EXHIBIT 10.1

 

Management Incentive Program

SECTION 1.                            PURPOSE; DEFINITIONS. THE PURPOSE OF THE
MOTHERS WORK, INC. MANAGEMENT INCENTIVE PROGRAM (THE “PROGRAM”) IS TO ENABLE
MOTHERS WORK, INC. (THE “COMPANY”) AND ITS AFFILIATED COMPANIES TO MOTIVATE AND
REWARD FAVORABLE PERFORMANCE BY PROVIDING CASH BONUS PAYMENTS BASED UPON THE
ACHIEVEMENT OF PRE-ESTABLISHED AND OBJECTIVE PERFORMANCE GOALS FOR EACH FISCAL
YEAR.

FOR PURPOSES OF THE PROGRAM, THE FOLLOWING TERMS WILL HAVE THE MEANINGS DEFINED
BELOW, UNLESS THE CONTEXT CLEARLY REQUIRES A DIFFERENT MEANING:

(A)          “AFFILIATE” MEANS, WITH RESPECT TO ANY PERSON, ANY OTHER PERSON
THAT, DIRECTLY OR INDIRECTLY, IS IN CONTROL OF, IS CONTROLLED BY, OR IS UNDER
COMMON CONTROL WITH, SUCH PERSON.  FOR PURPOSES OF THIS DEFINITION, THE TERM
“CONTROL,” INCLUDING ITS CORRELATIVE TERMS “CONTROLLED BY” AND “UNDER COMMON
CONTROL WITH,” MEAN, WITH RESPECT TO ANY PERSON, THE POSSESSION, DIRECTLY OR
INDIRECTLY, OF THE POWER TO DIRECT OR CAUSE THE DIRECTION OF THE MANAGEMENT AND
POLICIES OF SUCH PERSON, WHETHER THROUGH THE OWNERSHIP OF VOTING SECURITIES, BY
CONTRACT OR OTHERWISE.

(B)         “AWARD” MEANS A CASH BONUS UNDER THE PROGRAM.

(C)          “BOARD” MEANS THE BOARD OF DIRECTORS OF THE COMPANY, AS CONSTITUTED
FROM TIME TO TIME.

(D)         “CODE” MEANS THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, AND ANY
SUCCESSOR THERETO.

(E)          “COMMITTEE” MEANS THE COMPENSATION COMMITTEE OF THE BOARD, AND
SHALL CONSIST OF MEMBERS OF THE BOARD WHO ARE NOT EMPLOYEES OF THE COMPANY OR
ANY AFFILIATE THEREOF AND WHO QUALIFY AS “OUTSIDE DIRECTORS” UNDER SECTION
162(M) OF THE CODE.

(F)            “FISCAL YEAR” MEANS THE PERIOD BEGINNING ON OCTOBER 1 AND ENDING
ON SEPTEMBER 30.

(G)         “PARTICIPANT” MEANS THE EXECUTIVE OFFICERS OF THE COMPANY AND ANY
OTHER KEY EMPLOYEE OF THE COMPANY OR ANY AFFILIATE WITH THE TITLE OF “MANAGER”
OR ABOVE SELECTED BY THE COMMITTEE TO PARTICIPATE IN THE PROGRAM.

(H)         “PERSON” MEANS AN INDIVIDUAL, A CORPORATION, A PARTNERSHIP, AN
ASSOCIATION, A TRUST OR ANY OTHER ENTITY OR ORGANIZATION.

(I)             “PERFORMANCE PERIOD” MEANS EACH FISCAL YEAR OR ANOTHER PERIOD AS
DESIGNATED BY THE COMMITTEE, SO LONG AS SUCH PERIOD DOES NOT EXCEED ONE YEAR.

