           A certificate signed by a duly authorized officer of Purchaser to the effect that (i) the warranties and representations of Purchaser in Section 9 are true as of the Transfer Date (except for those representations and warranties made as of a particular date, which such representations and warranties shall be true in all material respects as of such particular date) or, if any such warranties and representations are not then true, specifying the deficiency in reasonable detail; and (ii) the covenants and agreements of Purchaser to be performed hereunder on or before the Transfer Date have been performed in all material respects, or, if any such covenants have not been so performed, specifying the deficiency in reasonable detail.

11.5   Expiration or Termination of Existing Merchant Services Agreement

The Existing Merchant Services Agreement shall have expired or been terminated by Seller and Company as of or prior to the Closing Date, except for such obligations which pursuant to the terms of the Existing Merchant Services Agreement survive expiration or termination.

11.6           Closing under the Company Purchase Agreement

Closing shall have occurred under the Company Purchase Agreement.

11.7           New Merchant Services Agreement

The New Merchant Services Agreement shall be in full force and effect and Purchaser shall not have taken any action or exercised any right to terminate such agreement due to an event of default by Golden Gate or its affiliate.

12.           Survival of Representations and Warranties

           Notwithstanding any investigation made by or on behalf of either party at any time, all covenants, agreements, representations, indemnifications and warranties made herein and in any certificate delivered pursuant hereto shall survive the execution and delivery of this Agreement and Closing hereunder until the third anniversary of the Transfer Date; provided that the representations and warranties contained in Section 8.7 (and the indemnifications related thereto) will survive indefinitely and the representations and warranties contained in Sections 8.6, 8.8 and 8.10 (and the indemnifications related thereto) will survive for the period of the applicable statute of limitations.  Notwithstanding the foregoing, any representation or warranty that would otherwise terminate shall survive with respect to losses asserted in any claim for indemnification hereunder of which notice is given pursuant to this Agreement prior to the end of the applicable survival period, until such claim is finally resolved and any related losses are paid.

13.   Default/Termination of Agreement

13.1  A “Default” shall occur hereunder upon the occurrence of the following:

           (i)           The expiration of thirty (30) days from the date one party shall have given notice to the other party (the “Defaulting Party”) of a breach or default by the Defaulting Party in the performance of any covenant, agreement, representation or warranty hereunder which is not cured within such thirty (30) day period; or

(ii)           Seller or Purchaser (as applicable in this clause (ii), the “Bankrupt Party”) becomes insolvent or generally fails to pay, or admits in writing its inability to pay, its debts as they become due; or the Bankrupt Party applies for, consents to, or acquiesces in the appointment of, a trustee, receiver or other custodian for the Bankrupt Party or any property thereof, or makes a general assignment for the benefit of creditors; or in the absence of such application, consent of acquiescence, a trustee, receiver or other custodian is appointed for the Bankrupt Party or for a substantial part of its property and is not discharged within thirty (30) days; or any bankruptcy, reorganization, debt arrangement, or other case or proceeding under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding, is commenced in respect to the Bankrupt Party, and if such case or proceeding is not commenced by the Bankrupt Party or remains for thirty (30) days undismissed; or the Bankrupt Party takes any corporate action to authorize, or in furtherance of, any of the foregoing.

13.2           Upon the occurrence of a Default, the non-defaulting party, in addition to all other rights and remedies available at law or in equity, shall have the right to terminate this Agreement upon notice to the defaulting party.

13.3  In addition to the termination rights set forth in Section 13.2, Purchaser shall have the right to terminate this Agreement in the event that as of the Transfer Date there shall have been a material adverse change (financial or otherwise) in the Assets to be Sold, taken as a whole, since the Financial Information Computation Date excluding, however any matter, condition or event that is within the sole control of Company or any action, change, effect circumstance or condition expressly contemplated or required by this Agreement or attributable solely to the announcement of this Agreement or the transactions contemplated hereby made in accordance with the provisions of this Agreement.

13.4  This Agreement may be terminated (i) upon mutual agreement of Purchaser and Seller or (ii) by either Purchaser or Seller if the Closing has not occurred by the later to occur of (1) the date forty-five (45) days following the date Purchaser and Seller mutually agreed would be the Transfer Date (or any mutually agreed extension of the Transfer Date) or (2) January 31, 2009; provided that the party seeking to terminate this Agreement under clause (ii) hereof has not caused such failure to close.

13.5  No termination of this Agreement pursuant to this Section or otherwise shall release, or be construed as releasing, either party hereto from any liability for damages to the other party hereto arising out of, in connection with or otherwise relating to, directly or indirectly, such party’s breach or default of any of its representations, warranties, covenants, agreements, duties or obligations arising under this Agreement or the Existing Merchant Services Agreement.

14.           Delayed Payment After Closing

14.1   Final Settlement and Disputes

In the event that Purchaser and Seller disagree after the Closing Date as to any item or amount (or the computation or determination in accordance with the terms of this Agreement of any item or amount) reflected, set forth in or relating to the Preliminary Closing Statement or any Adjusted Closing Statement, the Payment Amount, the Adjustment Amount or any other amounts due either party under this Agreement, then any payment required to be made under this Agreement shall be made when due on the basis of such items or amounts as to which the parties do not disagree and any party hereto shall thereupon be entitled to request Ernst and Young L.L.P. (or, if said firm shall be unwilling to act hereunder, such other firm of nationally recognized independent accounts as Purchaser and Seller may jointly designate which does not have a material relationship with either Purchaser or Seller) to determine, in accordance with the provisions of this Agreement, such disputed item or amount (or the computation or determination thereof).  Any such request shall be in writing and shall specify with particularity the disputed items, amounts and computations being submitted for determination, and the requesting party shall furnish the other parties hereto with a copy of such request at the same time it is submitted to the independent accountants.  The firm of independent accountants to which any dispute is referred hereunder shall as promptly as practicable determine, in accordance with the provisions of this Agreement, the proper amount of any disputed item or other amount, or the computation thereof, and such determination shall be final, conclusive and binding on all parties hereto.  In acting pursuant to this Agreement, such firm of independent accountants shall constitute, and be entitled to the privileges and immunities of, arbitrators.  Seller and Purchaser shall cooperate fully in assisting such firm in making any determination requested hereunder, including giving such firm full access to all files, books and records relevant thereto and providing such other information as such firm may reasonably request in connection with the determination to be made by it hereunder.  The fees and disbursements in connection with such firm’s determination shall be borne equally by Purchaser and Seller.  In the event that a determination by independent accountants pursuant to this Section 14.1 requires any previously suspended payment to be made by any party, such payment shall be made promptly (and in any event within ten (10) days) after receipt by such party from such independent accountants of written notice of such determination.  Such firm of accountants shall promptly and substantially simultaneously notify Purchaser and Seller in writing of any determination by it hereunder.  In the event of any litigation between the parties regarding this Agreement, the prevailing party shall be entitled to seek recovery of all costs and expenses (including attorney’s fees) incurred by the prevailing party in such litigation (which costs may be included as part of the damages awarded in any such litigation).

14.2   Interest

Any amount payable by any party to another party pursuant to Section 14.1 shall bear interest from the date such amount would originally have been required to be paid hereunder had no dispute over such amount existed to the date of payment at the federal funds rate (at weighted average daily rates reported by Federal Reserve System) during the period(s) involved.

14.3   Records and Financial Information

The party having control of the relevant records and financial information used in connection with any adjustment provided for in this Section 14 shall certify the accuracy of such records and financial information if so requested by the other party.

15.   Miscellaneous

15.1   Expenses

Except as is otherwise specifically provided in this Agreement, each party shall pay its own costs and expenses in connection with this Agreement and the transactions contemplated hereby, including, but not by way of limitation, all regulatory fees, attorneys’ fees, accounting fees and other expenses.

15.2   Notices

All notices, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered in person or by United States mail, certified or registered, with return receipt requested, or otherwise actually delivered, as follows:

(i)   If to Seller, to:

Spirit of America National Bank

450 Winks Lane

Bensalem, PA  19020

Attention:  President

With a copy (which shall not constitute notice) to:

Spirit of America National Bank

450 Winks Lane

Bensalem, PA  19020

Attention:  Legal Dept.

(ii)   If to Purchaser, to:

World Financial Network National Bank

3100 Easton Square Place

Columbus, OH  43219

Attention: President

With a copy (which shall not constitute notice) to:

World Financial Network National Bank

3100 Easton Square Place

Columbus, OH  43219

Attention: General Counsel

           The persons or addresses to which mailings or deliveries shall be made may be changed from time to time by notice given pursuant to the provisions of this Section 15.2.  Any notice, demand or other communication given pursuant to the provisions of this Section 15.2 shall be deemed to have been given on the date actually delivered or three (3) days following the date deposited in the United States mail, properly addressed, postage prepaid, as the case may be.

15.3   Successors and Assigns

All terms and provisions of this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.  This Agreement and all rights, privileges, duties and liabilities, and obligations of the parties hereto, may be assigned or delegated by any party without the consent of the other party.  In order for any such assignment to be effective, the assigning party and the assignee must first execute a written agreement (and deliver a copy thereof to the other party hereto) by which the assigning party assigns the particular rights or privileges to the assignee.  In order for any such delegation to be effective, the delegating party and the delegatee must first execute a written agreement (and deliver a copy thereof to the other party hereto) by which the delegating party delegates the particular duties, liability or obligations to the delegatee and such delegatee expressly assumes the performance and discharge thereof when due.  No such assignment or delegation shall relieve Purchaser or Seller of any of their respective duties, obligations, or liabilities to the other hereunder which are not performed or discharged in full by such assignee or delegatee.  For clarification, Purchaser may assign its rights under this Agreement with respect to the receivables included in the Assets to Be Sold in connection with Purchaser’s securitization of such receivables without also assigning any obligations with respect thereto provided Purchaser shall remain liable for all obligations hereunder.

15.4   Counterparts

This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one instrument.

15.5   Governing Law

The laws of the State of Ohio applicable to contracts executed and wholly performed therein shall govern the validity and interpretation hereof and the performance of the parties hereto of their respective duties and obligations hereunder.

15.6   Captions

The captions contained in this Agreement are for convenience of reference only and no not form a part of this Agreement.

   15.7  No Waiver

The failure or delay on the part of any party to exercise any right provided for herein shall not act as a waiver thereof, nor shall any single or partial exercise of any right by and party hereto preclude the exercise of any other right or the further exercise of such right thereof.  In no event shall a term or provision of this Agreement be deemed to have been waived, modified or amended unless said waiver, modification or amendment is in writing and signed by Purchaser and Seller.

   15.8  No Joint Venture

Nothing in this Agreement shall be deemed to create a partnership or joint venture between any of the parties hereto.  Except as expressly set forth herein, no party shall have any authority to bind or commit any other party.

   15.9  Severability

Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement in such jurisdiction or any other jurisdiction.

   15.10  No Third Party Beneficiaries

This Agreement is not for the benefit of any third party and nothing in this Agreement, express or implied, is intended to confer upon any person other than the parties hereto and their respective successors and assigns any rights or remedies under or by reason of this Agreement.

   15.11   Waiver of Jury Trial

THE PARTIES HERETO WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS PURSUANT HERETO.

   15.12   Entire Agreement

The making, execution and delivery of this Agreement by the parties hereto have been induced by no representations, statements, warranties or agreements other than those herein expressed.  This Agreement and other written agreements specifically referred to herein (including without limitation the Confidentiality Agreement and the Exhibits attached hereto) embody the entire understanding of the parties and there are no further or other agreements or understandings, written or oral, in effect between the parties relating to the subject matter hereof.  This instrument and the agreements contained herein may be amended or modified only by a written instrument signed by both parties or their duly authorized agents.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and year first above written.

WORLD FINANCIAL NETWORK NATIONAL BANK

By:_________________________________

Name:_______________________________

Title:________________________________

SPIRIT OF AMERICA NATIONAL BANK

By:_________________________________

Name:_______________________________

Title:________________________________

EXHIBITS AND SCHEDULES

EXHIBITS:

1           -           Form of Preliminary Closing Statement

2           -           Form of Assignment and Bill of Sale

3.           -           Form of Assumption Agreement

SCHEDULES:

Schedule 5.2 - Customer Communications and Communications Schedule

Schedule 8.3 - -              Additional Account Information

Schedule 8.8(a)  -         Form(s) of Seller’s Cardholder Agreement

Schedule 8.8(b) -          Form of Seller’s Periodic Statement

EXHIBIT 1

FORM OF PRELIMINARY CLOSING STATEMENT

Preliminary Closing Statement

As of _______________, 200__

VALUATION DATE:

CLOSING DATE:

TOTAL ELIGIBLE ACCOUNTS	#######
FOR INFORMATIONAL PURPOSES ONLY THE FOLLOWING
INELIGIBLE ACCOUNT NUMBERS:
Subsection (a) bankrupts	#######
Subsection (b) charged-offs	#######
Subsection (c) fraud loss or lost or stolen Credit Card	#######
Subsection (d) pending litigation	#######
Subsection (e) deceased	#######
Subsection (f) not within the United States, District of Columbia,
Puerto Rico or another United States territory, Mexico or Canada
or is not a U.S. APO or U.S. F.P.O. account	#######
Subsection (g) under age of eighteen	#######
Subsection (h) business/commercial receivables	#######
Subsection (i) $0 balance, DLP >18 mos from Transfer Date & inactive	#######

TOTAL DOLLARS:
TOTAL ACCOUNT BALANCES OF ALL ELIGIBLE ACCOUNTS
EXCLUDING UNBILLED FINANCE CHARGES FOR
ELIGIBLE ACCOUNTS:	$$$$$$$$$
PLUS UNBILLED FINANCE CHARGES
FOR ELIGIBLE ACCOUNTS:	$$$$$$$$$
LESS INELIGIBLE ACCOUNT DOLLARS	$$$$$$$$$
EQUALS: TOTAL DOLLARS DUE SELLER:

EXHIBIT 10.2

EXHIBIT 2

FORM OFASSIGNMENT AND BILL OF SALE

THIS ASSIGNMENT AND BILL OF SALE (this "Assignment") is made and entered into as of the ___ day of __________, 200__ by and between., SPIRIT OF AMERICA NATIONAL BANK, a national bank (the "Assignor"), andWORLD FINANCIAL NETWORK NATIONAL BANK, a national bank (the "Assignee"),

                                   W_I_T_N_E_S_S_E_T_H:

                      WHEREAS, the Assignor (or its Predecessor in Interest) has heretofore entered into certain Cardholder Agreements and established certain Eligible Accounts for Cardholders in connection with Credit Cards bearing the Trade Names; and

                      WHEREAS, pursuant to the terms and provisions of that certain Purchase Agreement dated as of August __, 2008 (the "Purchase Agreement") among the Assignor and the Assignee, the Assignor has agreed to transfer and assign to the Assignee, and the Assignee has agreed to accept the assignment of the Assets to be Sold (capitalized terms used in this Assignment and not otherwise defined herein shall have the meaning ascribed to such terms in the Purchase Agreement);

                      NOW, THEREFORE, in consideration of the terms, agreements, covenants and conditions set forth herein and in the Purchase Agreement, together with the sum of Ten Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of all of which are hereby acknowledged, the Assignor and the Assignee, intending to be legally bound, agree as follows:

                      1.           The Assignor hereby assigns, assigns, sells, transfers, conveys and forever remises to Assignee and its successors and assigns, all of the right, title and interest of the Assignor in and to the Assets to be Sold and all of the rights, benefits and privileges of the Assignor thereunder, free and clear of any and all liens, encumbrances or other interests of third parties,  TO HAVE AND TO HOLD, the Assets to be Sold unto the Assignee, its successors and assigns, to and for its own proper use and benefit forever.

                      2.           The Assignor’s obligations and the Assignee’s rights, relating to causes of action arising from a breach of, or any event relating to, the Cardholder Agreements, including without limitation the Account Duties thereunder occurring prior to the date hereof shall be as set forth in the Purchase Agreement, the terms of which are incorporated herein by reference.

                      3.           All of the terms, agreements, covenants and conditions set forth herein shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns.  No person or entity other than the Assignor and the Assignee and their respective successors and assigns shall have any rights hereunder.

4.           Nothing contained in this Assignment shall be deemed to limit or supersede any of the provisions of the Purchase Agreement.

                      5.           Whenever possible, each provision of this Assignment shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Assignment shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Assignment.  The Assignor shall execute such other documents and instruments as the Assignee may reasonably request to effectuate the assignment and transfer set forth herein.

                      6.           The laws of the State of Ohio applicable to contracts executed and wholly performed therein shall govern the validity and interpretation hereof and the performance of the parties hereto of their respective duties and obligations hereunder.

                      7.           This Assignment has been executed in a number of counterparts, each of which shall be considered an original and no other counterpart need be produced.

           IN WITNESS WHEREOF, the parties hereto have executed this Assignment and Bill of Sale as of the day and year first set forth above.

WORLD FINANCIAL NETWORK NATIONAL BANK

By:_________________________________

Name:_______________________________

Title:________________________________

SPIRIT OF AMERICA NATIONAL BANK

By:_________________________________

Name:_______________________________

Title:________________________________

[NOTARY PAGE FOLLOWS]

STATE  OF ______________________)

                                                          ) SS.:

COUNTY OF ____________________ )

           On this _____ day of _____________, 200__, before me, the undersigned Notary Public, personally appeared __________________________________________ and ___________________, personally known to me, who acknowledged themselves to be the ____________ and ______________ of World Financial Network National  Bank, a  national bank, and who acknowledged that they, being duly authorized to do so, executed the foregoing instrument as such officers for the purposes therein set forth.

           WITNESS my hand and official seal.

