Exhibit 10.01

DESTINATION MATERNITY CORPORATION

AMENDED AND RESTATED 2005 EQUITY INCENTIVE PLAN

SECTION 1. Purpose; Definitions. The purposes of this Amended and Restated
Destination Maternity Corporation 2005 Equity Incentive Plan (the “Plan”) are
to: (a) enable Destination Maternity Corporation (the “Company”) and its
affiliated companies to recruit and retain highly qualified personnel;
(b) provide those personnel with an incentive for productivity; and (c) provide
those personnel with an opportunity to share in the growth and value of the
Company.

For purposes of the Plan, the following terms will have the meanings defined
below, unless the context clearly requires a different meaning:

(a) “Affiliate” means, with respect to a Person, a Person that directly or
indirectly controls, is controlled by, or is under common control with such
Person.

(b) “Award” means an award of Options, SARs, Restricted Stock, Restricted Stock
Units or Performance Awards made under this Plan.

(c) “Award Agreement” means, with respect to any particular Award, the written
document that sets forth the terms of that particular Award.

(d) “Board” means the Board of Directors of the Company, as constituted from
time to time; provided, however, that if the Board appoints a Committee to
perform some or all of the Board’s administrative functions hereunder,
references to the “Board” will be deemed to also refer to that Committee in
connection with matters to be performed by that Committee.

(e) “Cause” means (i) conviction of, or the entry of a plea of guilty or no
contest to, a felony or any other crime that causes the Company or its
Affiliates public disgrace or disrepute, or adversely affects the Company’s or
its Affiliates’ operations or financial performance, (ii) gross negligence or
willful misconduct with respect to the Company or any of its Affiliates,
including, without limitation fraud, embezzlement, theft or proven dishonesty in
the course of employment; (iii) alcohol abuse or use of controlled drugs other
than in accordance with a physician’s prescription; or (iv) material breach of
any agreement with or duty owed to the Company or any of its Affiliates.
Notwithstanding the foregoing, if a Participant and the Company (or any of its
Affiliates) have entered into an employment agreement, consulting agreement or
other similar agreement that specifically defines “cause,” then with respect to
such Participant, “Cause” shall have the meaning defined in that employment
agreement, consulting agreement or other agreement.

(f) “Change in Control” means the occurrence of any of the following, in one
transaction or a series of related transactions: (i) any “person” (as such term
is used in Sections 13(d) and 14(d) of the Exchange Act) becoming a “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing more than 50% of the
voting power of the Company’s then outstanding securities; (ii) a consolidation,
share exchange, reorganization or merger of the Company resulting in the
stockholders of the Company immediately prior to such event not owning at least
a majority of the voting power of the resulting entity’s securities outstanding
immediately following such event; (iii) the sale or other disposition of all or
substantially all the assets of the Company, (iv) a liquidation or dissolution
of the Company, or (v) any similar event deemed by the Board to constitute a
Change in Control for purposes of this Plan.

 

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(g) “Code” means the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto.

(h) “Committee” means a committee appointed by the Board in accordance with
Section 2 of the Plan.

(i) “Director” means a member of the Board.

(j) “Disability” means a condition rendering a Participant Disabled.

(k) “Disabled” will have the same meaning as set forth in Section 22(e)(3) of
the Code.

(l) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(m) “Fair Market Value” means, as of any date: (i) if the Shares are not then
publicly traded, the value of such Shares on that date, as determined by the
Board in its sole and absolute discretion; or (ii) if the Shares are publicly
traded, the closing price for a Share on the principal national securities
exchange on which the Shares are listed or admitted to trading or, if the Shares
are not listed or admitted to trading on any national securities exchange, but
are traded in the over-the-counter market, the closing sale price of a Share or,
if no sale is publicly reported, the average of the closing bid and asked
quotations for a Share, as reported by The Nasdaq Stock Market, Inc. (“Nasdaq”)
or any comparable system or, if the Common Stock is not listed on Nasdaq or a
comparable system, the closing sale price of a Share or, if no sale is publicly
reported, the average of the closing bid and asked prices, as furnished by two
members of the National Association of Securities Dealers, Inc. who make a
market in the Common Stock selected from time to time by the Company for that
purpose.

(n) “Incentive Stock Option” means any Option intended to be an “Incentive Stock
Option” within the meaning of Section 422 of the Code.

(o) “Non-Employee Director” will have the meaning set forth in
Rule 16b-3(b)(3)(i) promulgated by the Securities and Exchange Commission under
the Exchange Act, or any successor definition adopted by the Securities and
Exchange Commission; provided, however, that the Board or the Committee may, to
the extent that it deems necessary to comply with Section 162(m) of the Code or
regulations thereunder, require that each “Non-Employee Director” also be an
“outside director” as that term is defined in regulations under Section 162(m)
of the Code.