SECTION 2.                            ADMINISTRATION OF PROGRAM. THE COMMITTEE
SHALL ADMINISTER AND INTERPRET THE PROGRAM, PROVIDED, THAT, THE PROGRAM WILL NOT
BE INTERPRETED IN A MANNER THAT CAUSES

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AN AWARD INTENDED TO QUALIFY AS “QUALIFIED PERFORMANCE-BASED COMPENSATION” UNDER
SECTION 162(M) OF THE CODE TO FAIL TO SO QUALIFY. THE COMMITTEE SHALL HAVE THE
POWER, FROM TIME TO TIME, TO: (I) SELECT PARTICIPANTS; (II) DETERMINE THE AMOUNT
OF CASH TO BE PAID PURSUANT TO EACH PARTICIPANT; (III) DETERMINE THE TERMS AND
CONDITIONS OF EACH AWARD; (IV) ESTABLISH THE PERFORMANCE OBJECTIVES FOR ANY
PERFORMANCE PERIOD IN ACCORDANCE WITH SECTION 3 AND CERTIFY WHETHER SUCH
PERFORMANCE OBJECTIVES HAVE BEEN OBTAINED; (V) ESTABLISH AND AMEND RULES AND
REGULATIONS RELATING TO THE PROGRAM, AND TO MAKE ALL OTHER DETERMINATIONS
NECESSARY AND ADVISABLE FOR THE ADMINISTRATION OF THE PROGRAM; AND (VI) CORRECT
ANY DEFECT, SUPPLY ANY OMISSION OR RECONCILE ANY INCONSISTENCY IN THE PROGRAM OR
ANY AWARD.

NOTHING IN THE PROGRAM SHALL BE DEEMED TO LIMIT THE ABILITY OF THE COMMITTEE TO
GRANT AWARDS TO PARTICIPANTS UNDER THE PROGRAM WHICH ARE NOT INTENDED TO QUALIFY
AS “QUALIFIED PERFORMANCE-BASED COMPENSATION” UNDER SECTION 162(M) OF THE CODE
AND WHICH ARE NOT EXEMPT FROM THE LIMITATIONS THEREOF.

ALL DECISIONS MADE BY THE COMMITTEE PURSUANT TO THE PROGRAM SHALL BE MADE IN THE
COMMITTEE’S SOLE AND ABSOLUTE DISCRETION AND SHALL BE FINAL AND BINDING ON THE
PARTICIPANTS, AND THE COMPANY.  NO MEMBER OR FORMER MEMBER OF THE BOARD OR THE
COMMITTEE SHALL BE LIABLE FOR ANY ACT, OMISSION, INTERPRETATION, CONSTRUCTION OR
DETERMINATION MADE IN CONNECTION WITH THE PROGRAM OTHER THAN AS A RESULT OF SUCH
INDIVIDUAL’S WILLFUL MISCONDUCT.

SECTION 3.                            AWARDS.

(A)          PERFORMANCE CRITERIA. WITHIN 90 DAYS AFTER EACH PERFORMANCE PERIOD
BEGINS (OR SUCH OTHER DATE AS MAY BE REQUIRED OR PERMITTED UNDER SECTION
162(M)), THE COMMITTEE SHALL ESTABLISH THE PERFORMANCE OBJECTIVE OR OBJECTIVES
THAT MUST BE SATISFIED IN ORDER FOR A PARTICIPANT TO RECEIVE AN AWARD FOR THAT
PERFORMANCE PERIOD.  IN ADDITION, AT THAT TIME THE COMMITTEE WILL ALSO SPECIFY
THE PORTION OF AWARDS THAT WILL BE PAYABLE UPON THE FULL, PARTIAL OR
OVER-ACHIEVEMENT OF SPECIFIED PERFORMANCE OBJECTIVES FOR THAT PERFORMANCE
PERIOD.  EXCEPT WITH RESPECT TO AN AWARD THAT IS NOT INTENDED TO CONSTITUTE
“QUALIFIED PERFORMANCE-BASED COMPENSATION” UNDER SECTION 162(M) OF THE CODE,
SUCH PERFORMANCE OBJECTIVES WILL BE BASED UPON THE FOLLOWING CRITERIA, AS
DETERMINED BY THE COMMITTEE FOR THE APPLICABLE PERFORMANCE PERIOD (SUBJECT TO
ADJUSTMENT IN ACCORDANCE WITH SECTION 3(B), BELOW):