______________________________

Notary Public

STATE  OF ______________________)

                                                          ) SS.:

COUNTY OF ____________________ )

           On this _____ day of _______________, 200__, before me, the undersigned Notary Public, personally appeared __________________________________________ and ___________________, personally known to me, who acknowledged themselves to be the ____________ and ______________ of Spirit of America National Bank, a national bank, and who acknowledged that they, being duly authorized to do so, executed the foregoing instrument as such officers for the purposes therein set forth.

           WITNESS my hand and official seal.

______________________________

Notary Public

EXHIBIT 3

FORM OF ASSUMPTION AGREEMENT

This Assumption Agreement (this “Assumption Agreement”) is made as of this ______ day of ____________, 200_ by, WORLD FINANCIAL NETWORK NATIONAL BANK, a national bank (“Purchaser”) in favor of SPIRIT OF AMERICA NATIONAL BANK, a national bank (“Seller”),

W I T N E S S E T H:

           WHEREAS, under Section 2.2 of that certain Purchase Agreement between Seller and Purchaser dated as of _____________, 200__ (the “Purchase Agreement”) by and between Seller and Purchaser, Purchaser agreed to assume, pay and discharge or perform certain liabilities and obligations of Seller that relate to the Assets to be Sold,

           NOW, THEREFORE, in consideration of the foregoing, it is agreed as follows:

           1.           Capitalized terms used in this Assumption Agreement and not otherwise defined herein shall have the meaning ascribed to such terms in the Purchase Agreement.

           2.           Purchaser hereby agrees that it has assumed and does hereby assume from Seller, and has agreed and does hereby agree to pay and discharge or perform for Seller, as of the Transfer Date, the Assumed Liabilities, including without limitation the Account Duties in existence on or arising after the Transfer Date; provided, however, that Purchaser does not assume any liabilities arising from Seller’s failure to perform Account Duties prior to the Transfer Date and Seller’s liability with respect thereto shall be governed by the Purchase Agreement.

           3.           Nothing contained in this Assumption Agreement shall be deemed to limit or supersede any of the provisions of the Purchase Agreement.

           4.           Whenever possible, each provision of this Assumption Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Assumption Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Assumption Agreement.

           5.           The laws of the State of Ohio applicable to contracts executed and wholly performed therein shall govern the validity and interpretation hereof and the performance of the parties hereto of their respective duties and obligations hereunder.

           6.           No person or entity other than Purchaser and Seller and their respective successors and assigns shall have any rights hereunder.  This Agreement may be executed in counterparts.

           IN WITNESS WHEREOF, parties hereto have caused this Assumption Agreement to be executed by a corporate officer thereunto duly authorized, all as of the day and year first above written.

PURCHASER:

WORLD FINANCIAL NETWORK NATIONAL BANK

By:___________________________

Name:_________________________

Title:__________________________

SELLER

SPIRIT OF AMERICA NATIONAL BANK

By:___________________________

Name:_________________________

Title:__________________________

EX-10.3

EXHIBIT 10.3

PRIVATE LABEL CREDIT CARD PLAN AGREEMENT

BETWEEN

SPIRIT OF AMERICA NATIONAL BANK

AND

ARIZONA MAIL ORDER COMPANY, INC.

DATED AS OF August 25, 2008

PRIVATE LABEL CREDIT CARD PLAN AGREEMENT

TABLE OF CONTENTS

SECTION 1.	DEFINITIONS	1
SECTION 2.	THE PLAN	9
SECTION 3.	OPERATION OF THE PLAN	19
SECTION 4.	REPRESENTATIONS AND WARRANTIES OF AMO	24
SECTION 5.	COVENANTS OF AMO	26
SECTION 6.	REPRESENTATIONS AND WARRANTIES OF BANK	29
SECTION 7.	COVENANTS OF BANK	30
SECTION 8.	INDEMNIFICATION	32
SECTION 9.	TERM, EXPIRATION AND TERMINATION	34
SECTION 10.	MISCELLANEOUS	38
SCHEDULE 2.1(a)		2
Schedule 2.1(b)	Service Standards	7
Schedule 2.3	OPERATING PROCEDURES	8
Schedule 2.5(a)	Marketing Promotions	11
Schedule 2.5(b)	Marketing Funds	12
SCHEDULE 2.7		13
CREDIT CRITERIA		13
Schedule 2.8	Monthly Master File Information	16
Schedule 2.9(c)	Bank Enhancement Marketing Services	19
Schedule 3.1	Cross-Shopping	20
Schedule 3.6(d)	Summary of Rates and Fees	21
Schedule 3.11	Non-Competition	23
Schedule 3.13	Bank Reports	24
APPENDIX A	AMO Businesses and AMO Brands and AMO Marks	25

PRIVATE LABEL CREDIT CARD PLAN AGREEMENT

RIVATE LABEL CREDIT CARD PROGRAM AGREEMENT

THIS PRIVATE LABEL CREDIT CARD PLAN AGREEMENT is effective as of the 25th day of August, 2008, and is entered into between Arizona Mail Order Company, Inc., a Delaware corporation (“Arizona Mail Order” or “AMO”), and SPIRIT OF AMERICA NATIONAL BANK, a national banking association with its principal office at 1103 Allen Drive, Milford, Ohio 45150 (hereinafter referred to as “Bank”).

WITNESSETH:

WHEREAS, pursuant to the Crosstown Traders Business Purchase/Sale Agreement (as defined below), Norm Thompson has agreed to acquire all of the issued and outstanding shares of capital stock of Arizona Mail Order; and

WHEREAS, prior to the date hereof, Bank has operated the Crosstown Traders Program   under which Bank has extended credit under the Crosstown Traders Accounts and issued Crosstown Traders Credit Cards to Crosstown Traders Credit Cardholders (as such capitalized terms are defined below); and

WHEREAS, AMO has requested that Bank continue to extend credit to qualifying individuals, in the form of private label open-ended credit card accounts (including the Crosstown Traders Program Accounts), for the purchase of Goods and/or Services from AMO through its Sales Channels and to issue Credit Cards to such individuals in a manner substantially similar to that in which it has operated the Crosstown Traders Program, on the terms set forth herein, following Closing until the Conversion or earlier expiration of the Term as provided herein (as such capitalized terms are defined below); and

WHEREAS, until the closing under any Account Portfolio Purchase/Sale Agreement, Bank shall own all the Accounts, and Cardholder payments will be sent to such location as Bank shall from time to time direct (as such capitalized terms are defined below); and

WHEREAS, Bank will operate the Plan subject to the terms and conditions as more fully set forth herein;

NOW THEREFORE, in consideration of the terms and conditions hereof, and for other good and valuable consideration, the receipt and sufficiency of which are hereby mutually acknowledged by the parties, AMO and Bank agree as follows.

SECTION 1.  DEFINITIONS

1.1           Certain Definitions.  As used herein and unless otherwise required by the context, the following terms shall have the following respective meanings.

PRIVATE LABEL CREDIT CARD PLAN AGREEMENT

1

“Account” shall mean an individual open-end revolving line of credit which is (i) established by Bank for a Customer pursuant to the terms of a Credit Card Agreement, (ii) marketed with an AMO Brand or combination of AMO Brands; and (iii) which can be accessed by a Credit Card issued by Bank to correspond to such Account; including without limitation the Crosstown Traders Accounts.

“Account Balance” means any and all amounts owing by the Cardholder thereunder, including principal, accrued finance charges and other fees, whether or not billed.

“Account Portfolio Purchase/Sale Agreement” shall mean the WFNNB Account Portfolio Purchase/Sale Agreement or such other agreement entered into by Bank and an Approved Replacement Purchaser to effect the transfer of ownership and custody of all or substantially all of the Accounts and receivables with respect thereto.

“Accounts Receivable “shall mean, as to any Account at the time of reference, any and all amounts owing on such Account, including, without limitation, principal balances from Purchases, purchases of AMO Enhancement Marketing Services, fees related to Protection Programs and Bank Enhancement Marketing Services, accrued finance charges (whether or not posted or billed to an Account), late fees, and all other fees and charges assessed on the Accounts, less any payments and credits received by Bank with respect to the Accounts. This definition specifically excludes any amounts which have been written-off by Bank with respect to such Accounts.

 “Address Verification Service” shall mean an adjunct process to the credit authorization process where the Cardholder’s reported billing address is verified against the Bank’s address on file for such Cardholder.

“Affiliate” shall mean with respect to a party any entity that is owned by, owns, or is under common control with such party.

“Agreement” shall mean this Private Label Credit Card Plan Agreement, including any schedules, exhibits, addenda, and future amendments and supplements hereto.

“AMO” shall mean the party identified by such name in the first paragraph on Page 1 of this Agreement.

“AMO Brands” shall mean the brand name(s) chosen by AMO to identify the Accounts, Credit Cards, etc. related to a corresponding AMO Business. No AMO Brand shall do business using the AMO Brand of another AMO Business, although a single AMO Business can do business under more than one (1) AMO Brand.  For instance, as of the Closing Date, the AMO Brands “Bedford Fair Lifestyles” and “Willow Ridge” comprise a single AMO Business. All AMO Brands are also AMO Marks, but not vice-versa.  The AMO Brands are set forth on Appendix A.

“AMO Businesses” shall mean the business operations under which AMO operates, which are set forth on Appendix A under the column entitled “AMO Businesses”.

PRIVATE LABEL CREDIT CARD PLAN AGREEMENT

2

“AMO Deposit Account” shall mean the one (1) deposit account (to be used for all AMO Businesses) maintained by AMO and designated by it in writing to Bank as to which Bank should direct its payments. See also Section 3.6 (a).

“AMO Mark” shall mean a trademark, service mark, or name owned by or licensed (and capable of being sublicensed) to AMO relating to the AMO Brands and designated by AMO to Bank for use in connection with the Plan.

“Applicable Law” shall mean any applicable federal, state or local law, rule, or regulation, including, without limitation, any directive or guidance of the Office of the Comptroller of the Currency.

“Applicant” shall mean an individual who is a Customer and applies for an Account under the Plan.

“Approved Replacement Purchaser” means a bank or financial institution (i) reasonably acceptable to AMO and Bank, which, notwithstanding the foregoing, shall include each of the following: World Financial Network National Bank, any investment fund managed by Golden Gate Private Equity, Inc., Orchard Brands Corporation, Citigroup, Barclay’s, HSBC, GE Capital, Bank of America and JP Morgan Chase, any of the respective affiliates of any of the foregoing or any other entity mutually agreed upon by AMO and Bank and (ii) which enters into a Program Agreement with AMO.

“Bank” shall mean the party to this Agreement identified in the first paragraph on Page 1 of this Agreement.

“Bank Mark” shall mean a trademark, service mark, or name owned by or licensed (and capable of being sublicensed) to Bank and designated by Bank to AMO for use in connection with the Plan.

“Batch Prescreen” shall mean a process where Bank’s offer of credit is made to certain Customers prequalified by Bank (per its criteria), in a batch mode (often but not exclusively within a direct to consumer environment).

“Billing Statement” shall mean Bank’s periodic statement listing the amounts of Purchases made, credits received, and other information, as required by Applicable Law and/or deemed desirable by Bank.

“Business Day” shall mean any day, except Saturday, Sunday or a day on which banks in Ohio are required to be closed.

“Cardholder” shall mean any natural person to whom an Account has been issued by Bank and/or any authorized user of the Account; including without limitation the Crosstown Traders Credit Cardholders.

“Card Association” shall mean a nationwide payment clearing network such as MasterCard International, Inc., Visa U.S.A. Inc., American Express, or Discover, the

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credit accounts and cards related to which are accepted universally in the retail market place.

“Charge Slip” shall mean a sales receipt, register receipt tape, invoice or other documentation, whether in hard copy or electronic form, in each case evidencing a Purchase that is to be charged to a Cardholder’s Account.

“Closing” shall mean the transfer of ownership and custody of all issued and outstanding shares of Arizona Mail Order from Crosstown Traders, Inc. to Norm Thompson Outfitters, Inc., as set forth in the Crosstown Traders Business Purchase/Sale Agreement.

“Closing Date” means the date of the Closing.

“Consumer Personal Information” shall mean that non-public personal information regarding Applicants, Customers, and Cardholders, including but not limited to Account information consumer reports, and information derived from consumer reports, that is subject to protection from publication under Applicable Law.

“Conversion” shall mean the transition of private label credit card services from Bank to a Program Provider (who shall be an Approved Replacement Purchaser) pursuant to a Program Agreement.

“Conversion Date” shall mean the date of the closing of a Conversion.

“Conversion Plan” shall mean the plan as set forth on Schedule 2.1 attached hereto.

“Credit Card” shall mean the credit card issued by Bank to Cardholders, corresponding to a related Account for the purpose of purchasing Goods and/or Services pursuant to this Agreement; including, without limitation, the Crosstown Traders Credit Cards.

“Credit Card Agreement” shall mean the open-end revolving credit agreement between a Cardholder and Bank governing the Account and Cardholder’s use of the Credit Card, together with any modifications or amendments which may be made to such agreement.

“Credit Sales Day” shall mean any day, whether or not a Business Day, on which Goods and/or Services are sold by AMO through its Sales Channels.

“Credit Slip” shall mean a sales credit receipt or other documentation, whether in hard copy or electronic form, evidencing (i) a return or exchange of Goods, or (ii) a credit on an Account as an adjustment by AMO for goodwill or for Services rendered or not rendered by AMO to a Cardholder.

“Crosstown Traders Accounts” shall mean the private label credit accounts issued under the Crosstown Traders Program for the AMO Brands.

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“Crosstown Traders Business Purchase/Sale Agreement” shall mean that Stock Purchase Agreement, dated as of the date hereof, by and between Crosstown Traders, Inc. and Norm Thompson, under the terms of which Norm Thompson. shall acquire all of the issued and outstanding shares of capital stock of Arizona Mail Order.

“Crosstown Traders Credit Cards” shall mean the private label credit cards issued under the Crosstown Traders Program, used to access Crosstown Traders Accounts for the AMO Brands.

“Crosstown Traders Credit Cardholders” shall mean those individuals to whom Crosstown Traders Accounts and Crosstown Traders Credit Cards were issued.

“Crosstown Traders Program” shall mean the private label credit account program operated by Bank for Arizona Mail Order prior to the Closing Date relating to the AMO Brands.

“Cross Shopping” shall mean the reciprocal honoring, by different AMO Businesses, of Accounts corresponding to other AMO Businesses.  See also Schedule 3.1.

“Customer” shall mean any individual consumer who is a customer or potential customer of an AMO Business.  Use of the term shall encompass all AMO Businesses unless the context of the reference dictates otherwise.

“Deferred Program” shall mean a program featuring special repayment terms approved by Bank, including any one or more of the following: deferred and/or waived interest, deferred payments, minimum purchase amounts, minimum monthly payments, and any other terms and conditions set forth by Bank.  Bank offers 60 day Deferred Programs at the Discount Fee set forth on Schedule 1.1.  Any other Deferred Programs may be made part of this Agreement only by written amendment.

“Deferred Program Purchases” shall mean Purchases made under the terms of any Deferred Program.

“Discount Fee” shall have the meaning set forth in Schedule 1.1.

“Electronic Customer Service (or eCS)” shall mean a web-based customer service system Bank makes available on a Bank website.

“Equal Payment Program” shall mean a program featuring special repayment terms, approved by Bank, including repayment based on equal payments over a predetermined period of time, and any other terms and conditions set forth by Bank. As of the date hereof, there are no Equal Payment Programs. Equal Payment Programs may be made part of this Agreement only by written amendment.

“Equal Payment Program Purchases” shall mean Purchases made under the terms of any Equal Payment Program.

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“Financial Products” shall mean credit card issuance or payment processing arrangements or programs similar in purpose to those components of the Plan (including but not limited to ones involving a credit card) dealing with the extension of credit and repayment of debt extended to Customers as contemplated under this Agreement, including cardless, Internet-based or Internet-only payment vehicles and contactless payment vehicles to be used as devices and/or methods by Customers to purchase Goods and/or Services.

“Forms” shall have the meaning set forth in Section 2.4.

“Goods and/or Services” shall mean those goods and/or services sold at retail by AMO through its Sales Channels to the general public for individual, personal, family or household use.  Use of the term shall encompass all AMO Businesses unless the context of the reference dictates otherwise.  This definition specifically excludes goods and services that are sold to Customers by third-party vendors of AMO and not AMO itself.

“Ineligible Account” has the meaning set forth for such term in the WFNNB Account Portfolio/Sale Agreement (as in effect as of the date hereof); provided that any references therein to the “Transfer Date” shall be deemed references to the date of the closing under any Account Portfolio/Purchase Sale Agreement.

“Initial Term” shall have the meaning set forth in Section 9.1.

“Instant Credit” shall mean an Account application procedure designed to open Accounts whereby the application information is communicated to Bank either (i) verbally at Point of Sale; or (ii) systemically during the order entry process.

“IVR” shall mean an interactive voice response system and/or procedure.

“Marketing Fund” shall have the meaning set forth in Section 2.5(b).

“Net Proceeds” shall mean Purchases  less:  (i) credits to Accounts for the return or exchange of Goods, or a credit on an Account as an adjustment by AMO for goodwill or for Services rendered or not rendered by AMO to a Cardholder, all as shown in the Transaction Records (as corrected by Bank in the event of any computational error), calculated each Business Day; (ii) payments from Cardholders received by AMO from Cardholders on Bank’s behalf; (iii) applicable Discount Fees, and (iv) any other amounts owed to or by Bank pursuant to this Agreement.  See Schedule 1.1

“Net Sales” shall mean Purchases, less credits or refunds for Goods and/or Services, all as shown in the Transaction Records (as corrected by Bank in the event of any computational error), calculated each Business Day.

“Net Sales on Regular Revolving Purchases” shall mean Regular Revolving Purchases, less credits or refunds for Goods and/or Services, all as shown in the Transaction Records (as corrected by Bank in the event of any computational error), calculated each Business Day.