(p) “Non-Qualified Stock Option” means any Option that is not an Incentive Stock
Option.

(q) “Option” means any option to purchase Shares (including Restricted Stock, if
the Board so determines) granted pursuant to Section 5 hereof.

 

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(r) “Parent” means, in respect of the Company, a “parent corporation” as defined
in Sections 424(e) of the Code.

(s) “Participant” means an employee, consultant, Director, or other service
provider of or to the Company or any of its respective Affiliates to whom an
Award is granted.

(t) “Performance Award” means Shares or other Awards that, pursuant to
Section 10, are granted, vested and/or settled upon the achievement of specified
performance conditions.

(u) “Person” means an individual, partnership, corporation, limited liability
company, trust, joint venture, unincorporated association, or other entity or
association.

(v) “Restricted Stock” means Shares that are subject to restrictions pursuant to
Section 8 hereof.

(w) “Restricted Stock Unit” means a right granted under and subject to
restrictions pursuant to Section 9 hereof.

(x) “SAR” means a stock appreciation right granted under the Plan and described
in Section 6 hereof.

(y) “Shares” means shares of the Company’s common stock, par value $.01, subject
to substitution or adjustment as provided in Section 3(c) hereof.

(z) “Subsidiary” means, in respect of the Company, a subsidiary company as
defined in Sections 424(f) and (g) of the Code.

SECTION 2. Administration. The Plan will be administered by the Board; provided,
however, that the Board may at any time appoint a Committee to perform some or
all of the Board’s administrative functions hereunder; and provided further,
that the authority of any Committee appointed pursuant to this Section 2 will be
subject to such terms and conditions as the Board may prescribe and will be
coextensive with, and not in lieu of, the authority of the Board hereunder.

Subject to the requirements of the Company’s by-laws and certificate of
incorporation any other agreement that governs the appointment of Board
committees, any Committee established under this Section 2 will be composed of
not fewer than two members, each of whom will serve for such period of time as
the Board determines; provided, however, that if the Company has a class of
securities required to be registered under Section 12 of the Exchange Act, all
members of any Committee established pursuant to this Section 2 will be
Non-Employee Directors. From time to time the Board may increase the size of the
Committee and appoint additional members thereto, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies
however caused, or remove all members of the Committee and thereafter directly
administer the Plan.

The Board will have full authority to grant Awards under this Plan and determine
the terms of such Awards. Such authority will include the right to:

(a) select the persons to whom Awards are granted (consistent with the
eligibility conditions set forth in Section 4);

 

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(b) determine the type of Award to be granted;

(c) determine the number of Shares, if any, to be covered by each Award;

(d) establish the vesting or forfeiture terms of each Award;

(e) establish the performance conditions relevant to any Performance Award and
certify whether such performance conditions have been satisfied;

(f) determine whether and under what circumstances an Option may be exercised
without a payment of cash under Section 5(d); and

(g) determine whether, to what extent and under what circumstances Shares and
other amounts payable with respect to an Award may be deferred either
automatically or at the election of the Participant.

The Board will have the authority to adopt, alter and repeal such administrative
rules, guidelines and practices governing the Plan as it, from time to time,
deems advisable; to establish the terms and form of each Award Agreement; to
interpret the terms and provisions of the Plan and any Award issued under the
Plan (and any Award Agreement); and to otherwise supervise the administration of
the Plan. The Board may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or in any Award Agreement in the manner and to the
extent it deems necessary to carry out the intent of the Plan.

All decisions made by the Board pursuant to the provisions of the Plan will be
final and binding on all persons, including the Company and Participants. No
Director will be liable for any good faith determination, act or omission in
connection with the Plan or any Award.

SECTION 3. Shares Subject to the Plan.

(a) Shares Subject to the Plan. The Shares to be subject to or related to Awards
under the Plan will be authorized and unissued Shares of the Company, whether or
not previously issued and subsequently acquired by the Company. The maximum
number of Shares that may be issued in respect of Awards under the Plan is
2,000,000. The Company will reserve for the purposes of the Plan, out of its
authorized and unissued Shares, such number of Shares. Notwithstanding the
foregoing, no individual may granted Awards with respect to more than 400,000
Shares in any calendar year. In addition, not more than 1,000,000 Shares will be
issued hereunder in respect of Restricted Stock or Restricted Stock Units.