(I)                                     THE ATTAINMENT OF CERTAIN TARGET LEVELS
OF, OR A SPECIFIED PERCENTAGE INCREASE IN, (1) REVENUES, (2) INCOME BEFORE TAXES
AND EXTRAORDINARY ITEMS, (3) NET INCOME, (4) OPERATING INCOME, (5) EARNINGS
BEFORE INCOME TAX, (6) EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND
AMORTIZATION, (7) AFTER-TAX OR PRE-TAX PROFITS, (8) OPERATIONAL CASH FLOW, (9)
RETURN ON CAPITAL EMPLOYED OR RETURNED ON INVESTED CAPITAL, (10) AFTER-TAX OR
PRE-TAX RETURN ON STOCKHOLDERS’ EQUITY, (11) THE PRICE OF OUR COMMON STOCK OR
(12) A COMBINATION OF THE FOREGOING;

(II)                                  THE ACHIEVEMENT OF A CERTAIN LEVEL OF,
REDUCTION OF, OR OTHER SPECIFIED OBJECTIVES WITH REGARD TO LIMITING THE LEVEL OF
INCREASE IN, OUR BANK DEBT OR  OTHER PUBLIC OR PRIVATE DEBT OR FINANCIAL
OBLIGATIONS;

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(III)                               EARNINGS PER SHARE OR THE ATTAINMENT OF A
SPECIFIED PERCENTAGE INCREASE IN EARNINGS PER SHARE OR EARNINGS PER SHARE FROM
CONTINUING OPERATIONS;

(IV)                              THE ATTAINMENT OF CERTAIN TARGET LEVELS OF, OR
A SPECIFIED INCREASE IN, ECONOMIC VALUE ADDED TARGETS BASED ON A CASH FLOW
RETURN ON INVESTMENT FORMULA;

(V)                                 THE GROWTH IN THE VALUE OF AN INVESTMENT IN
OUR COMMON STOCK ASSUMING THE REINVESTMENT OF DIVIDENDS;

(VI)                              THE ATTAINMENT OF A CERTAIN LEVEL OF,
REDUCTION OF, OR OTHER SPECIFIED OBJECTIVES WITH REGARD TO LIMITING THE LEVEL IN
OR INCREASE IN ALL OR A PORTION OF CONTROLLABLE EXPENSES OR COSTS OR OTHER
EXPENSES OR COSTS; AND/OR

(VII)                           ANY OTHER OBJECTIVE BUSINESS CRITERIA THAT WOULD
NOT CAUSE AN AWARD TO FAIL TO CONSTITUTE “QUALIFIED PERFORMANCE-BASED
COMPENSATION” UNDER SECTION 162(M) OF THE CODE.

(VIII)                        PERFORMANCE GOALS MAY BE ESTABLISHED ON A
COMPANY-WIDE BASIS OR WITH RESPECT TO ONE OR MORE BUSINESS UNITS, DIVISIONS,
AFFILIATES, OR PRODUCTS; AND IN EITHER ABSOLUTE TERMS OR RELATIVE TO THE
PERFORMANCE OF ONE OR MORE COMPARABLE COMPANIES OR AN INDEX COVERING MULTIPLE
COMPANIES.  THE PERFORMANCE OBJECTIVES FOR A PARTICULAR PERFORMANCE PERIOD NEED
NOT BE THE SAME FOR ALL PARTICIPANTS.