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“Net Sales on Promotional Program Purchases” shall mean Promotional Program Purchases, less credits or refunds for Goods and/or Services, all as shown in the Transaction Records (as corrected by Bank in the event of any computational error), calculated each Business Day.

“Norm Thompson” means Norm Thompson Outfitters, Inc.

“On-Line Prescreen” shall mean a process where an offer of credit is made to certain pre-qualified Customers, in real time pre-approved manner, at the POS at the time of a transaction.

“Operating Procedures” shall mean Bank’s instructions and procedures regarding the Plan as written by Bank and provided to AMO to be followed by AMO.

“Plan” shall mean the private label credit card plan established and administered by Bank for Customers by virtue of this Agreement which shall replace the Crosstown Traders Program in its entirety.

“Plan Documents” shall have the meaning set forth in Section 2.4.

“Plan Year” shall mean each consecutive twelve (12) month period commencing on the Closing Date (or the first day of the first full calendar month following the Closing Date if the Closing Date is not the first day of a calendar month) and each anniversary thereof.

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“Point of Sale (or POS)” shall mean the physical or electronic location at which transactions (sales, credits, and returns) take place.  This includes but is not limited to a point of order entry or website (as applicable).

“Prescreen Acceptance” shall mean a POS process designed to recognize and activate Bank’s pre-approved batch offers for Accounts for Customers.

“Program Agreement” shall mean the WFNNB Program Agreement or any other agreement between AMO and a Program Provider for the establishment and maintenance of private label credit card services for the AMO Brands.

“Program Provider” shall mean World Financial Network National Bank or any other Person that provides private label credit card services to AMO for the AMO Brands following the expiration of the Term of this Agreement (or earlier termination in accordance with the terms hereof) pursuant to a Program Agreement.

“Promotional Programs” shall mean any special Cardholder payment terms approved by Bank (in the form of an amendment) for certain Purchases, including without limitation Deferred Programs and Equal Payment Programs. As of the date hereof, there are no Promotional Programs. Promotional Programs may be made part of this Agreement only by written amendment.

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“Promotional Program Purchase” shall mean a Purchase made under the terms of a Promotional Program.

“Purchase” shall mean a purchase of Goods and/or Services, including without limitation all applicable taxes and shipping costs, with a specific extension of credit by Bank to a Cardholder using an Account as provided for under this Agreement.  The term shall be interpreted to include Regular Revolving Purchases as well as Promotional Program Purchases unless the context of the reference clearly indicates otherwise.  Use of the term shall encompass purchases from all AMO Businesses unless the context of the reference dictates otherwise.

“Regular Revolving Purchases” shall mean Purchases which are not subject to any Promotional Programs.

“Sales Channels” shall mean those certain sales channels (i.e., websites, catalogues, etc.) through which AMO sells its Goods and/or Services under the AMO Brands during the Term (and encompasses all AMO Businesses unless the context of the reference dictates otherwise), which as of the Closing Date include website and catalog.  As a point of clarification, this definition includes different or additional sales channels that are part of AMO’s expansion of its business under the AMO Brands as then constituted, if such expansion does not include an entity other than AMO or a brand other than an AMO Brand. For example: the opening of a retail location (by AMO, or by its Affiliate or a franchisee or licensee operating under an AMO Mark) through either (i) “organic growth” or (ii) acquisition of the assets (but not the ownership interest) of another business. (See also Section 3.14 regarding the internal development or acquisition of a business that would be new to AMO’s business as then constituted or that involves an entity other than AMO).  However, the ownership or operation by an AMO Affiliate of a business that is substantially similar to that of AMO (at the then current point in time) shall be considered an expansion of AMO for the purposes of this Agreement and such business (and its owner entity) shall, at Bank’s option, be included in this Agreement by amendment.

“Service Standards” shall have the meaning set forth in Schedule 2.1 (b).

“Term” shall mean the Initial Term as defined in Section 9.1.

“Transaction Record” shall mean the following, with respect to each Purchase or with respect to a credit or return related to a Purchase (as applicable), and each payment received by AMO from a Cardholder on Bank’s behalf:  (a) the Charge Slip or Credit Slip corresponding to the Purchase, credit or return; or (b) a computer readable tape/cartridge or electronic transmission containing the following information: the Account number of the Cardholder, identification of the AMO’s Sales Channel (location) where the Purchase, credit or return was made (if applicable), the total of (i) the Purchase price of Goods or Services purchased or amount of the credit, as applicable, plus (ii) the date of the transaction, a description of the Goods or Services purchased, credited or returned and the authorization code, if any, obtained by AMO prior to completing the transaction; or (c) electronic record whereby AMO or one of its Sales Channels electronically transmits the information described in subsection (b)

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hereof to a network provider (selected by AMO at its expense), which in turn transmits such information to Bank by a computer tape/cartridge or electronic tape or transmission.

“Web (or Internet)” shall mean the world-wide web internet network as generally understood in the greater business community.

“Web Application” shall mean a web based new Account application procedure made available by Bank.  See also Section 2.2 (d).

“WFNNB Program Agreement” means the Private Label Credit Card Plan Agreement, dated as of the date hereof, between Norm Thompson and World Financial Network National Bank.

“WFNNB Account Portfolio Purchase/Sale Agreement” shall mean that purchase agreement dated as of the date hereof, by and between Bank  (as seller), and World Financial Network National Bank (as buyer) for the sale by Bank of certain Accounts issued under the Crosstown Traders Program and the Plan and the receivables related thereto (excluding Ineligible Accounts).

1.2           Other Definitions.  As used herein, terms defined in the introductory paragraph hereof and in other sections of this Agreement shall have such respective defined meanings.  Defined terms stated in the singular shall include reference to the plural and vice versa.  The terms “shall” and “will” have the identical meaning (i.e., that something is compulsory and certain), and the use of one versus the other is not to be interpreted as implying less certainty or a sense of possibility or choice.

SECTION 2.  THE PLAN

2.1           Establishment and Operation of the Plan/Conversion Plan.  (a) The Plan is established for the primary purposes of providing Customer financing for purchasing Goods and/or Services through AMO Brands.  The Plan shall commence on the Closing Date.  Qualified Applicants desiring to use the Plan shall be granted an Account by Bank with a credit line in an amount to be determined by Bank in its discretion for each individual Applicant (but subject to Section 2.7).  Subject to Section 3.6 (d) and Applicable Law, Bank shall determine the terms and conditions of the Account to be contained in a Credit Card Agreement.  For clarification, prior to the Closing, Bank has operated the Crosstown Traders Program and pursuant to this Agreement, Bank will operate the Plan following Closing until the Conversion or earlier termination of the Term on the terms set forth herein, it being agreed that the intent of this Agreement is for Bank to continue offering services to AMO, consistent with the services provided under the Crosstown Traders Program as in effect prior to the date hereof, until the Conversion or earlier termination of this Agreement.  Bank and AMO shall use their commercially reasonable efforts to pursue completion of the Conversion by October 31, 2008 in accordance with the Conversion Plan set forth in Schedule 2.1(a) and the parties hereby agree that to the extent any modifications to the Conversion Plan are required to ensure the successful and efficient transition of a fully operational private label credit card program consistent with the Plan as operated hereunder to the Program Provider the parties shall negotiate in good faith to implement such mutually agreed-upon

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modifications.  In the event any requests for enhancement or revisions to the credit Plan contained in this Agreement would conflict with the timely completion of the Conversion Plan, the Conversion Plan shall take precedence.  The parties shall dedicate sufficient resources to the Conversion Plan as necessary to ensure its timely completion.

(b)           Bank shall perform in accordance with the Service Standards. Bank will provide AMO with a monthly summary of Bank’s performance regarding the Service Standards, as set forth in Schedule 2.1 (b).  Bank shall use commercially reasonable efforts to meet the Service Standards set forth in Schedule 2.1(b).  Bank shall provide eCS, and AMO shall provide a weblink to the eCS.  Regardless of whether any Bank website related to eCS is the same as any referenced in 2.2 (d) below, AMO shall be subject to the same obligations and terms and conditions set forth therein with regard to maintaining connections, use of Bank’s Mark, Applicable Law, etc.

2.2           Applications for Credit Under the Plan; Internet Services.  (a) AMO shall not promote or participate in any application by a Customer for financing the purchase of Goods and/or Services other than for participation in the Plan as provided in Section 3.11.  Applicants who wish to apply for an Account under the Plan must submit a completed application on a form or in an electronic format approved by Bank, and Bank shall grant or deny the request for credit based solely upon Bank’s credit criteria.  When facilitating any method of application, AMO shall follow all applicable Operating Procedures. The application shall be submitted to Bank by the Applicant or submitted by AMO on behalf of the Applicant, as required in the Operating Procedures.  If Bank grants the request for an Account, Bank will issue a Credit Card to the Applicant to accesses an individual line of credit in an amount determined by Bank.

(b)           Bank shall make available, and AMO shall utilize, as applicable, the following application procedures as of the Closing Date: Batch Prescreen Applications, Address Verification Service, Instant Credit (Web and telephone based) and mail-in application procedures.  See also subsection (d) below regarding the Web Application procedure.  To the extent the same are available under the Crosstown Traders Program as in effect on the date hereof, the Bank further agrees to provide each Cardholder with the ability to view its Account information and billing statements online, make payments on such Cardholder’s Account via automated clearing house transfer or other payment mechanism approved by the Bank and send other secure correspondence; obtain billing statements; set up personal credit alert reminders; and request a credit line increase on-line.  Bank will make available the use of its smart messaging system at no cost to AMO provided the messaging format and volume are substantially similar to the Crosstown Traders Program currently provided.  See also clause (d) below.  Bank hereby represents that as of the date hereof and as of the Closing Date, it does not provide On-Line Prescreen services to the Crosstown Traders Program.

(c)           Regarding applications submitted in whole or in part by AMO, AMO agrees that it will (i) protect and keep confidential any and all Applicant information (which information shall be Bank Consumer Personal Information) acquired as a result of participating in the submission of any such applications, and not disclose the information (except as required by Applicable Law or legal process) to anyone other than authorized representatives of Bank,

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and its representatives and agents, and (ii) follow all Operating Procedures applicable to such Bank Consumer Personal Information.

Bank shall make available the Web Application procedure by establishing a website for such purpose, which shall be accessible from AMO’s website.  AMO acknowledges that as of the date hereof, such website has been established.  Bank will maintain and operate the website and Web Application procedure consistent with past practices. AMO shall appropriately monitor its website to ensure proper functioning.  In the event Bank changes or otherwise modifies the website address for its designated website, AMO will either update or modify its website thereto, as directed by Bank.  In providing Web Application on the AMO website, if appropriate, AMO shall make it clear and conspicuous that the Customer is leaving AMO’s website and is being directed to Bank’s website for the exclusive purpose of accessing Bank’s website and submitting an application for credit.  AMO agrees that, in connection with the Web Application, it will use Bank’s name, or any logo, statements, or any other information that is related to Bank, only as directed by Bank, or as previously approved by Bank in writing. Without limiting the generality of the scope of required approvals, but by way of example, AMO shall seek Bank’s approval not only with respect to content, but also with respect to any typestyle, color, or abbreviations used in connection with the Web Application.

If Accounts opened via Web Applications prove to be unprofitable to Bank, Bank shall have the right upon thirty (30) days prior written notice to AMO to propose that AMO pay Bank a certain fee related to Web Applications.  However, Bank shall not impose such fee if within such thirty (30) days after receipt of Bank’s notice setting forth the amount of such fee, AMO has rejected the fee and proposed an alternative.  However, Bank may choose to discontinue Web Applications if the parties cannot agree upon a fee or an alternative.

(d) Bank agrees that, to integrate and maintain the webpage and to ensure access to the Plan website and reduce technical errors, it will use commercially reasonable efforts to ensure that its software providing the link will function, and continue to function, in a sound technical manner. Bank hereby represents and warrants that as of the date hereof and as of the Closing Date, its software providing the link functions in a sound technical manner consistent with past practice (including cooperating with Charming Shoppes of Delaware, Inc. in performing its obligations related thereto as set forth in Appendix A to that certain Transition Services Agreement to be entered into between Charming Shoppes of Delaware, Inc. and AMO).  AMO branding style (including color, font and type size), marketing content and marketing design format of the Plan website shall be subject to approval by the parties.  Bank shall appropriately monitor the Plan website to ensure it is functioning properly. AMO represents and warrants that, to integrate and maintain the link, and to ensure access to the Plan website and reduce technical errors, it will use its commercially reasonable efforts to ensure that its software providing the link will function, and continue to function, in a sound technical manner. AMO shall appropriately monitor the link to ensure it is functioning properly. In the event Bank changes or otherwise modifies the website address for the Plan website, AMO will either update or modify the link as reasonably requested by Bank.  AMO agrees that, in connection with the link, it will only use Bank's name, or any logo, statements, or any other information that is related to Bank, only in accordance with this Agreement, or as approved in advance and in writing by Bank.  Bank shall ensure that the Bank's Privacy Policy is clearly and prominently posted on the pages of the Plan website.

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(e) Each party represents and warrants to the other with respect to its Internet site used to support the Plan as of the Closing Date and during the Term of this Agreement that such party has the license, right or privilege to use the hardware, software and content acquired from third parties for use in its respective Internet website, and that it is the owner (or licensee) of all hardware, software and content used in its respective Internet website and that neither the website as a whole, nor any part thereof, infringes upon or violates any patent, copyright, trade secret, trademark, invention, proprietary information, nondisclosure or other rights of any third party.

2.3           Operating Procedures.  Each of AMO and Bank shall observe and comply with the Operating Procedures and such other reasonable procedures as Bank may prescribe on not less than thirty (30) days’ prior notice to AMO or otherwise required by Applicable Law.  The Operating Procedures may be amended or modified by Bank from time to time in its reasonable discretion; provided, however, unless such changes are required by Applicable Law, a copy of any such amendment or modification shall be provided to AMO at least thirty (30) days before its effective date, and for those changes required by Applicable Law, notice shall be given as soon as practicable.  The initial Operating Procedures are attached hereto as Schedule 2.3.

2.4           Plan Documents (Forms and Collateral).  (a)  Forms - General. Subject to (b) below, Bank shall design, determine the terms and conditions of, and generate the form of the Credit Card Agreement, applications, Credit Card, card mailers, privacy notices, Billing Statements (including backers), Cardholder letters, templates, and other documents and forms  to be used under the Plan which (i) relate to the Plan, (ii) relate to Bank’s and/or the Cardholder’s obligations, (iii) are used by Bank in maintaining and servicing the Accounts; or (iv) are required by Applicable Law (collectively, “Forms”).  By way of clarification, Bank’s responsibilities do not include any obligations AMO may have as a retailer, such as creating the form of Charge Slips and Credit Slips.  All Forms shall be in the English language only unless otherwise agreed by the parties in writing, and there shall be only one design for each Form as to each AMO Business (which are the five (5) identified on Appendix A).

(b)           Forms - Conditions.  The provisions of (a) above are subject to the following conditions.  First, Bank’s actions are subject to Section 3.6 (d), Applicable Law, and Section 2.10.  Second, Bank and AMO shall jointly design any Customer marketing aspects of Billing Statements, Credit Cards, and card mailers.

(c)           Collateral. AMO may design and produce promotional material, direct mail pieces, catalog, newspaper, radio and Internet advertisements, and other collateral documents (collectively, “Collateral”) which reference the Plan.  AMO shall submit all Collateral to Bank for its review and approval of the Plan disclosures, as well as references to the Plan and use of Bank Marks.  Pursuant to this review and approval process, AMO will make (or have made) all changes that Bank requests to satisfy Applicable Law and/or in exercising its rights under this Agreement promptly following such request.  Except as otherwise set forth in this Agreement, AMO shall otherwise have sole discretion as to any action with respect to any catalogue mailing or circulation.

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(d)           Bank’s Costs.  Subject to subsection (e) below, Bank will at its expense provide to AMO at one central location, the template of any appropriate Forms.

(e)           AMO’s Costs.

(i) AMO Re-issuances. AMO shall pay all costs related to any re-issuance of Credit Cards to Cardholders that AMO requests or that is necessitated by AMO’s decisions and/or actions (collectively “AMO Re-issuances”).  The costs associated with an AMO Re-issuance include those of the card itself (including all embossing and encoding), card mailers, envelopes, Credit Card Agreements, other Forms, Collateral, and postage.  As a point of clarification, none of the following constitutes an AMO Re-issuance: Bank’s replacement (on an Account-by-Account basis) of lost or stolen Credit Cards, expired Credit Cards, or in response to some other Cardholder request.

(ii)           Variations from Bank’s Standards.  If, in Bank’s good faith determination, a request or requirement (as applicable) of AMO with regard to any Plan Documents requires a variation from Bank’s standard specifications, and such variation causes an increase in any cost of Bank, the following shall apply. First, Bank will advise AMO in writing of the variance and provide a written estimate of the related cost increase.  Second, AMO shall thereafter notify Bank in writing of its decision to forego the request, to modify the request such that no cost increase is generated, or agree to bear the additional expense. In the event any Forms become obsolete as a result of changes requested by AMO or is reasonably necessitated by its decisions and/or actions, AMO shall reimburse Bank for the itemized and documented costs associated with any unused obsolete Forms.

(iii)           Mass Mailings.  As to any mass mailings requested by AMO (including but not limited to catalog mailings, pre-approved mailings, and zero balance mailings), AMO shall pay all costs of such mass mailings.

2.5           Marketing and Promotion of Plan.  (a) Throughout the Term of this Agreement, AMO shall take commercially reasonable steps to actively and consistently market, promote, participate in and support the Plan in a manner consistent with past practices, which may include, without limitation, those marketing promotions set forth in Schedule 2.5 (a) and such other methods mutually agreed upon by AMO and Bank.  AMO and Bank will jointly agree upon programs to market the Plan, both initially and on a continuing basis. Once AMO and Bank agree upon standards for the use of AMO Marks and Bank Marks, respectively, neither party will deviate from such standards without express prior approval of the other party. Bank must approve in advance AMO’s use of Bank’s Marks and any references to the Plan.  Any cross-marketing agreements between AMO and Bank are subject to the mutual agreement of the parties at a later date.