(B)         ADJUSTMENTS TO PERFORMANCE CRITERIA.  THE COMMITTEE MAY PROVIDE, AT
THE TIME THE PERFORMANCE GOALS ARE ESTABLISHED IN ACCORDANCE WITH SECTION 3(A),
THAT ADJUSTMENTS WILL BE MADE TO THE APPLICABLE PERFORMANCE GOALS TO TAKE INTO
ACCOUNT, IN ANY OBJECTIVE MANNER SPECIFIED BY THE COMMITTEE, THE IMPACT OF ONE
OR MORE OF THE FOLLOWING: (I) GAIN OR LOSS FROM ALL OR CERTAIN CLAIMS AND/OR
LITIGATION AND INSURANCE RECOVERIES, (II) THE IMPAIRMENT OF TANGIBLE OR
INTANGIBLE ASSETS, (III) STOCK-BASED COMPENSATION EXPENSE, (IV) EXTRAORDINARY,
UNUSUAL OR INFREQUENTLY OCCURRING EVENTS REPORTED IN THE COMPANY’S PUBLIC
FILINGS, (V) RESTRUCTURING ACTIVITIES REPORTED IN THE COMPANY’S PUBLIC FILINGS,
(VI) INVESTMENTS, DISPOSITIONS OR ACQUISITIONS, (VII) GAIN OR LOSS FROM THE
DISPOSAL OF CERTAIN ASSETS, (VIII) GAIN OR LOSS FROM THE EARLY EXTINGUISHMENT,
REDEMPTION, OR REPURCHASE OF DEBT, (IX) CASH OR NON-CASH CHARGES RELATED TO
STORE CLOSING EXPENSES, (X) CHANGES IN ACCOUNTING PRINCIPLES THAT BECOME
EFFECTIVE DURING THE PERFORMANCE PERIOD, OR (XI) ANY OTHER ITEM, EVENT OR
CIRCUMSTANCE THAT WOULD NOT CAUSE AN AWARD TO FAIL TO CONSTITUTE “QUALIFIED
PERFORMANCE-BASED COMPENSATION” UNDER SECTION 162(M) OF THE CODE.

ANY ADJUSTMENT DESCRIBED IN THIS SECTION 3(B) MAY RELATE TO THE COMPANY OR TO
ANY SUBSIDIARY, DIVISION OR OTHER OPERATIONAL UNIT OF THE COMPANY OR ITS
AFFILIATES, AS DETERMINED BY THE COMMITTEE AT THE TIME THE PERFORMANCE GOALS ARE
ESTABLISHED.  ANY ADJUSTMENT SHALL BE DETERMINED IN ACCORDANCE WITH GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES AND STANDARDS, UNLESS SUCH OTHER OBJECTIVE METHOD
OF MEASUREMENT IS DESIGNATED BY THE COMMITTEE AT THE TIME PERFORMANCE GOALS ARE
ESTABLISHED.  NOTWITHSTANDING THE FOREGOING, ADJUSTMENTS WILL BE MADE AS
NECESSARY TO ANY PERFORMANCE CRITERIA RELATED TO THE COMPANY’S STOCK TO REFLECT
CHANGES IN CORPORATE CAPITALIZATION, INCLUDING A RECAPITALIZATION, STOCK SPLIT
OR COMBINATION, STOCK DIVIDEND,

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SPIN-OFF, MERGER, REORGANIZATION OR OTHER SIMILAR EVENT OR TRANSACTION AFFECTING
THE COMPANY’S STOCK.

(C)          MAXIMUM AWARD AMOUNT PAYABLE. THE MAXIMUM AMOUNT PAYABLE HEREUNDER
TO ANY SINGLE PARTICIPANT WITH RESPECT TO ANY PARTICULAR PERFORMANCE PERIOD WILL
NOT EXCEED $1,500,000.

(D)         PAYMENT CONDITIONED ON CONTINUED EMPLOYMENT.  NO PARTICIPANT WILL BE
ENTITLED TO ANY PAYMENT HEREUNDER WITH RESPECT TO ANY PARTICULAR PERFORMANCE
PERIOD UNLESS HE OR SHE HAS REMAINED CONTINUOUSLY EMPLOYED BY THE COMPANY OR ITS
AFFILIATES THROUGH THE LAST DAY OF THAT PERFORMANCE PERIOD (OR SUCH OTHER DATE
AS IS SPECIFIED BY THE COMMITTEE AT THE TIME THAT PERFORMANCE OBJECTIVES ARE
ESTABLISHED).

(E)          NEGATIVE DISCRETION. NOTWITHSTANDING ANYTHING ELSE CONTAINED IN
SECTION 3(B) TO THE CONTRARY, THE COMMITTEE SHALL HAVE THE RIGHT, IN ITS
ABSOLUTE DISCRETION, (I) TO REDUCE OR ELIMINATE THE AMOUNT OTHERWISE PAYABLE TO
ANY PARTICIPANT UNDER SECTION 3(B) BASED ON INDIVIDUAL PERFORMANCE OR ANY OTHER
FACTORS THAT THE COMMITTEE, IN ITS DISCRETION, SHALL DEEM APPROPRIATE AND (II)
TO ESTABLISH RULES OR PROCEDURES THAT HAVE THE EFFECT OF LIMITING THE AMOUNT
PAYABLE TO EACH PARTICIPANT TO AN AMOUNT THAT IS LESS THAN THE MAXIMUM AMOUNT
OTHERWISE AUTHORIZED UNDER SECTION 3(B).

SECTION 4.                            PAYMENT.  TO THE EXTENT THAT THE COMMITTEE
DETERMINES AT THE TIME OF GRANT TO QUALIFY AN AWARD AS PERFORMANCE-BASED
COMPENSATION UNDER SECTION 162(M) OF THE CODE, NO AWARD SHALL BE PAYABLE EXCEPT
UPON WRITTEN CERTIFICATION BY THE COMMITTEE THAT THE PERFORMANCE GOALS HAVE BEEN
SATISFIED TO A PARTICULAR EXTENT AND THAT ANY OTHER MATERIAL TERMS AND
CONDITIONS PRECEDENT TO PAYMENT OF AN AWARD HAVE BEEN SATISFIED.  PAYMENT
HEREUNDER WILL BE MADE AS SOON AS PRACTICABLE AFTER THE COMMITTEE CERTIFICATION
REFERENCED ABOVE IS COMPLETED, BUT IN NO EVENT LATER THAN 2½ MONTHS FOLLOWING
THE END OF THE FISCAL YEAR TO WHICH THE AWARD RELATES.

SECTION 5.                            GENERAL PROVISIONS

(A)          AMENDMENT AND TERMINATION. THE BOARD OR THE COMMITTEE MAY AT ANY
TIME AMEND, SUSPEND, DISCONTINUE OR TERMINATE THE PROGRAM; PROVIDED; HOWEVER,
THAT NO SUCH ACTION SHALL BE EFFECTIVE WITHOUT APPROVAL BY THE SHAREHOLDERS OF
THE COMPANY TO THE EXTENT NECESSARY TO CONTINUE TO QUALIFY THE AMOUNTS PAYABLE
HEREUNDER TO PARTICIPANTS AS “QUALIFIED PERFORMANCE-BASED COMPENSATION” UNDER
SECTION 162(M) OF THE CODE.

(B)         UNSECURED CREDITOR STATUS.  A PARTICIPANT ENTITLED TO PAYMENT
HEREUNDER SHALL RELY SOLELY UPON THE UNSECURED PROMISE OF THE COMPANY AND
NOTHING HEREIN CONTAINED SHALL BE CONSTRUED TO GIVE TO OR VEST IN A PARTICIPANT
OR ANY OTHER PERSON NOW OR AT ANY TIME IN THE FUTURE, ANY RIGHT, TITLE,
INTEREST, OR CLAIM IN OR TO ANY SPECIFIC ASSET, FUND, RESERVE, ACCOUNT,
INSURANCE OR ANNUITY POLICY OR CONTRACT, OR OTHER PROPERTY OF ANY KIND WHATEVER
OWNED BY THE COMPANY, OR IN WHICH THE COMPANY MAY HAVE ANY RIGHT, TITLE, OR
INTEREST, NOR OR AT ANY TIME IN THE FUTURE.