(b)           Bank shall contribute the amounts, if any, set forth in Schedule 2.5 (b) to apply to marketing and promotion expenses associated with the Plan.  All of such funds shall be referred to herein as the “Marketing Fund.”  If the Marketing Funds are not used in the Plan Year or other time period contributed, they will roll over to the next Plan Year.  AMO shall pay all marketing and promotion expenses directly as they are incurred, and, if any funds are then available in the Marketing Fund, shall send Bank an invoice for the aggregate amount of

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the expenditures mutually agreed upon by the parties, together with copies of paid invoices or other supporting documentation reasonably satisfactory to Bank for such expenses.  Bank shall then reimburse AMO (within 30 days of Bank’s receipt of each individual’s reimbursement request) until Bank’s maximum contribution amount for the applicable Plan Year has been met.  Bank shall have the right to cease the availability of the Marketing Funds contributed by Bank for any future marketing or promotions if either party: (i) terminates this Agreement, (ii) notifies the other party of an intent to terminate or the fact that the notifying party has already terminated this Agreement, or (iii) notifies the other of an intent to allow this Agreement to expire.  However, Bank shall renew the availability of the Marketing Funds for the then current Plan Year on a retroactive basis under the following circumstances.  If, despite the occurrence of  (i), (ii), or (iii) but prior to this Agreement’s expiration or termination, the parties renew this Agreement and/or extend the expiration date by at least one (1) year.

2.6           Administration of Accounts and Plan.  Bank shall perform, in compliance with Applicable Law, all functions necessary to administer and service the Accounts, including but not limited to: processing of applications; Credit Card production and issuance; making all necessary credit investigations; notifying Applicants in writing of acceptance or rejection of credit under the Plan; preparing and mailing Billing Statements; making collections; handling Cardholder inquiries; and processing payments.  Bank reserves the right to deny (or reverse) an extension of credit for particular transactions in order to comply with Applicable Law, which might include but not be limited to prohibitions against transactions related to gambling.

2.7           Credit Decision.  Subject to the other provisions of this Section 2.7, the decision to extend credit to any Applicant under the Plan shall be Bank’s decision.  Bank will work in good faith with AMO to develop business strategies with respect to the issuance of Credit Cards which are intended to maximize the potential of the Plan, and which are mutually beneficial to AMO and Bank, provided the same are generally consistent with the strategies utilized in connection with the Crosstown Traders Program.  In addition to Promotional Programs, commencing February 1, 2009 AMO may from time to time request Bank to consider offering certain other types of special credit programs.  Bank shall reasonably consider AMO’s requests and negotiate with AMO in good faith.  However, Bank shall, in its sole discretion, subject to Applicable Laws and its safety and soundness considerations, determine whether or not to offer any of such programs.  In the event Bank agrees to any special credit program, such agreement shall be documented in the form of a written amendment, which amendment shall set forth any applicable terms related thereto, including but not limited to fees associated with the special credit program.  The Bank hereby agrees that in connection with the Plan it will continue to utilize substantially similar credit criteria as it currently uses with respect to the Crosstown Traders Program (which credit criteria are attached as Schedule 2.7 hereto) and that it shall continue to offer and maintain Accounts in a manner substantially consistent with such credit criteria.  Bank hereby represents that the criteria attached as Schedule 2.7 accurately reflect the credit criteria currently applied by Bank under the Crosstown Traders Program and that Bank has no present intent to modify such criteria.  In addition, during the Term of this Agreement, except as may otherwise be required to comply with Applicable Law, Bank shall offer and maintain Accounts in such a manner that would not impair the ability of Bank to consummate a sale of the Accounts under the WFNNB Account Portfolio Purchase/Sale Agreement (or after the termination of the

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WFNNB Account Portfolio Purchase/Sale Agreement under any other Account Portfolio Purchase/Sale Agreement).  Bank hereby agrees that unless Bank determines, in its reasonable discretion (after consultation with AMO) that continued usage of such credit criteria would have a material adverse effect on the Bank’s ability to consummate a sale of the Accounts under the WFNNB Account Portfolio Purchase/Sale Agreement or unless otherwise required by Applicable Law, it shall not amend, supplement or otherwise modify the aforementioned credit criteria attached hereto as Schedule 2.7 unless Bank obtains AMO’s prior written consent.

2.8           Ownership of Accounts and Information. (a) The parties recognize that Cardholders are Customers, and that each of Bank and AMO has certain ownership rights in information relating to such individuals in their respective roles as Cardholders and Customers.  The parties acknowledge that the same or similar information may be contained in the Bank Cardholder Information (defined below) and the AMO Customer Information (defined below); such common information being referred to herein as “Common Information”.  Each such pool of data shall therefore be considered separate information subject to the specific provisions applicable to that data hereunder.  For example, in subsection (b) below Bank is authorized to use AMO Customer Information only for certain limited purposes.  For illustrative purposes only, presume such information included names of both Customers who were Cardholders and non-Cardholder Customers. The names of those who were both Customers and Cardholders would be Common Information. So, Bank would not be limited by the terms of subsection (b) as to such names. However, the names of non-Cardholder Customers would not be Common Information, and thus would be subject to the limitations set forth in subsection (b). Likewise, though subsection (c) below limits what AMO can do with Bank Cardholder Information, such limitations do not apply to that portion of Bank Cardholder Information that is comprised of Common Information.

(b)           The Customer’s names and addresses and other Customer information collected by AMO independent of Bank and set forth in AMO’s records shall be the exclusive property of AMO; such information and AMO’s Common Information shall be referred to collectively as “AMO  Customer Information”.  AMO Customer Information might or might not be comprised exclusively of AMO’s Consumer Personal Information. As requested by Bank, AMO shall provide the names and addresses of Customers to Bank, to be used only for purposes of (i) evaluating such Customer’s creditworthiness, (ii) soliciting such Customers for Credit Cards, (iii) administering  the Plan in accordance with the terms of this Agreement and Applicable Law. Bank shall protect the confidentiality of such information as set forth in Section 10.17.

(c)           (i)           The Accounts and all information related thereto set forth in Bank’s records, including without limitation the information listed in Schedule 2.8, the information obtained through applications, the receivables, names, addresses, credit, and transaction information of Cardholders shall be the exclusive property of Bank during the Term, and thereafter (unless the Accounts are purchased by AMO or its designee pursuant to Section 9.5). Such information and Bank’s Common Information shall be referred to collectively as “Bank Cardholder Information”. Bank Cardholder Information might or might not be comprised exclusively of Bank’s Consumer Personal Information.

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(ii)           Bank shall provide to AMO monthly one (1) master file extract, initially containing the information set forth on Schedule 2.8 to the extent such information is available to and may be shared by Bank, and subject to change by Bank at any time.  Bank shall also provide to AMO any other Bank Cardholder Information agreed to by AMO and Bank, to the extent permitted by Applicable Law and Bank’s privacy and security policies. AMO may use such information in connection with maintaining and servicing the Accounts; furthermore, AMO may use it to market its Goods and/or Services or its business in general to the Cardholders, but in any event only as permitted by Applicable Law.  The parties recognize that AMO’s efforts related to such approved purposes might necessitate disclosure of Bank Cardholder Information to AMO’s vendors and contractors.  Such disclosure shall be permitted, provided the third-parties agree in writing to use the information only for the aforementioned approved purposes and to protect the confidentiality of such information as set forth in Section 10.17.  Except as so provided, unless Bank consents otherwise in advance and in writing, AMO shall keep such Bank Cardholder Information confidential as set forth in Section 10.17, and shall not disclose such information to any third party nor sell, lease, or otherwise transfer such information to any third party.

(iii)           Notwithstanding any provision herein to the contrary, except as may be necessary to effectuate a conversion or sale of the Accounts under Section 9.5 as set forth below, at no time shall Bank have any right to use any information relating to the Plan, the Accounts, the Customers or the Cardholders (other than any such information which satisfies any of clauses (i) through (iv) of Section 10.17(a)) for any marketing purposes whatsoever other than with respect to the Plan unless it shall have previously obtained AMO’s consent in writing.  For the avoidance of doubt, nothing in this clause (iii) shall limit the ability of Bank to use such information as may be required by Applicable Law.  In connection with a conversion or sale of the Accounts under Section 9.5, Bank or the purchaser of the Accounts shall be entitled to market to the Cardholders any of the programs permitted in connection with a wind up of the Plan under Section 9.5(b)(iii); provided, however, that in so marketing the card, Bank and such purchaser shall not be entitled to use any sales history or other transaction history or other information obtained or related to the usage of the Credit Card which occurred during the operation of the Plan or the Crosstown Traders Program.  For clarification, once the Cardholders’ Accounts are converted to non-AMO Accounts in accordance with Section 9.5, then such Cardholders shall have an independent relationship with Bank and Bank’s use of information obtained after the conversion date not in violation of this Agreement, and so long as the same does not constitute Confidential Information of AMO hereunder, shall not be subject to the restrictions herein.

2.9           Protection Programs and Enhancement Marketing Services.  (a) Protection Programs. AMO and Bank agree that Bank will have the exclusive right but not the obligation to make available to Cardholders* various types of debt cancellation and credit related protection programs (collectively referred to herein as “Protection Programs”) offered by Bank.  Commencing February 1, 2009, Bank may but is not obligated to offer such Protection Programs through direct marketing channels including but not limited to telemarketing, call transfer (of inbound calls to Bank and not inbound calls to AMO), inbound customer service call offers (inbound calls to Bank and not inbound calls to AMO), call to confirm programs,

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IVR, and eCS.  Bank also has the right but not the obligation to make written offers through Billing Statement bangtails and inserts Billing Statement messaging, and direct mail. The fees for Protection Programs will be charged to the applicable Cardholder’s Account.  AMO will assist Bank’s effort to offer Protection Programs so long as such assistance will not require AMO to incur any direct expense or cost.  Bank shall have the right but not the obligation to immediately terminate any Protection Programs if and when either party:  (i) terminates this Agreement, (ii) notifies the other party of an intent to terminate or that the notifying party has already terminated this Agreement, or (iii) notifies the other of an intent to allow this Agreement to expire.

*Recognizing that, with regard to non-Cardholder Customers who have specifically rejected an offer of credit from Bank (or offer to apply for same), AMO has the right to offer its own debt cancellation and credit related protection programs and products.

(b)           Pursuant and subject to the provisions of this Section 2.9 (b) and Schedule 2.9 (b), commencing February 1, 2009, AMO shall have the right (but not the obligation) to market to Customers products and services which are not Protection Programs and which are sold to Customers by third-party vendors of AMO and not AMO itself (collectively, “AMO Enhancement Marketing Services”). AMO Enhancement Marketing Services shall include, but not be limited to, travel clubs, legal services, and merchandise.  The parties shall also adhere to the provisions set forth in Schedule 2.9 (b).

(c)           Pursuant and subject to the provisions of this Section 2.9 (c), AMO’s rights under Section 2.9 (b) and Schedule 2.9 (b), and AMO’s rights under this Section 2.9 (c) and Schedule 2.9 (c), commencing February 1, 2009 Bank may (but is not obligated) to solicit Cardholders, through solicitations made in connection with their Accounts, those products and services (which are not Protection Programs and not competitive with Goods and/or Services, or AMO Enhancement Marketing Services, which shall be referred to herein as “Bank Enhancement Marketing Services”); provided, however, that Bank may not begin to market or sell any particular AMO Enhancement Marketing Service without AMO’s prior written approval of such AMO Enhancement Marketing Service (not to be unreasonably withheld). It shall not be deemed unreasonable for AMO to fail to provide such approval solely because AMO plans to market competing Goods and/or Services or AMO Enhancement Marketing Services.  Bank Enhancement Marketing Services may. include, but not be limited to, travel clubs, legal services, and merchandise products. Bank may but is not obligated to offer Bank Enhancement Marketing Services through direct marketing channels including but not limited to telemarketing, call transfer, inbound customer service call offers, call to confirm programs, IVR and ECS.  Bank also has the right but not the obligation to make written offers through Billing Statement bangtails and inserts, Billing Statement messaging, and direct mail. Bank will notify AMO of proposed offers through direct mail, telemarketing, statement inserts, and statement messaging prior to execution.  The charges for Bank Enhancement Marketing Services will be billed to the applicable Cardholder’s Account when appropriate.  Bank shall have the right but not the obligation to immediately terminate any Bank Enhancement Marketing Services if and when either party:  (x) terminates this Agreement, (y) notifies the other party of an intent to terminate or that the notifying party has already terminated this Agreement, or (z) notifies the other of an intent to allow this Agreement to expire. In addition, Bank shall also adhere to the requirements set forth on Schedule 2.9 (c). 

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2.10                      Ownership and Licensing of the Party’s Marks.  (a)  Subject to the other provisions of this Agreement, AMO hereby grants to Bank a non-exclusive (except as to branded credit account and card plans per Section 3.11), non-transferable license to use the AMO’s Marks solely in satisfaction of its duties, rights and obligations described in this Agreement, including without limitation, using same in any and all promotional materials, Account documentation, advertising, websites, marketing, and solicitations related to the Plan, during the Term.  Bank shall use the trademark designations “®” or “TM” or such other designation as AMO may specify or approve in connection with the AMO’s Marks on the Credit Cards, Account documentation and promotional materials.  Bank agrees it will not use the AMO’s Marks on or in connection with any products or services or for any other purpose other than as explicitly described in this Agreement except as required by Applicable Law.  For the avoidance of doubt, Bank may not use AMO’s Marks in connection with the marketing and sale of any Bank Enhancement Marketing Service without the prior written consent of AMO.

(b)           Anything in this Agreement to the contrary notwithstanding, AMO shall retain all rights in and to AMO Mark pertaining to such Accounts, and all goodwill associated with the use of AMO Marks (whether under this Agreement or otherwise) shall inure to the benefit of AMO.  AMO shall have the right, in its sole and absolute discretion, to prohibit the use of any AMO Marks in any Forms, advertisements or other materials or references proposed to be used by Bank which AMO in its reasonable business judgment deems objectionable or improper.  Bank shall cease all use of AMO Marks upon the termination of this Agreement for any reason unless Bank retains the Accounts after termination of the Agreement. In that case, Bank may use AMO Marks solely in connection with the administration and collection of the balance due on the Accounts.

(c)           AMO recognizes that Bank is the sole owner of the Bank Marks, that AMO has no rights of ownership or license therein, and that AMO is not entitled to (and shall not) use the Bank’s Marks other than as explicitly and specifically provided in this Agreement. As a point of clarification, Bank has and retains all rights in and to Bank’s Marks and the use thereof, and all goodwill associated with the use of Bank’s Marks (whether under this Agreement or otherwise) shall inure to the benefit of Bank.  Bank shall have the right, in its sole and absolute discretion, to prohibit the use of any Bank’s Marks in any Plan Documents, advertisements, or other materials or references proposed to be used by AMO which Bank in its reasonable business judgment deems objectionable or improper.  AMO shall cease all use of Bank’s Marks upon the termination of this Agreement for any reason.

SECTION 3.  OPERATION OF THE PLAN

3.1           Honoring Accounts.  AMO agrees that each AMO Business will honor any Account properly issued and authorized by Bank and bearing an AMO Brand that corresponds with such AMO Business, as set forth in Appendix A. For example, the AMO Business “Arizona Mail Order” shall be authorized to honor a properly issued and authorized Account bearing the AMO Brand “Coward Shoes”, as long as that AMO Brand remains related to that AMO Business. In addition, as of the Closing Date, and subject to Schedule 3.1, there shall be Cross Shopping between and amongst all the AMO Businesses and AMO

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Brands. Furthermore, AMO shall deliver to Bank all Transaction Records evidencing transactions made under the Plan, in accordance with the provisions of this Agreement and the Operating Procedures.

3.2           Re-Branding of Accounts with Lost Utility.  The parties agree that, in the event certain Accounts (including their corresponding Credit Cards) lose utility with respect to certain geographic market areas as a result of changes in AMO’s business, Bank shall have the right to re-brand the Accounts for the affected Cardholders and issue such Cardholders a replacement or substitute account (including, at Bank’s discretion, a corresponding card) with such characteristics as Bank considers appropriate.  Such new accounts (and any corresponding cards) shall not be part of the Plan nor governed by this Agreement, but also shall not be issued in connection with any other retailer. Bank shall be responsible for providing any affected Cardholders with notice of such changes.  The cost of designing and issuing such new cards shall be borne by Bank.  Prior to issuing any newly branded accounts for the AMO Brands or AMO Businesses, Bank shall discuss the matter with AMO.

3.3           Cardholder Disputes Regarding Accounts, and Goods and/or Services.  (a) AMO shall promptly notify Bank regarding any Cardholder dispute regarding an Account.  This includes but is not limited to claims related to outstanding balances, Bank reports to credit bureaus, finance charges, fees, and collection efforts (e.g., notification that the Cardholder has filed bankruptcy or wants collection communications directed to legal counsel, etc.).

(b)           AMO shall act promptly to investigate and work to resolve disputes with Cardholders regarding Goods and/or Services obtained through AMO pursuant to the Plan.  AMO shall timely process credits or refunds for Cardholders utilizing the Plan.

3.4           No Special Agreements.  AMO will not extract any special agreement, condition, fee, or security from Cardholders in connection with their use of a Credit Card, unless approved in advance by Bank in writing.

3.5           Cardholder Disputes Regarding Violations of Applicable Law.  AMO shall assist Bank in further investigating and using its reasonable efforts to help resolve any Applicant or Cardholder claim, dispute, or defense which may be asserted under Applicable Law.

3.6           Payment to AMO; Ownership of Accounts; Fees; Accounting.  (a)  Unless otherwise agreed to by the parties in a written amendment to this Agreement, there shall be one (1) settlement for all AMO Businesses.  AMO shall electronically transmit all Transaction Records (from its main offices and/or its Sales Channels) to Bank within a reasonable period of time and in a format acceptable to Bank. Upon receipt, Bank shall use commercially reasonable efforts to promptly verify and process such Transaction Records and, in the time frames specified herein, Bank will remit to AMO an amount equal to the Net Proceeds indicated by such Transaction Records for the Credit Sales Day(s) for which such remittance is made. Bank will transfer funds via Automated Clearing House (“ACH”) to an account designated in writing by AMO to Bank (the “AMO Deposit Account”).  The parties recognize and agree that the above referenced designation may come as part of, and be subject to, a deposit account control agreement entered into by the parties and one or more third-parties with whom AMO has a relationship.  If Transaction Records are received by Bank’s

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processing center before 12 noon Eastern time on a Business Day, Bank will initiate such ACH transfer no later than 12 noon on the second Business Day thereafter.  In the event that the Transaction Records are received after 12 noon Eastern time on a Business Day, then Bank will initiate such transfer no later than 12 noon on the third Business Day thereafter.  The term “initiate” shall mean that Bank shall transmit an ACH file to Bank’s financial institution for settlement on the next Business Day.

(b)           Bank shall own all the Accounts under the Plan from the time of establishment, and except as otherwise provided herein, AMO shall not have any right to any indebtedness on an Account or to any Account payment from a Cardholder arising out of or in connection with any Purchases under the Plan.  Effective upon the delivery of each Charge Slip by AMO to Bank and payment to AMO by Bank pursuant to Section 3.6(a), AMO shall be deemed to have transferred, conveyed, assigned and surrendered to Bank all right, title or interest in all such Charge Slips and in all other rights and writings evidencing such Purchases, if any.

(c)           All Transaction Records are subject to review and acceptance by Bank.  In the event of a computational or similar error of an accounting or record keeping nature with respect to such Transaction Records, Bank may credit to the AMO’s Deposit Account or net against the Net Proceeds (as the case may be) the proper amount as corrected. If the Net Proceeds are insufficient, AMO shall remit the proper amount to Bank immediately upon written demand.  Upon any such correction, Bank shall give AMO prompt notice of same, including details of the discrepancy and correction.

(d)           The Credit Card Agreement shall initially include the terms and conditions regarding rates and fees as are set forth in Schedule 3.6 (d) (“Rates and Fees”).  Bank hereby represents that these Rates and Fees accurately reflect such rates and fees charged in connection with the Crosstown Traders Program as of the date hereof.  In connection with its servicing of the Accounts, Bank may make changes to the Credit Card Agreement on an individual Account by Account basis and without notice to AMO.  On other than an Account by Account basis, Bank may make non-Rates and Fees changes at any time, or as required by Applicable Law, but must provide notice of same to AMO as is reasonable under the circumstances. With respect to any changes in the Rates and Fees, Bank will, prior to making any such changes, notify AMO of such changes and discuss such changes with AMO.

(e)           AMO shall obtain and maintain at its own expense such Point of Sale terminals, cash registers, network (electronic communication interchange system), telephone or other communication lines, software, hardware and other items of equipment as are necessary for it to request and receive authorizations, transmit Charge Slip and Credit Slip information, process applications and perform its obligations under this Agreement. The computer programs and telecommunications protocols necessary to facilitate communications between Bank and AMO (and/or Bank and specific Sales Channels, if applicable) shall be determined by Bank from time to time, subject to reasonable prior notice of any change in such programs, equipment or protocols.

(f)           AMO shall be responsible for ensuring that all Promotional Program Purchases are properly designated as such on the Transaction Record in accordance with Bank’s instructions.

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(g)           Bank may, if AMO fails to pay Bank any amounts due to Bank pursuant to this Agreement for more than thirty (30) days after the due date, offset such amounts against the Net Proceeds or any other amounts owed by Bank to AMO under this Agreement.

(h)           In the event either party fails to pay the other party any sum when due hereunder and such failure continues for ten (10) days after written notice that the same is past due, interest shall commence to accrue on the unpaid amount at an annual interest rate equal to twelve percent (12%) per annum from the date such sum was due until the date the same is paid in full.

3.7           Bank Mailings; Insertion of AMO’s Promotional Materials.  Envelope space (including bangtail) for Billing Statements and Credit Card mailers shall be allocated as follows:

(a)           “Priority Materials”, defined as: legally required material, privacy notices, disclosures, Cardholder notices, Billing Statements, new Credit Card mailers, Credit Card Agreement, and notices sent by Bank;

(b)           Bank’s other inserts (including bangtail).

(c)           AMO’s promotional materials, subject to the following terms:

At AMO’s request, Bank will include with the Billing Statements and new Credit Card mailers AMO promotional materials (including those relating to AMO Enhancement Marketing Services described in Schedule 2.9 (b)) provided by AMO (which promotional materials shall be prepared and provided to Bank or its vendor at AMO’s expense), so long as the materials:  (i) are provided to Bank at least thirty (30) days prior to the scheduled mailing date of such statements or notices and pursuant to an insert schedule that AMO provided to Bank at least sixty (60) days in advance; (ii) have been approved as to content by Bank (in its reasonable discretion) with respect to any manner of reference to Bank or the Plan; (iii) meet all size, weight, or other specifications for such inserts as shall be reasonably set by Bank from time to time; (iv) would not require the removal (in Bank’s standard envelope) of Priority Materials and/or Bank’s other inserts; and (v) are paid for by AMO, along with all additional postage costs caused by Bank’s insertion of such materials.  Notwithstanding the immediately preceding sentence, Bank must provide AMO reasonable advance notice of any such additional postage charge.  Furthermore, Bank shall only insert AMO materials (and charge such additional expense to AMO) if AMO approves such insertion regardless of the additional postage costs.  In addition to paying for the costs and expenses of the promotional materials and additional postage expenses as set forth above AMO shall pay Bank an insert fee for any AMO promotional materials inserted in accordance with this Section 3.7 in an amount equal to $0.02 per billing statement in which such insertion is inserted.  Bank hereby represents that the foregoing accurately represents the actual costs incurred by Bank in performing the insertions as of the date hereof.

Bank reserves the right to disallow any inserts which are in violation of Applicable Law, conflict with any other provision of this Agreement, or whose subject matter is reasonably deemed by Bank to be salacious in nature.

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3.8           Payments.  All payments to be made by Cardholders with respect to any amounts outstanding on the Accounts shall be made in accordance with the instructions of Bank and at the location or address specified by Bank.  AMO hereby authorizes Bank, or any of its employees or agents, to endorse “Spirit of America National Bank” upon all or any checks, drafts, money orders or other evidence of payment, made payable to AMO and intended as payment on an Account, that may come into Bank’s possession from Cardholders and to credit said payment against the appropriate Cardholder’s Account.  Bank has the sole right to receive and retain all payments made with respect to all Accounts and to pursue collection of all amounts outstanding, unless a Purchase is charged back to AMO pursuant to the provisions of Section 3.9 and 3.10.

3.9           Chargebacks.  Bank shall have the right to charge back AMO the amount of any Purchase, including the unpaid principal balance, applicable sales tax, accrued and billed finance charges, fees, charges and any of such amounts written off by Bank.  

(a)           If any Applicant or Cardholder claim, defense, dispute, or basis for non-payment is based on an alleged action or inaction by AMO and/or otherwise involves the Goods and/or Services, including but not limited to an alleged: (i) breach of warranty or representation; (ii) unauthorized use of the Credit Card; (ii) charge for something other than an actual Purchase; (iii) the Charge Slip related to the Purchase is a duplicate of one already paid and/or the price on it differs from the price on the Cardholder’s copy of same; and/or (Bank’s determination, upon receipt of a fraud affidavit from the Cardholder, that the signature on any Charge Slip has been forged or is counterfeit; or

(b)           If Bank determines that, with respect to such Purchase or the Account that:  (i) there is a breach of any warranty or representation made by or with respect to AMO under this Agreement; (ii) there is a failure by AMO to comply with any term or condition of this Agreement, which failure shall not have been cured within fifteen (15) days after receipt of written notice thereof from Bank; or (iii) after; or

(c)           For any chargeback reason as set forth in the Operating Procedures.

3.10                      Exercise of Chargebacks.  With respect to any amounts to be charged back pursuant to Section 3.9, Bank will offset such amount as part of the Net Proceeds to be paid to AMO, to the extent the balance thereof is sufficient or Bank may demand payment from AMO in immediately available funds for the full or any partial amount of such chargeback.  Upon payment in full of the related amount by AMO to Bank, or off-setting, as the case may be, Bank shall transfer to AMO, without any representation, warranty or recourse, all of Bank’s right to payments of such amounts charged back in connection with such Purchase.  Bank will exercise commercially reasonable efforts to cooperate with AMO in any efforts by AMO to collect the chargeback amount.  Bank may reduce the amount owed by a Cardholder on any Purchase subject to chargeback, but the related chargeback shall then be equal to the reduced (or net) amount owed by the Cardholder.  AMO shall not resubmit or re-transmit any charged back Purchase to Bank, without Bank’s prior written consent.

3.11                      Non-Competition.  (a) AMO shall actively and consistently market, promote, participate in and support the Plan as set forth in this Agreement. Furthermore, except as

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otherwise provided in subsections (b), (c) and (d) below, AMO agrees that, in consideration of and as an inducement for Bank to make the Plan available to AMO as provided in this Agreement, AMO (including its Affiliates) shall not, either on its own or under contract or in concert with any third party, establish, provide, own, accept or process any (i) “private label” or “co-brand” revolving credit card, (ii) debit card that is  “branded” (with an AMO Mark or other mark related to or for the promotion of AMO and/or its Affiliates); or (iii) other Financial Product.

(b)           Notwithstanding the provisions set forth in subsection (a) above or elsewhere in this Agreement, nothing contained in this Agreement will be construed to prohibit or prevent AMO from accepting (i) any Card Association credit account and/or card that is not “branded”; (ii) any form of Card Association debit account and/or card that is not “branded”; or (iii) any fixed payment (installment) credit programs for Applicants declined by Bank.

(c)           The prohibitions set forth in subsection (a) will not apply: (i) as to a particular state after Bank has terminated the operation of the Plan in such state pursuant to Section 9.4; (ii) after termination or expiration of this Agreement, or (iv) in cases where AMO is exercising its rights under Section 3.14 of this Agreement.

(d)           Following the earlier to occur of January 31, 2009 or the date the WFNNB Account Portfolio Purchase/Sale Agreement is terminated, if the sale under the WFNNB Account Portfolio Purchase/Sale Agreement has not closed, Bank hereby acknowledges and agrees that AMO shall be permitted to enter into a Program Agreement at any time thereafter and its actions in connection therewith shall in no circumstances be deemed to violate, or be limited or restricted by, this Section 3.11.

(e)  See also Schedule 3.11.

3.12                      Postage.  If during the Term Bank’s aggregate cost of mailing Billing Statements, form letters, or Credit Cards (including card mailers) increases due to an increase in postage cost implemented by the United States Postal Service, the following provisions shall apply.  The parties shall evenly share any cost increase. Adjustments will be made for any subsequent decreases in the cost of postage.  Bank will use commercially reasonable efforts to obtain the best bulk rate discount for Plan related mailings.

3.13                      Reports.  Bank will deliver to AMO the reports set forth in Schedule 3.13, as specified therein and to the extent information is available and applicable.  Bank may provide any additional reports requested by AMO upon such terms and conditions (including cost) as are mutually agreed to by the parties.

3.14                      New Businesses and Existing Credit Program Conversions.

(a)           No Other AMO Obligations.  (AMO shall have no obligation to (1) include in the Plan any credit card portfolios acquired in connection with any merger, consolidation, acquisition or other transaction; (2) otherwise cause such portfolios to be transferred to Bank; or (3) otherwise transfer any such portfolios to Bank.  The non-competition provisions set

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forth in Section 3.11 shall not apply to the ownership and/or administration of accounts described in this Section 3.14, nor any additional accounts related thereto.

(b)           See also Schedule 3.11.

SECTION 4.  REPRESENTATIONS AND WARRANTIES OF AMO

AMO hereby represents and warrants to Bank as follows:

4.1           Organization, Power and Qualification.  As of the date of execution of this Agreement and as of the Closing, AMO is duly organized, validly existing and in good standing under the laws of its formation or organization and has full power and authority to enter into this Agreement and to carry out the provisions of this Agreement.  As of the date of execution of this Agreement and as of the Closing, AMO is duly qualified and in good standing to do business in all jurisdictions where located and/or conducting business, except where the failure to be so qualified would not have a material adverse effect on AMO’s business, AMO’s or Bank’s ability to perform as required under this Agreement, or operation of the Plan.

4.2           Authorization, Validity and Non-Contravention.  As of the date of execution of this Agreement and as of the Closing:

(a) This Agreement has been duly authorized by all necessary corporate proceedings (or analogous governing proceedings).  Further, this Agreement has been duly executed and delivered by AMO, and is a valid and legally binding agreement of AMO and duly enforceable in accordance with its terms (except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights generally and by general equity principles).

(b)           No consent, approval, authorization, order, registration or qualification of or with any court or regulatory authority or other governmental body having jurisdiction over AMO is required for (nor would the absence of such adversely affect) the legal and valid execution and delivery of this Agreement, and the performance of the transactions contemplated by this Agreement.

(c)           The execution and delivery of this Agreement by AMO and the compliance by AMO with all provisions of this Agreement:  (i) will not conflict with or violate any Applicable Law; and (ii) will not conflict with or result in a breach of or default under any of the terms or provisions of any indenture, loan agreement, or other contract or agreement to which AMO is a party (including but not limited to any under which AMO is an obligor or by which its property is bound) where such conflict, breach or default would have a material adverse effect on AMO or the Plan, nor will such execution, delivery or compliance violate or result in the violation of the Articles of Incorporation or By-Laws (or analogous rules of governance) of AMO.

4.3           Accuracy of Information.  All factual information furnished by AMO to Bank in writing at any time pursuant to any requirement of, or furnished in response to any written request of Bank under this Agreement or any transaction contemplated hereby has been,

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and all such factual information hereafter furnished by AMO to Bank will be, to AMO’s best knowledge and belief, true and accurate in every respect material to the transactions contemplated hereby on the date as of which such information was or will be stated or certified.

4.4           Validity of Charge Slips.  (a)  As of the date any Transaction Records are presented to Bank in accordance with the provisions of this Agreement, each Charge Slip relating to such Transaction Records shall represent the obligation of a Cardholder in the respective amount set forth therein for Goods sold or Services rendered, together with applicable taxes, if any, and shall not involve any element of credit for any other purpose.

(b)           As of the date any Transaction Records are presented to Bank in accordance with the provisions of this Agreement, AMO has no knowledge or notice of any fact or matter which would immediately or ultimately impair the validity of any Charge Slip relating to such Transaction Records, the transaction evidenced thereby, or its collectability.

4.5           Compliance with Law.  AMO’s conduct of its business, including but not limited to sales of Goods and/or Services and compliance with its obligations under the Plan, is in compliance with all Applicable Law, including but not limited to not engaging in: the sale of any illegal goods and/or services, the illegal sale of otherwise legal goods and/or services, and sales in violation of federal and state laws designed to prevent unlawful gambling, except where the failure to comply individually or in the aggregate, does not or will not have a material adverse effect on AMO, Bank or the Plan.

4.6           AMO’s Marks.  AMO has the legal right to use and to permit the Bank to use, to the extent set forth herein, AMO Marks.

4.7           Intellectual Property Rights.  In the event AMO provides any software or hardware to Bank, AMO has the legal right to such software or hardware and the right to permit Bank to use such software or hardware, and such use shall not violate any intellectual property rights of any third party.  Any software, hardware or technology provided by or on behalf of AMO is without warranty of merchantability or warranty of fitness for any particular use, and is provided “AS-IS”, but nothing in this Section 4.7 shall relieve AMO of its obligations set forth elsewhere in this Agreement with respect to the performance of its systems and operations.  Any software or other technology developed by or for AMO or its Affiliates, to facilitate the Plan, including but not limited to, software and software modifications developed in response to Bank’s request or to accommodate Bank’s special requirements and all derivative works, regardless of the developer thereof, will remain the exclusive property of AMO and/or its Affiliates.  Nothing in this Agreement shall be deemed to convey a proprietary interest to Bank or any third party in any of the software, hardware, technology or any of the derivative works thereof which are owned or licensed by AMO and/or its Affiliates, and Bank shall return to AMO all materials containing such intellectual property upon termination of this Agreement.

4.8           WFNNB Program Agreement.  AMO has entered into the WFNNB Program Agreement with World Financial Network National Bank and the same is in full force and effect on the date hereof and constitutes the legal and binding obligation of AMO and, to

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AMO’s knowledge, World Financial Network National Bank.  The anticipated Conversion Date under the WFNNB Program Agreement is on or before October 31, 2008.

SECTION 5.  COVENANTS OF AMO

AMO hereby covenants and agrees as follows:

5.1           Notices of Changes.  AMO will as soon as reasonably possible notify Bank of any:  (a) change in the name or form of business organization of AMO, change in the location of its chief executive office or the location of the office where its records concerning the Plan are kept; (b) merger or consolidation of AMO, the sale of a significant portion of its stock (or other form of ownership) or  the sale of a substantial amount of its assets not in the ordinary course of business, or any change in the control of AMO; (c) material adverse change in its financial condition or operations; (d) the planned opening or closing of any Sales Channels (including individual AMO Businesses); (e) any change in business practices of AMO that would have a material adverse effect on this Agreement or the Plan; or (f) any occurrence that would constitute a Bank Termination Event under Section 9.2.  AMO will furnish such additional information with respect to any of the foregoing as Bank may reasonably request, for the purpose of Bank’s evaluating the effect of such change on the financial condition and operations of AMO and on the Plan.  Prior to the earliest to occur of (x) February 1, 2009, (y) the closing under the WFNNB Account Portfolio Purchase/Sale Agreement and (z) the date of termination of the WFNNB Account Portfolio Purchase/Sale Agreement, AMO shall not discontinue or sell any Sales Channels or AMO Businesses (except that AMO shall have the right, in its sole discretion, to discontinue or sell all or any portion of the Lew-Magram Brand and/or Lew-Magram Business).