(C)          NON-ASSIGNMENT OF AWARDS.  THE PARTICIPANT SHALL NOT BE PERMITTED
TO SELL, TRANSFER, PLEDGE OR ASSIGN ANY AMOUNT PAYABLE PURSUANT TO THE PROGRAM
OR AN AWARD, PROVIDED

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THAT THE RIGHT TO PAYMENT OF AN AWARD EARNED HEREUNDER MAY PASS BY WILL OR THE
LAWS OF DESCENT AND DISTRIBUTION.

(D)         SEPARABILITY.  IF ANY TERM OR CONDITION OF THE PROGRAM SHALL BE
INVALID OR UNENFORCEABLE TO ANY EXTENT OR IN ANY APPLICATION, THEN THE REMAINDER
OF THE PROGRAM, WITH THE EXCEPTION OF SUCH INVALID OR UNENFORCEABLE PROVISION,
SHALL NOT BE AFFECTED THEREBY, AND SHALL CONTINUE IN EFFECT AND APPLICATION TO
ITS FULLEST EXTENT.

(E)          CONTINUED EMPLOYMENT.  NEITHER THE ADOPTION OF THE PROGRAM NOR THE
EXECUTION OF ANY DOCUMENT IN CONNECTION WITH THE PROGRAM WILL: (I) CONFER UPON
ANY EMPLOYEE OF THE COMPANY OR AN AFFILIATE ANY RIGHT TO CONTINUED EMPLOYMENT
WITH THE COMPANY OR SUCH AFFILIATE, OR (II) INTERFERE IN ANY WAY WITH THE RIGHT
OF THE COMPANY OR SUCH AFFILIATE TO TERMINATE THE EMPLOYMENT OF ANY OF ITS
EMPLOYEES AT ANY TIME.

(F)            INCAPACITY.  IF THE COMMITTEE DETERMINES THAT A PARTICIPANT IS
UNABLE TO CARE FOR HIS AFFAIRS BECAUSE OF ILLNESS OR ACCIDENT, ANY AMOUNT DUE
SUCH PARTICIPANT UNDER THE PROGRAM MAY BE PAID TO HIS SPOUSE, CHILD, PARENT, OR
ANY OTHER PERSON DEEMED BY THE COMMITTEE TO HAVE INCURRED EXPENSE FOR SUCH
PARTICIPANT (INCLUDING A DULY APPOINTED GUARDIAN, COMMITTEE, OR OTHER LEGAL
REPRESENTATIVE), AND ANY SUCH PAYMENT SHALL BE A COMPLETE DISCHARGE OF THE
COMPANY’S OBLIGATION HEREUNDER.

(G)         WITHHOLDING.  THE COMPANY SHALL WITHHOLD THE AMOUNT OF ANY FEDERAL,
STATE, LOCAL OR OTHER TAX, CHARGE OR ASSESSMENT ATTRIBUTABLE TO THE PAYMENT OF
ANY AWARD AS IT MAY DEEM NECESSARY OR APPROPRIATE, IN ITS SOLE DISCRETION.

(H)         GOVERNING LAW.  THE PROGRAM AND ALL AWARDS GRANTED HEREUNDER WILL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS AND JUDICIAL DECISIONS OF
THE COMMONWEALTH OF PENNSYLVANIA, WITHOUT REGARD TO THE APPLICATION OF THE
PRINCIPLES OF CONFLICTS OF LAWS.

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