5.2           Conversion.  AMO shall use commercially reasonable good faith efforts to comply with the Conversion Plan (as such Conversion Plan may modified by the parties in accordance with Section 2.1(a)) and AMO shall not agree to any amendment or modification of the WFNNB Program Agreement which would reduce World Financial Network National Bank’s obligations with respect to the Conversion or extend or delay the Conversion Date (as such term is defined in the WFNNB Program Agreement) beyond January 31, 2009.   AMO shall request that World Financial Network National Bank comply with its obligations under the WFNNB Program Agreement with respect to the Conversion.

5.3           Access Rights.  Subject to (b) below, AMO will permit, once per Plan Year unless Bank has reasonable cause to do so more than once, authorized representatives designated by Bank, at Bank’s expense, to visit its facilities and inspect, to the extent permitted by Applicable Law, any of the books and records of AMO and/or its Sales Channels pertaining to Applicants, Accounts, Transaction Records and any category of payments owed by one party to the other, and to make copies and take extracts there from, and to discuss the same with its officers and independent public accountants, all at reasonable times during normal business hours.  In addition, AMO shall permit regulatory bodies having jurisdiction over Bank to visit its facilities related to the Plan during normal business hours with advance notice.

(b)           AMO’s obligations under (a) shall not be required to the extent that (i) such access is prohibited by Applicable Law, (ii) such records are legally privileged, or (iii) such

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records are AMO planning documents or those of any of its Affiliates, operating budgets, management reviews or employee records.

5.4           AMO’s Business.  AMO shall do or cause to be done all things necessary to preserve and keep in full force and effect its corporate existence (or analogous business form) and to comply with all Applicable Laws in connection with its business and the sale of Goods and/or Services, including, but not limited to: (i) compliance with all applicable license requirements related to its business, and (ii) fulfilling its obligations under the Plan.  AMO shall provide to Bank, annually, a forecast of the next year in terms of AMO’s total sales, number of catalog mailings (in aggregate and by Brand), and expansion or contraction of any Sales Channels.

5.5           Insurance.  AMO shall maintain insurance policies with insurers, and in such amounts and against such types of loss and damage, as are customarily maintained by other companies engaged in similar businesses within AMO’s industry.

5.6           Sales Information.  AMO shall furnish to Bank on a quarterly basis a report showing AMO’s total sales of Goods and/or Services, categorized by tender type.

5.7           Business Continuation/Disaster Recovery Plan.  AMO shall maintain a plan designed to mitigate damages resulting from Force Majeure or other causes that would threaten operation of AMO’s business and/or loss or exposure of information requiring protection as described in Sections 2.8 and 10.17.

5.8           Compliance with Agreement and Operating Procedures.  AMO shall use commercially reasonable efforts to ensure that its Affiliates, licensees, franchises, officers, directors, associates and agents comply with the terms of this Agreement and the Operating Procedures.

5.9           Compliance with Program Agreement and Conversion.  AMO will comply with its obligations under any Program Agreement and will use its commercially reasonable efforts to cooperate with Bank and the Program Provider in facilitating the Conversion.  AMO shall use its commercially reasonable efforts to perform its obligations under the Conversion Plan and acknowledges that, in connection with the Conversion, AMO will not request or require any system interface elements beyond those set forth in the Conversion Plan.

5.10                      Program Assets Sale Agreement.  If the WFNNB Account Portfolio/Sale Agreement is terminated, AMO and Bank shall endeavor in good faith until the expiration of the Term, or earlier termination of this Agreement in accordance with its terms to identify an Approved Replacement Purchaser with which Bank shall enter into an Account Portfolio/Sale Agreement (and Bank agrees to enter into an Account Portfolio/Sale Agreement with an Approved Replacement Purchaser) in form and substance reasonably acceptable to AMO and Bank, it being understood that an Account Portfolio/Sale Agreement shall be deemed to be reasonably acceptable to Bank so long as it contains terms that in the aggregate are not materially less favorable to Bank than those contained in the WFNNB Account Portfolio/Sale Agreement; provided that if such Account Portfolio/Sale Agreement provides for (i) a sale to an Approved Replacement Purchaser for a purchase price of less than 100% but greater than 80% of the aggregate Account Balances of the Accounts transferred thereunder (other

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than with respect to any Ineligible Accounts) and (ii) AMO agrees to pay to Bank an amount equal to 50% of the shortfall between (x) the actual purchase price and (y) 100% of the aggregate Account Balances of the Accounts transferred thereunder (other than with respect to any Ineligible Accounts), up to a cap of 10% of such aggregate Account Balances, then the purchase price under such Account Portfolio/Sale Agreement shall be deemed to be not materially less favorable to Bank than the purchase price contained in the WFNNB Account Portfolio/Sale Agreement and the purchase price shall be deemed reasonably satisfactory to Bank; provided, however if the Approved Replacement Purchaser is World Financial Network National Bank, any investment fund managed by Golden Gate Private Equity, Inc., Orchard Brands Corporation, or any of their respective affiliates or subsidiaries, then, unless Bank otherwise agrees, the Account Portfolio/Sale Agreement shall not be deemed reasonably acceptable to Bank unless the purchase price is 100% of the aggregate Account Balances of the Accounts transferred thereunder (other than with respect to any Ineligible Accounts).  In addition, in such event, Bank and AMO shall also endeavor in good faith until the expiration of the Term or earlier termination of this Agreement in accordance with its terms to identify a Program Provider with which AMO shall enter into a Program Agreement reasonably acceptable to AMO (it being agreed that such Program Agreement shall be deemed to be reasonably acceptable to AMO if it contains terms which in the aggregate are not materially less favorable to AMO than those contained in the WFNNB Program Agreement).

SECTION 6.  REPRESENTATIONS AND WARRANTIES OF BANK

Bank hereby represents and warrants to AMO as follows:

6.1           Organization, Power and Qualification.  As of the date of execution of this Agreement and as of the Closing, Bank is a national banking association, duly organized, validly existing and in good standing under the laws of the United States of America and has full power and authority to enter into this Agreement and to carry out the provisions of this Agreement.  As of the date of execution of this Agreement and as of the Closing, Bank is duly qualified and in good standing to do business in all jurisdictions where such qualification is necessary for Bank to carry out its obligations under this Agreement.

6.2           Authorization, Validity and Non-Contravention.  As of the date of execution of this Agreement and as of the Closing,

(a) This Agreement has been duly authorized by all necessary proceedings, has been duly executed and delivered by Bank and is a valid and legally binding agreement of Bank and duly enforceable in accordance with its terms (except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium and other laws relating to or affecting creditors’ rights generally and by general equity principles).

(b)           No consent, approval, authorization, order, registration or qualification of or with any court or regulatory authority or other governmental body having jurisdiction over Bank is required for (nor would the absence of such materially adversely affect) the legal and valid execution and delivery of this Agreement, and the performance of the transactions contemplated by this Agreement.

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(c)           The execution and delivery of this Agreement by Bank hereunder and the compliance by Bank with all provisions of this Agreement:  (i) will not conflict with or violate any Applicable Law; (ii) will not conflict with or result in a breach of the terms or provisions of any indenture, loan agreement or other contract or agreement to which Bank is a party (including but not limited to any under by which Bank’s property is bound) where such conflict, breach or default would have a material adverse effect on Bank, nor will such execution, delivery or compliance violate or result in the violation of the Charter or By-Laws of Bank.

6.3           Accuracy of Information.  All factual information furnished by Bank to AMO in writing at any time pursuant to any requirement of, or furnished in response to any written request of AMO under this Agreement or any transaction contemplated hereby has been, and all such factual information hereafter furnished by Bank to AMO will be, to Bank’s best knowledge and belief, true and accurate in every respect material to the transactions contemplated hereby on the date as of which such information has or will be stated or certified.

6.4           Compliance with Law.  As of the date of execution, Bank’s conduct of its business is in compliance with all Applicable Law, except where the failure to comply individually or in the aggregate, does not or will not have a material adverse effect on AMO, Bank or the Plan.

6.5           Intellectual Property Rights.  In the event Bank provides any software or hardware to AMO, Bank has the legal right to such software or hardware and the right to permit AMO to use such software or hardware, and such use shall not violate any intellectual property rights of any third party.  Any software, hardware or technology provided by or on behalf of Bank is without warranty of merchantability or warranty of fitness for any particular use, and is provided “AS-IS”, but nothing in this Section 6.5 shall relieve Bank of its obligations set forth elsewhere in this Agreement (including but not limited to Section 2 and Section 3 with respect the performance of its systems and operations.  Any software or other technology developed by Bank or its Affiliates or developed for Bank or its Affiliates at Bank’s expense, to facilitate the Plan, including but not limited to, software and software modifications developed in response to AMO’s request or to accommodate AMO’s special requirements and all derivative works, regardless of the developer thereof, will remain the exclusive property of Bank and/or its Affiliates.  Nothing in this Agreement shall be deemed to convey a proprietary interest to AMO or any third party in any of the software, hardware, technology or any of the derivative works thereof which are owned or licensed by Bank and/or its Affiliates, and AMO shall return to Bank all materials containing such intellectual property upon termination of this Agreement.

6.6           WFNNB Account Portfolio Purchase/Sale Agreement.  Bank has entered into the WFNNB Account Portfolio Purchase/Sale Agreement with World Financial Network National Bank and the same is in full force and effect on the date hereof and constitutes the legal and binding obligation of Bank and, to the knowledge of Bank, World Financial Network National Bank.

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SECTION 7.  COVENANTS OF BANK

Bank hereby covenants and agrees as follows:

7.1           Notices of Changes.  Bank will as soon as reasonably possible notify AMO of any:  (a) change in the name or form of business organization of Bank, change in the location of its chief executive office or the location of the office where its records concerning the Plan are kept; (b) merger or consolidation of Bank or the sale of a significant portion of its stock or of any substantial amount of its assets not in the ordinary course of business or any change in the control of Bank; (c) material adverse change in its financial condition or operations; or (d) litigation, whether actual, pending or threatened, which would have a material adverse effect on the Plan or on Bank’s ability to fulfill any of its obligations hereunder or thereunder. Bank will furnish such additional information with respect to any of the foregoing as AMO may request for the purpose of evaluating the effect of such transaction on the financial condition and operations of Bank and on the Plan.

7.2.           Intentionally Omitted.

7.3           Access Rights.  Subject to (b) below, Bank will permit, once per Plan Year unless AMO has reasonable cause to do so more than once, authorized representatives designated by AMO, at AMO’s expense, to visit its facilities and  inspect, to the extent permitted by Applicable Law, any of Bank’s books and records pertaining to Purchases and any category of payments owed by one party to the other, and to make copies and take extracts there from, and to discuss the same with its officers and independent public accountants, all at reasonable times during normal business hours.  Bank shall permit AMO, once per Plan Year, during normal business hours and upon reasonable notice, and in a manner which does not disrupt the operations, to visit the offices at which services relating to the Plan are provided, to review the activities of Bank and its subcontractors.

(b)           Bank’s obligations under (a) shall not be required to the extent that (i) such access is prohibited by Applicable Law, (ii) such records are legally privileged, (iii) such records are Bank planning documents or those of any of its Affiliates, operating budgets, management reviews or employee records, or (iv) such records relate to other clients of, or credit programs operated by, Bank.

7.4           Bank’s Business.  Bank shall do or cause to be done all things necessary to preserve and keep in full force and affect its corporate existence and to comply with all Applicable Laws in connection with its business and the issuance of credit by Bank.

7.5           Insurance.  Bank shall maintain insurance policies with insurers and in such amounts and against such types of loss and damage as are customarily maintained by other banks engaged in similar businesses as Bank.

7.6           Business Continuation/Disaster Recovery Plan.  Bank shall maintain a plan designed to mitigate damages resulting from Force Majeure or other causes that would threaten operation of Bank’s business and/or loss or exposure of information requiring protection as described in Sections 2.8 and 10.17.

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7.7           Compliance with Law.  Any action or inaction taken by Bank (where Bank has a duty to act) in connection with the Plan shall be in compliance with all Applicable Law except where the failure to so comply does not or will not have an adverse effect on the Bank, AMO or the Plan.

7.8            Termination of WFNNB Account Portfolio Purchase/Sale Agreement; Termination of WFNNB Program Agreement.

(i) Bank shall not (i) extend the “Transfer Date” (as such term is defined in the WFNNB Account Portfolio Purchase/Sale Agreement) beyond January 31, 2009 or (ii) otherwise amend, waive, supplement or modify the WFNNB Account Portfolio Purchase/Sale Agreement in any manner that would reasonably be expected to materially adversely affect AMO or its Affiliates (including, after the Closing, Norm Thompson Outfitters Inc.), in each case, without the prior written consent of AMO.  If the WFNNB Account Portfolio Purchase/Sale Agreement is terminated, Bank and AMO shall endeavor in good faith until the expiration of the Term or earlier termination of this Agreement in accordance with its terms to execute an Account Portfolio Purchase/Sale Agreement with an Approved Replacement Purchaser which is in a form reasonably acceptable to AMO and Bank and contains terms that in the aggregate are not materially less favorable to Bank than those contained in the WFNNB Account Portfolio Purchase/Sale Agreement as set forth in Section 5.10.  Any sale pursuant to such Account Portfolio Purchase/Sale Agreement entered into with an Approved Replacement Purchaser shall be subject to the payment provisions set forth in the proviso to Section 5.10.

(ii)  In connection with the termination of this Agreement on account of a Conversion, Bank shall use commercially reasonable efforts to assist AMO with the transition of the Plan to a Program Provider pursuant to a Program Agreement reasonably acceptable to AMO.  In connection therewith, Bank shall be responsible for the items set forth as Bank’s obligations under the Conversion Plan including the cost of transitioning the Plan from the current processing system utilized by Bank to such Program Provider (it being agreed that Bank shall not be responsible for any of such Program Provider’s costs in connection therewith), but excluding any expenses incurred in the transition or development of information technology systems that allow AMO to interface with such Program Provider.

SECTION 8.  INDEMNIFICATION

8.1           Indemnification Obligations.  (a) AMO shall be liable to and shall indemnify and hold harmless Bank and its Affiliates and their respective officers, directors, employees, subcontractors and their successors and assigns (collectively “Bank Indemnified Parties”) from any and all Losses (as hereinafter defined) incurred by them by reason of:  (i) AMO’s breach of any representation, warranty or covenant hereunder; (ii) AMO’s failure to perform its obligations hereunder; (iii) any property damage or personal injury damage caused by or related to Goods or Services charged to an Account; (iv) any action or failure to act (where there was a duty to act) by AMO related to the Plan and/or as otherwise provided for in this Agreement; (v) AMO having caused Losses to third parties, where such third parties have sought recovery from Bank Indemnified Parties; and (vi) Bank’s defending against claims described in (v).  In any case, AMO’s liability does not extend to Losses proximately arising from an act or failure to act by Bank Indemnified Parties.

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(b)           Bank shall be liable to and shall indemnify and hold harmless AMO and its Affiliates and their respective officers, directors, employees, sub-contractors and their successors and assigns (collectively, “AMO Indemnified Parties”) from any and all losses incurred by reason of:  (i) Bank’s breach of any representation, warranty or covenant hereunder; (ii) Bank’s failure to perform its obligations hereunder; and (iii) any action or failure to act (where there was a duty to act) by Bank and its officers, directors, and employees relating to the Plan and/or as otherwise provided for in this Agreement; (iv)  Bank having caused Losses to third-parties, where such third-parties have sought recovery from AMO Indemnified Parties; and (v) Bank’s defending against claims described in (iv).  In any case, Bank’s liability does not extend to Losses proximately arising from an act or failure to act by AMO Indemnified Parties.

(c)           For purposes of this Section 8.1 the term “Losses” shall mean any liability, damage, costs, fees, losses, judgments, penalties, fines, and expenses, including without limitation, any reasonable attorneys’ fees, disbursements, settlements (which require the other party’s consent which shall not be unreasonably withheld), and court costs, reasonably incurred by Bank, AMO, or a third party, as the case may be, without regard to whether or not such Losses would be deemed material under this Agreement; provide however, that Losses shall not include any overhead costs that either party would normally incur in conducting its everyday business.

8.2           LIMITATION ON LIABILITY.  (a)  IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY INCIDENTAL, INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES THE OTHER PARTY INCURS OR CLAIMS TO HAVE INCURRED ARISING OUT OF THIS AGREEMENT; PROVIDED, HOWEVER, THAT THIS LIMITATION SHALL NOT APPLY WITH RESPECT TO A PARTY’S INTENTIONAL BREACH OF THIS AGREEMENT.

(b)           BANK’S TOTAL ANNUAL LIABILITY TO AMO FOR ALL DAMAGES INCURRED BY IT, FOR ANY CAUSE WHATSOEVER DURING ANY CALENDAR YEAR OF THE TERM OF THIS AGREEMENT, SHALL NOT EXCEED ONE MILLION DOLLARS ($1,000,000.00).  BANK’S TOTAL CUMULATIVE LIABILITY TO AMO FOR ALL DAMAGES INCURRED BY IT, FOR ANY CAUSE WHATSOEVER, SHALL NOT EXCEED FIVE MILLION DOLLARS ($5,000,000.00); PROVIDED, HOWEVER, THAT THIS LIMITATION SHALL NOT APPLY WITH RESPECT TO BANK’S INTENTIONAL BREACH OF THIS AGREEMENT OR TO BANK’S OBLIGATION TO PAY ANY SPECIFIC AMOUNTS DUE AMO AS SPECIFIED UNDER THIS AGREEMENT (SUCH AS NET PROCEEDS, ETC.).

(c)           AMO’S TOTAL ANNUAL LIABILITY TO BANK FOR ALL DAMAGES INCURRED BY IT, FOR ANY CAUSE WHATSOEVER OCCURRING DURING ANY CALENDAR YEAR OF THE TERM OF THIS AGREEMENT, SHALL NOT EXCEED ONE MILLION DOLLARS ($1,000,000.00).  AMO’S TOTAL CUMULATIVE LIABILITY TO BANK FOR ALL DAMAGES IT INCURS, FOR ANY CAUSE WHATSOEVER, SHALL NOT EXCEED FIVE MILLION DOLLARS ($5,000,000.00); PROVIDED, HOWEVER, THAT THIS LIMITATION SHALL NOT APPLY WITH RESPECT TO AMO’S INTENTIONAL BREACH OF THIS AGREEMENT OR TO AMO’S OBLIGATION TO PAY ANY SPECIFIC AMOUNTS DUE

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BANK AS SPECIFIED UNDER THIS AGREEMENT (SUCH AS CHARGEBACKS, DISCOUNT FEES, INSERT FEES, ETC.).

8.3           NO WARRANTIES.  EXCEPT AS PROVIDED HEREIN, THERE ARE NO EXPRESS OR IMPLIED WARRANTIES, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, RESPECTING THE SERVICES AND/OR OTHER PRODUCTS SOLD OR PROVIDED BY BANK PURSUANT TO THIS AGREEMENT.

8.4           Notification of Indemnification; Conduct of Defense.  (a) In no case shall the indemnifying party be liable under Section 8.1 of this Agreement with respect to any claim or claims made against the indemnified party or any other person so indemnified unless it shall be notified in writing of the nature of the claim within a reasonable time after the assertion thereof. However, failure to so notify the indemnifying party shall not relieve it from any liability which it may have under other provisions of this Agreement, except to the extent that the indemnifying party’s right to defend the matter is materially and irrevocably prejudiced by such failure to give prompt notice.

(b)           The indemnifying party shall be entitled to participate, at its own expense, in the defense of any suit brought against the indemnified party which gives rise to a claim against the indemnifying party.  Alternatively, the indemnified party may elect to assume defense of such claim, but must do so within a reasonable time after receiving notice of the claim.  However, if the indemnifying party so elects to assume the defense, such defense shall be conducted by counsel chosen by the indemnifying party  and approved by the indemnified party (or the person or persons so indemnified, who are the defendant or defendants in any suit so brought), which approval shall not be unreasonably withheld.  Once the indemnifying party has retained counsel approved by the indemnifying party, the indemnified party (or the person or persons so indemnified who are the defendant or defendants in the suit), shall bear the fees and expenses of any additional counsel it chooses to retain.

SECTION 9.  TERM, EXPIRATION AND TERMINATION

9.1           Term and Expiration.  Upon execution by authorized representatives of both parties, and unless terminated as provided herein, this Agreement shall become effective as of the date hereof and remain in effect until the earlier to occur of (x) the Conversion Date and (y) January 31, 2010 (such period, the “Term”).

9.2           Termination with Cause by Bank; Bank Termination Events.  Any of the following conditions or events shall constitute a “Bank Termination Event” hereunder, and Bank may terminate this Agreement immediately if such a Bank Termination Event occurs by providing written notice of such decision to AMO setting forth Bank’s reason for termination and the effective date of termination:

(a)           If AMO shall:  (i) generally not pay its debts as they become due; (ii) file, or consent by answer or otherwise to the filing against it, of a petition for relief, reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction; (iii) make an assignment for the benefit of its creditors; (iv) consent to the appointment of a custodian, receiver, trustee or other officer with

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similar powers of itself or of any substantial part of its property; (v) be adjudicated insolvent or be liquidated; (vi) take corporate action for the purpose of any of the foregoing and such event shall materially adversely affect the ability of AMO to perform under this Agreement or the Plan; (vii) have a materially adverse change in its financial condition; or (viii) receive an adverse opinion by its auditors or accountants as to its viability as a going concern; or (ix) breach or fail to perform or observe any covenant or other term contained in any creditor loan agreement, debt instrument or any other material agreement to which it is bound, which breach or failure, if left uncured could result in a default of such agreement, exceptin each such case if the creditor waives rights of foreclosure or acceleration under such agreement in writing or such breach otherwise does not trigger an acceleration of amounts owed under such agreement; or

(b)           If a court or government authority of competent jurisdiction shall enter an order appointing, without consent by AMO, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or if an order for relief shall be entered in any case or proceeding for liquidation or reorganization or otherwise to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding up or liquidation of AMO, or if any petition for any such relief shall be filed against AMO and such petition shall not be dismissed within sixty (60) days; or

(c)           If AMO shall materially default (or default in such a manner that it has a material adverse impact on Bank and/or the Plan) in the performance of or compliance with any term or violate any of the covenants, representations, warranties or agreements contained in this Agreement and AMO shall not have remedied such default within thirty (30) days after written notice thereof shall have been received by AMO from Bank; or

(d)           If at any time the type of Goods and/or Services sold by AMO materially changes from the type of Goods and/or Services sold by AMO on the date of execution of this Agreement; or

(e)           If at any time AMO eliminates or ceases operations of Sales Channels which, immediately prior to such elimination or cessation, account for more than twenty percent (20%) of AMO’s sales volume  in the aggregate (or announces or notifies Bank of an intent or anticipation of the foregoing); or  

(f)           If there are any changes in business practices of AMO that have a material adverse effect on this Agreement or the Plan.

           9.3           Termination with Cause by AMO; AMO Termination Events.  Any of the following conditions or events shall constitute a “AMO Termination Event” hereunder, and AMO may terminate this Agreement immediately if such AMO Termination Event occursby providing written notice of such decision to Bank setting forth AMO’s reason for termination and the effective date of termination,:

(a)           If Bank shall:  (i) generally not be paying its debts as they become due; (ii) file or consent by answer or otherwise to the filing against it, of a petition for relief, reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any

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bankruptcy or insolvency law of any jurisdiction; (iii) make an assignment for the benefit of its creditors; (iv) consent to the appointment of a custodian, receiver, trustee or other officer with similar powers for itself or of any substantial part of its property; (v) be adjudicated insolvent or be liquidated; or (vi) take corporate action for the purpose of any of the foregoing and such event shall materially adversely affect the ability of Bank to perform under this Agreement or the operation of the Plan and such event shall materially adversely affect the ability of Bank to perform under this Agreement or the Plan; or (vii) have a materially adverse change in its financial condition; or (viii) receive an adverse opinion by its auditors or accountants as to its viability as a going concern; or (ix) breach or fail to perform or observe any covenant or other term contained in any creditor loan agreement, debt instrument or any other material agreement to which it is bound, which breach or failure, if left uncured could result in a default of such agreement exceptin each such case if the creditor waives rights of foreclosure or acceleration under such agreement in writing or such breach otherwise does not trigger an acceleration of amounts owed under such agreement; or

(b)           If a court or government authority of competent jurisdiction shall enter an order appointing, without consent by Bank, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or if an order for relief shall be entered in any case or proceeding for liquidation or reorganization or otherwise to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding up or liquidation of Bank, or if any petition for any such relief shall be filed against Bank and such petition shall not be dismissed within sixty (60) days; or

(c)           Except with respect to the Service Standards, if Bank shall default in the performance of or compliance with any term or violates any of the covenants, representations, warranties or agreements contained in this Agreement and Bank shall not have remedied such default within thirty (30) days (ten (10) days in the case of failure to pay AMO pursuant to Section 3.6(a)) after written notice of the default thereof shall have been received by Bank from AMO; or

(d)           If Bank fails for three (3) consecutive months to perform any one of the same Service Standards in a Service Factor Category, and such failure is not the result of an act of AMO, or as a result of a force majeure event specified in Section 10.11, and Bank fails to remedy such failure within thirty (30) days after receipt of written notice from AMO;

(e)           If there are any changes in business practices of Bank that have a material adverse effect on this Agreement or the Plan; or

(f)           Upon 90 days’ prior written notice from AMO to Bank (and, for the avoidance of doubt, without any further obligation under Section 5.10) (which notice may not be delivered prior to the first to occur of (i) January 31, 2009 and (ii) such date as World Financial Network National Bank shall have notified AMO (or any of its Affiliates) that a closing under the WFNNB Account Portfolio Purchase/Sale Agreement is not expected to occur (whether by reason of termination of such WFNNB Account Portfolio Purchase/Sale Agreement or otherwise)).

9.4           Termination of Particular State.  In addition, Bank may terminate the operation of the Plan in a particular state or jurisdiction if the Applicable Law of the state or jurisdiction

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is amended or interpreted in such a manner so as to render all or any part of the Plan illegal or unenforceable, and in such event Bank will, if requested, assist AMO with finding a new credit provider for such state or jurisdiction.

9.5           Liquidation/Purchase of Accounts and Additional Termination Provisions.

(a)           AMO's Option to Purchase the Accounts.

(i)           If this Agreement expires or is terminated by either party for whatever reason prior to the closing under an Account Portfolio Purchase/Sale Agreement, AMO has the option to purchase from, or arrange the purchase by a third party nominated or selected by AMO (a "Nominated Purchaser") from, Bank the Accounts, except for any Accounts which are charged off or inactive or otherwise mutually deemed ineligible by AMO and Bank (it being agreed that the Ineligible Accounts as defined in the WFNNB Account Portfolio Purchase/Sale Agreement shall be ineligible Accounts), on such terms and conditions mutually acceptable to AMO (or a Nominated Purchaser) and Bank, including commercially reasonable representations and warranties.  AMO and Bank hereby agree that the terms of the WFNNB Account Portfolio Purchase/Sale Agreement are mutually acceptable.

(ii)           The purchase option given by Section 9.5(i) is exercisable by AMO or the Nominated Purchaser serving notice on Bank within sixty (60) days after the expiration or termination of this Agreement.

(iii) If such purchase option is exercised, AMO or the Nominated Purchaser must complete the purchase of the Accounts within ninety (90) days after the notice has been given pursuant to Section 9.5(ii); provided, however, that such times may be extended for required regulatory approvals, rating agency consents, and to complete any interim servicing obligation agreed to by AMO and Bank. The date of such completion shall be the "Plan Purchase Date."

(iv) The purchase price for the Accounts shall be shall be equal to 100% of the face value of the Accounts (excluding ineligible accounts referred to in Section 9.5 (i) above) and the receivables related thereto, including without limitation all accrued finance charges and fees.

(v) The parties will use reasonable commercial efforts to minimize transaction costs. Once a purchase agreement for purchase of Accounts has been executed, Bank shall transfer to AMO or the Nominated Purchaser all right title and interest in and to the Accounts and the related receivables and provide AMO or the Nominated Purchaser with access to the Accounts and such other information related thereto as agreed upon by Bank and AMO or the Nominated Purchaser.

(b)           If Purchase Option Is not Exercised.

If this Agreement is terminated and AMO (or a Nominated Purchaser) does not give written notice to Bank of the exercise of the its option to purchase the Accounts as set forth in Section 9.5(a), in addition to all other remedies available to the parties at law or in equity as a result of any default hereunder:

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(i)           subject to clauses (ii) through (iv) below, AMO shall have no further rights whatsoever in the Accounts;

(ii)           Bank may use AMO Marks solely to communicate with Cardholders in connection with the billing and collection of Accounts and as otherwise required by Applicable Law until the Account balances have been collected in full or written-off and liquidated, prior notice of which shall be provided by Bank to AMO; provided that Bank shall provide AMO with a reasonable opportunity to comment on all such communications which use any AMO Mark;

(iii)           Bank shall, at its own expense, terminate and wind up the Plan which may include any or all of the following, all of which shall be performed in accordance with Applicable Law:

(1) in the event the applicable Cardholder has an account under another credit card program originated and maintained by Bank, Bank shall have the right to transfer such Cardholder’s Account Balance to such other account;

(2)  Bank shall have the right to convert any or all of the Accounts to a general purpose credit card account maintained by Bank (e.g. VISA, Mastercard, etc.);

(3) Bank shall have the right to sell any or all of the Accounts to a third party bank or financial institution (which may but need not be an Approved Replacement Purchaser), provided such sale shall not be subject to the provisions of Section 5.10); and

 (4) Bank shall be entitled to liquidate any or all of the Accounts in accordance with its commercially reasonable collection policies and practices; provided, however, in the event Bank determines to adopt collection policies and practices for effectuating the liquidation process which differ from its policies and practices applicable to its non-liquidating portfolios, Bank shall take into account in making such determination the preservation of AMO’s existing customer relationships as well as the efficiency of the liquidation process and the recovery of the Account Balances.  In the event AMO desires Bank to send a letter to Cardholders that have receivable balances owed to the Bank regarding the termination and/or liquidation of the Accounts, Bank shall send such letter to such Cardholders (in form and content reasonably agreed by the parties) at AMO’s sole cost and expense.

(c)           Transition Assistance.  If the WFNNB Program Agreement shall terminate prior to the end of the Term of this Agreement, AMO shall be responsible for any expenses, fees or costs incurred by AMO or any new provider under a Program Agreement during the course of such transition and conversion process except for the conversion costs to be borne by Bank as set forth in the Conversion Plan unless the WFNNB Program Agreement is terminated as a result of an AMO default thereunder first occurring after the Closing Date (and the WFNNB Portfolio Account Purchase/Sale Agreement is terminated as a result thereof), in which event such costs shall be borne by AMO.

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SECTION 10.  MISCELLANEOUS

10.1                      Entire Agreement.  This Agreement constitutes the entire Agreement and supersedes all prior agreements and understandings, whether oral or written, among the parties hereto with respect to the subject matter hereof and merges all prior discussions between them.

10.2                      Coordination of Public Statements.  Except as required by Applicable Law, neither party will make any public announcement of the Plan or provide any information concerning the Plan to any representative of any news, trade or other media without the prior approval of the other party, which approval will not be unreasonably withheld.  Neither party will respond to any inquiry from any public or governmental authority, except as required by Applicable Law, concerning the Plan without prior consultation and coordination with the other party.

10.3                      Amendment.  Except as otherwise provided for in this Agreement, the provisions herein may be modified only upon the mutual written agreement of the parties; provided that, prior to Closing, in no event shall any modification to this Agreement be made or effective without the prior written consent of Norm Thompson.

10.4                      Successors and Assigns.  This Agreement and all obligations and rights arising hereunder shall be binding upon and inure to the benefit of the parties hereto and their respective successors, transferees and assigns.  Assignment. Neither party may assign this Agreement or any of its rights hereunder in any manner without the prior written consent of the other party, except such consent shall not be required if such assignment is in connection with an acquisition of control of AMO by an entity other than an Affiliate of AMO, or an acquisition of control of Bank by an entity other than an Affiliate of Bank, as the case may be, or sale of substantially all of the assets of AMO or Bank, as the case may be.

10.5                      Waiver.  No waiver of the provisions hereto shall be effective unless in writing and signed by the party to be charged with such waiver.  No waiver shall be deemed to be a continuing waiver in respect of any subsequent breach or default either of similar or different nature unless expressly so stated in writing.  No failure or delay on the part of either party in exercising any power or right under this Agreement shall be deemed to be a waiver, nor does any single or partial exercise of any power or right preclude any other or further exercise, or the exercise of any other power or right.

10.6                      Severability.  If any of the provisions or parts of the Agreement are determined to be illegal, invalid or unenforceable in any respect under any applicable statute or rule of law, such provisions or parts shall be deemed omitted without affecting any other provisions or parts of the Agreement which shall remain in full force and effect, unless the declaration of the illegality, invalidity or unenforceability of such provision or provisions substantially frustrates the continued performance by, or entitlement to benefits of, either party, in which case this Agreement may be terminated by the affected party, without penalty.

10.7                      Notices.  All communications and notices pursuant hereto to either party shall be in writing and addressed or delivered to it at its address shown below, or at such other address as may be designated by it by notice to the other party, and shall be deemed given

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when delivered by hand, or two (2) Business Days after being mailed (with postage prepaid) or when received by receipted courier service:

If to Bank: Spirit of America National Bank 1103 Allen Drive Milford, Ohio 45150 Attn.: President       With a Copy to: Spirit of America National Bank 450 Winks Lane Bensalem, PA 19020 Attn.:  General Counsel If to AMO: Arizona Mail Company, Inc. c/o Orchard Brands, Inc. 30 Tozer Road Beverly, MA 01915 Attn.:  David Walde Chief Financial Officer   With a Copy to: Kirkland & Ellis LLP 555 California Street San Francisco, California 94104 Attn: Nathan Shinn  

10.8                      Captions and Cross-References.  The table of contents and various captions in this Agreement are included for convenience only and shall not affect the meaning or interpretation of any provision of this Agreement.  References in this Agreement to any Section are to such Section of this Agreement.

10.9                      GOVERNING LAW / WAIVER OF JURY TRIAL.  THIS AGREEMENT SHALL BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF OHIO, REGARDLESS OF THE DICTATES OF OHIO CONFLICTS OF LAW, AND THE PARTIES HEREBY SUBMIT TO EXCLUSIVE JURISDICTION AND VENUE IN THE UNITED STATES FEDERAL DISTRICT COURT FOR THE SOUTHERN DISTRICT OF OHIO OR ANY OF THE STATE COURTS LOCATED IN FRANKLIN COUNTY, OHIO.  EACH PARTY HEREBY WAIVES ITS RIGHT TO A JURY TRIAL.

10.10                      Counterparts.  This Agreement may be signed in one or more counterparts, all of which shall be taken together as one agreement.

10.11                      Force Majeure.  Neither party will be responsible for any failure or delay in performance of its obligations under this Agreement because of circumstances beyond its reasonable control, and not due to the fault or negligence of such party, including, but not limited to, acts of God, flood, criminal acts, fire, riot, computer viruses or hackers where such party has utilized commercially reasonable means to prevent the same, accident, strikes or work stoppage, embargo, sabotage, terrorism, inability to obtain material, equipment or phone lines, government action (including any laws, ordinances, regulations or the like which restrict or prohibit the providing of the services contemplated by this Agreement), and other causes whether or not of the same class or kind as specifically named above.  In the event a party is unable to perform substantially for any of the reasons described in this Section, it will notify the other party promptly of its inability so to perform, and if the inability continues for at least one hundred eighty (180) consecutive days (thirty (30) days in the cases of credit authorizations and processing of new Accounts), the party so notified may then terminate this Agreement forthwith.  This provision shall not, however, release the party unable to perform

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from using its best efforts to avoid or remove such circumstance and such party unable to perform shall continue performance hereunder with the utmost dispatch whenever such causes are removed.

10.12                      Relationship of Parties.  This Agreement does not constitute the parties as partners or joint venturers and neither party will so represent itself.

10.13                      Survival.  No termination of this Agreement shall in any way affect or impair the powers, obligations, duties, rights, indemnities, liabilities, covenants or warranties and/or representations of the parties with respect to times and/or events occurring prior to such termination.  No powers, obligations, duties, rights, indemnities, liabilities, covenants or warranties and/or representations of the parties with respect to times and/or events occurring after termination shall survive termination except for the following Sections and their corresponding schedules: Section 2.10, Section 3.3, Section 3.5, Section 3.6, Section 3.8, Section 3.9, Section 3.10, Section 8, Section 9.5, Section 10.7, Section 10.9, Section 10.11, Section 10.17 and Section 10.18.

10.14                      Mutual Drafting.  This Agreement is the joint product of AMO and Bank and each provision hereof has been subject to mutual consultation, negotiation and agreement of AMO and Bank; therefore to the extent any language in this Agreement is determined to be ambiguous, it shall not be construed for or against any party based on the fact that either party controlled the drafting of the document.

10.15                      Independent Contractor.  The parties hereby declare and agree that Bank is engaged in an independent business, and shall perform its obligations under this Agreement as an independent contractor; that any of Bank’s personnel performing the services hereunder are agents, employees, Affiliates, or subcontractors of Bank and are not agents, employees, Affiliates, or subcontractors of AMO; that Bank has and hereby retains the right to exercise full control of and supervision over the performance of Bank’s obligations hereunder and full control over the employment, direction, compensation and discharge of any and all of the Bank’s agents, employees, Affiliates, or subcontractors, including compliance with workers’ compensation, unemployment, disability insurance, social security, withholding and all other federal, state and local laws, rules and regulations governing such matters; that Bank shall be responsible for Bank’s own acts and those of Bank’s agents, employees, Affiliates, and subcontractors; and that except as expressly set forth in this Agreement, Bank does not undertake by this Agreement or otherwise to perform any obligation of AMO, whether regulatory or contractual, or to assume any responsibility for AMO’s business or operations.

10.16                      No Third Party Beneficiaries.  The provisions of this Agreement are for the benefit of the parties hereto and not for any other person or entity; provided that the parties agree that Norm Thompson shall be a third party beneficiary of the Agreement solely for purposes of Section 10.3.

10.17                      Confidentiality and Security Control.

(a)           Confidential Information.  Except as specifically provided in this Section 10.17, neither party shall disclose any Confidential Information (defined below) which it learns as a

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result of negotiating or implementing this Agreement. “Confidential Information” shall mean information not of a public nature concerning the business or properties of the other party including, without limitation: the terms and conditions of this Agreement (as well as proposed terms and conditions of any amendments, renewals, or extensions of this Agreement), any proposed and/or agreed upon terms and conditions of any other credit card program agreement between the parties and/or their Affiliates, sales volumes, test results, and results of marketing programs, Plan reports and files generated by Bank (in the case of Bank), trade secrets, business and financial information, source codes, business methods, procedures, know-how and other information (including but not limited to intellectual property) of every kind that relates to the business of either party.   For the avoidance of doubt, the confidential information protected by this Section 10.17 shall include the names and addresses and other information relating to the Cardholders, and such information shall be the exclusive property of AMO following the Closing, recognizing that certain of such Cardholders may also have made purchases from Bank and its affiliates other than AMO (other than purchases under this Agreement) and the names and addresses and other information relating to such Cardholders, to the extent such information relates solely to such transactions with Bank and such Affiliates of Bank (other than AMO) shall be the exclusive property of the Bank and its Affiliates following the Closing.

However, the definition of “Confidential Information” specifically excludes information which:

(i)           is generally known to the trade or to the public at the time of such disclosure; or

(ii)           becomes generally known to the trade or the public subsequent to the time of such disclosure; provided, however, that such general knowledge is not the result of a disclosure in violation of this Section 10.17; or

(iii)           is obtained by a party from a source other than the other party, without breach of this Agreement or any other obligation of confidentiality or secrecy owed to such other party or any other person or organization; or

(iv)           is independently conceived and developed by the disclosing party and proven by the disclosing party through tangible evidence not to have been developed as a result of a disclosure of information to the disclosing party, or any other person or organization which has entered into a confidential arrangement with the non-disclosing party.

(b)           Other Protected Information. The use and/or disclosure of any Consumer Personal Information, AMO Customer Information, and/or Bank Cardholder Information shall be subject to Applicable Law, Section 2.8, and this Section 10.17.

(c)           Permitted Uses and Disclosures.

(i) Nothing in this Section 10.17 shall be interpreted to mean that a party is restricted with respect to the use or disclosure of Confidential Information which it owns. The parties may also disclose any Consumer Personal Information or Confidential Information under the

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following circumstances.  First, to the extent disclosure is required by Applicable Law.  Second, to the extent disclosure is both permitted by Applicable Law and either necessary for the performance of the disclosing party’s obligation under this Agreement and/or agreed to in writing by the other party, provided that:  (i) prior to disclosing any such information to any third party, the party making the disclosure (to the third party) shall give notice to the other party of the nature of such disclosure and of the fact that such disclosure will be made; and (ii) prior to filing a copy of this Agreement (whole or partial) with any governmental authority or agency, the filing party will consult with the other party with respect to such filing and shall redact such portions of this Agreement which the other party requests be redacted, unless, in the filing party’s reasonable judgment based on the advice of its counsel (which advice shall have been discussed with counsel to the other party), the filing party concludes that such request is inconsistent with the filing party’s obligations under Applicable Law.

(ii) Nothing in this Section 10.17 shall be interpreted to mean that a party is restricted with respect to the use or disclosure of Confidential Information in connection with disclosure (A) prior to January 31, 2009 (or the earlier termination of the WFNNB Account Portfolio Purchase/Sale Agreement), to World Financial Network National Bank in connection with the performance of the obligations set forth in the WFNNB Account Portfolio Purchase/Sale Agreement and the WFNNB Program Agreement and (B) thereafter, to prospective purchasers of the Accounts and prospective program providers in connection with the efforts of AMO and Bank to enter into a Account Portfolio Purchase/Sale Agreement and a Program Agreement.

(d)           Protecting Disclosed Information. When, pursuant to subsection (c) above, one party discloses the other party’s Confidential Information or Consumer Personal Information to the disclosing party’s Affiliate or a third party, the disclosing party shall be responsible for ensuring that such disclosure complies with Applicable Law.  Furthermore, the disclosing party shall ensure that the Affiliate or third party executes a confidentiality agreement provided by or approved in writing by the non-disclosing party, and that it keeps all such information in confidence.  Each party covenants that at all times it shall have in place procedures designed to assure that each of its employees who is given access to the other party’s Consumer Personal Information or Confidential Information shall protect the privacy of such information.  Each party acknowledges that any breach of the confidentiality provisions of this Agreement by it will result in irreparable damage to the other party and therefore in addition to any other remedy that may be afforded by law any breach or threatened breach of the confidentiality provisions of this Agreement may be prohibited by restraining order, injunction or other equitable remedies of any court.  The provisions of this Section 10.17 will survive termination or expiration of this Agreement.

(e)           Protecting Stored Information.  Each party shall establish commercially reasonable controls to ensure the confidentiality of any Consumer Personal Information and the other’s Confidential Information.  Each party shall also ensure that such information is not disclosed contrary to the provisions of this Agreement, or any applicable privacy, security or other laws, rules, and regulations.  Without limiting the foregoing, each party shall implement such physical and other security measures as are necessary to (i) ensure the security and confidentiality of any Consumer Personal Information and the other’s Confidential Information, (ii) protect against any threats or hazards to the security and integrity of such information, (iii) protect against any unauthorized access to or use of such information, and

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(iv) properly dispose of any Consumer Personal Information as required under Applicable Law.  AMO shall promptly notify Bank in the event it believes, or has reason to believe, that a confidentiality or security breach, or any other unauthorized intrusion, has occurred with respect to Consumer Personal Information.  AMO shall estimate the intrusion’s affect on Bank and shall specify the corrective action taken and to be taken by AMO.

(f)           If, upon expiration or termination of this Agreement, AMO or its designee does not purchase the Accounts from Bank pursuant to Section and Schedule 9.5, AMO shall take appropriate measures to destroy or remove from its systems Bank’s Cardholder, Confidential, and Consumer Personal Information.  This includes but is not limited to any and all records regarding Cardholders, whether in paper, electronic, or other form, that is maintained or otherwise possessed by or on behalf of AMO, including a compilation of such records.

If AMO or its designee does purchase the Accounts at such time, AMO’s obligation to remove or destroy information shall apply only to any Bank Confidential Information that is not comprised of Bank Cardholder Information or Consumer Personal Information.

10.18                      Taxes.  AMO will be responsible for, and agrees to pay, all sales, use, excise, and value-added taxes, or taxes of a similar nature (excluding personal property taxes and taxes based on Bank’s income which shall be borne by Bank), imposed by the United States, any state or local government, or other taxing authority, on all services provided by Bank under this Agreement.  The parties agree to cooperate with each other to minimize any applicable sales, use, or similar tax and, in connection therewith, the parties shall provide each other with any relevant tax information as reasonably requested (including without limitation, resale or exemption certificates, multi-state exemption certificates, information concerning the use of assets, materials and notices of assessments).  All amounts set forth in this Agreement are expressed and shall be paid in lawful U.S. dollars.

[Signature block on following page.]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement in manner and form sufficient to bind them as of the date first above written.

ARIZONA MAIL ORDER COMPANY, INC.	SPIRIT OF AMERICA NATIONAL BANK
By:  ________________________	By:  _________________________
___________________________	____________________________
Printed Name	Printed Name
___________________________	____________________________
Title	Title

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EX-99.1

EXHIBIT 99.1

FOR IMMEDIATE RELEASE

PRESS RELEASE

CHARMING SHOPPES ENTERS INTO DEFINITIVE AGREEMENT TO SELL

NON-CORE MISSES APPAREL CATALOG TITLES AND RELATED PORTION OF CREDIT CARD RECEIVABLES FOR AGGREGATE PROCEEDS OF $75 MILLION;

INITIATES EXPLORATION OF SALE PROCESS FOR FIGI’S GIFT CATALOG

Actions Support Strategy For Focus On Core Plus Apparel Brands

BENSALEM, Pa. – August 25, 2008 – In support of its strategy to provide a greater focus on its core brands, Charming Shoppes, Inc. (Nasdaq: CHRS) today announced that it has entered into a definitive agreement to sell its non-core misses apparel catalogs (collectively, “Crosstown Traders”) to Orchard Brands, a portfolio company of Golden Gate Capital, for a purchase price of $35 million in cash.  The transaction includes the following catalog titles and their associated e-commerce sites:  Old Pueblo Traders, Bedford Fair, Willow Ridge, Lew Magram, Brownstone Studio, Intimate Appeal, Monterey Bay Clothing Company and Coward Shoe. The Crosstown Traders headquarters are expected to remain in Tucson, Arizona.   Subject to certain customary closing conditions, the transaction is expected to close by the end of September 2008.

As part of the definitive agreement, the Company will retain the infrastructure of Crosstown Traders and accordingly, will provide certain services to Orchard Brands including distribution, information technology and call center functions for a limited transition period.  Subsequent to the transition period, Charming Shoppes will be responsible for the remaining lease liabilities and disposition costs for the distribution and office facilities.

Charming Shoppes also announced today that it has entered into an agreement for the sale of the misses apparel catalog credit card receivables for approximately $40 million in cash to Alliance Data Systems Corporation.  These receivables are directly related to the catalog titles being sold to Orchard Brands.  This transaction is expected to close prior to the Company’s January 31, 2009 fiscal year end.

It is expected that the sale of the catalogs and the related credit card receivables, less securitized indebtedness of approximately $32 million, will result in pre-tax net cash proceeds of approximately $43 million.

Alan Rosskamm, Chairman of the Board and Interim Chief Executive Officer of Charming Shoppes, Inc. commented, “We are pleased to enter into this agreement with Orchard Brands.  We have made the decision to sell our non-core catalogs as key steps in our strategy to focus on our core brands – Lane Bryant, Fashion Bug and Catherines – and leverage our leading market share position in women’s specialty plus apparel.”

Neale Attenborough, Chairman and Chief Executive Officer of Orchard Brands said, “We are extremely pleased to be adding these important titles to our own strong portfolio of direct-to-consumer businesses, which currently includes the Appleseed's, Blair, Draper's & Damon's, Gold Violin, Haband, Norm Thompson, Sahalie, Solutions, Tog Shop, and WinterSilks brands.  We look forward to incorporating the established and highly-regarded Crosstown Traders’ brands into the group, as they significantly increase our penetration of the 55+ market.  On behalf of the entire Orchard Brands team, I am very happy to welcome our new associates to the group.”

Rosskamm continued, “Charming Shoppes remains committed to providing our consumers the opportunity to purchase our products through whatever channel they prefer, whether it is in a store location, online or via catalog.  To that end, we are today announcing the appointment of Lori Twomey to the position of President, Direct-to-Consumer.  In this role, Lori will lead the Company’s direct-to-consumer and e-commerce businesses, including the Lane Bryant Woman catalog and related e-commerce site, the Company’s retail brands’ e-commerce businesses, and shoetrader.com.  Lori will continue to report to me in my role as Interim CEO.”

The Company also announced today that it will initiate a process to explore the sale of its Figi’s Gifts in Good Taste catalog business, based in Wisconsin.  Alan Rosskamm stated, “This decision is another key step in our strategy to refocus our energies on our core brands, and should not be seen in any way as a negative reflection on the performance of the Figi’s business.  In fact, Figi’s continues to perform quite profitably and generates substantial cash flow.  We and our Board of Directors are committed to identifying an appropriate buyer for this attractive asset, but will only do so in a transaction that we deem financially favorable.”  The Company noted that there can be no assurance that this process will result in any specific course of action or transaction, and the Company does not intend to comment further on this evaluation until final determinations have been made.

Banc of America Securities LLC and Lehman Brothers acted as financial advisors and Drinker Biddle & Reath LLP provided legal advice to Charming Shoppes in connection with the transaction to sell its non-core misses apparel catalog titles.

About Charming Shoppes, Inc.

At August 2, 2008, Charming Shoppes, Inc. operated 2,359 retail stores in 48 states under the names LANE BRYANT®, FASHION BUG®, FASHION BUG PLUS®, CATHERINES PLUS SIZES®, LANE BRYANT OUTLET®, and PETITE SOPHISTICATE OUTLET®.  Additionally, the Company operates the following direct-to-consumer titles:  Lane Bryant WomanTM, Figi's®, and shoetrader.com.

About Orchard Brands

A portfolio company of Golden Gate Capital, Orchard Brands is a leading, multi-channel marketer of apparel and home products focused on serving the needs of the rapidly growing market segment of women and men above the age of fifty-five.  With more than $1 billion of revenues, Orchard Brands provides quality products to consumers through the direct channels of catalog, Internet and retail, with a relentless focus on delivering superior service.  Orchard Brands consists of the brands Appleseed's, Blair, Draper's & Damon's, Gold Violin, Haband, Norm Thompson, Sahalie, Solutions, Tog Shop, and WinterSilks.

Safe Harbor Statement

This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 concerning appointments of executives, the Company's operations, performance, and financial condition. Such forward- looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those indicated. Such risks and uncertainties may include, but are not limited to: the failure to consummate the sale of our non-core misses apparel catalogs to Orchard Brands, the failure to sell the misses apparel catalog credit card receivables to Alliance Data Systems, the failure to sell Figi's, the failure to find a suitable permanent replacement for the Company's former Chief Executive Officer within a reasonable time period, the failure to consummate our identified strategic solution for our other non-core assets, the failure to effectively implement our planned consolidation,  cost and capital budget reduction plans, the failure to implement the Company's business plan for increased profitability and growth in the Company's retail stores and direct-to-consumer segments, adverse changes in costs, changes in or miscalculation of fashion trends, extreme or unseasonable weather conditions, economic downturns, competitive pressures, and the adverse effects of natural disasters, war, acts of terrorism or threats of either, or other armed conflict, on the United States and international economies. These, and other risks and uncertainties, are detailed in the Company's filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the fiscal year ended February 2, 2008, our Quarterly Reports on Form 10-Q and other Company filings with the Securities and Exchange Commission. Charming Shoppes assumes no duty to update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.

CONTACTS:	Charming Shoppes, Inc.
	Gayle M. Coolick
	Vice President, Investor Relations
	215-638-6955
	Orchard Brands
	Sarah Bochynski
	Senior Director of Human Resources
	503-614-4408