(b) Effect of the Expiration or Termination of Awards. If and to the extent that
an Option or SAR expires, terminates or is canceled or forfeited for any reason
without having been exercised in full, the Shares associated with that Option or
SAR will again become available for grant under the Plan. Similarly, if and to
the extent an Award of Restricted Stock, Restricted Stock Units or a Performance
Award is canceled, forfeited or repurchased for any reason, the Shares subject
to that Award will again become available for grant under the Plan. In addition,
if any Share is withheld pursuant to Section 12(e) in settlement of a tax
withholding obligation associated with an Award, that Share will again become
available for grant under the Plan.

(c) Other Adjustment. In the event of any recapitalization, stock split or
combination, stock dividend, spin-off, merger, reorganization or other similar
event or transaction affecting the Shares, substitutions

 

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or adjustments will be made by the Board to the aggregate number, class and/or
issuer of the securities that may be issued under the Plan, to the number, class
and/or issuer of securities subject to outstanding Awards, and to the exercise
price of outstanding Options or SARs, in each case in a manner that reflects
equitably the effects of such event or transaction.

(d) Change in Control. Notwithstanding anything to the contrary set forth in the
Plan, upon or in anticipation of any Change in Control, the Board may, in its
sole and absolute discretion and without the need for the consent of any
Participant, take one or more of the following actions contingent upon the
occurrence of that Change in Control: (i) cause any or all outstanding Options
or SARs to become vested and/or immediately exercisable, in whole or in part;
(ii) cause any or all outstanding Restricted Stock or Restricted Stock Units to
become non-forfeitable, in whole or in part; (iii) cancel any Option in exchange
for a substitute option in a manner consistent with the requirements of
Treas. Reg. §1.424-1(a) (notwithstanding the fact that the original Option may
never have been intended to satisfy the requirements for treatment as an
Incentive Stock Option); (iv) cancel any Restricted Stock, Restricted Stock
Units or SAR in exchange for restricted stock, restricted stock units or stock
appreciation rights in respect of the capital stock of any successor corporation
or its parent; (v) cancel any Option or SAR in exchange for cash and/or other
substitute consideration with a value equal to (A) the number of Shares subject
to that Option or SAR, multiplied by (B) the difference, if any, between the
Fair Market Value per Share on the date of the Change in Control and the
exercise price of that Option or SAR; provided, that if the Fair Market Value
per Share on the date of the Change in Control does not exceed the exercise
price of any such Option or SAR, the Board may cancel that Option or SAR without
any payment of consideration therefor; or (vi) cancel any Restricted Stock Unit
in exchange for cash and/or other substitute consideration with a value equal to
the Fair Market Value per Share on the date of the Change in Control. In the
discretion of the Board, any cash or substitute consideration payable upon
cancellation of an Award may be subjected to vesting terms substantially
identical to those that applied to the cancelled Award immediately prior to the
Change in Control.

SECTION 4. Eligibility. Employees, Directors, consultants, and other individuals
who provide services to the Company or its Affiliates are eligible to be granted
Awards under the Plan; provided, however, that only employees of the Company,
its Parent or a Subsidiary are eligible to be granted Incentive Stock Options.

SECTION 5. Options. Options granted under the Plan may be of two types:
(i) Incentive Stock Options or (ii) Non-Qualified Stock Options. Any Option
granted under the Plan will be in such form as the Board may at the time of such
grant approve. Without limiting the generality of Section 3(a), any or all of
the Shares reserved for issuance under Section 3(a) may be issued in respect of
Incentive Stock Options.

The Award Agreement evidencing any Option will incorporate the following terms
and conditions and will contain such additional terms and conditions, not
inconsistent with the terms of the Plan, as the Board deems appropriate in its
sole and absolute discretion:

(a) Option Price. The exercise price per Share purchasable under any Option will
be determined by the Board and will not be less than 100% of the Fair Market
Value per Share on the date of the grant. However, any Incentive Stock Option
granted to any Participant who, at the time the Option is granted, owns more
than 10% of the voting power of all classes of shares of the Company, its Parent
or a Subsidiary will have an exercise price per Share of not less than 110% of
Fair Market Value per Share on the date of the grant.

(b) Option Term. The term of each Option will be fixed by the Board, but no
Option will be exercisable more than 10 years after the date the Option is
granted. However, any Incentive Stock Option granted

 

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to any Participant who, at the time such Option is granted, owns more than 10%
of the voting power of all classes of shares of the Company, its Parent or a
Subsidiary may not have a term of more than five years. No Option may be
exercised by any person after expiration of the term of the Option.

(c) Exercisability. Options will vest and be exercisable at such time or times
and subject to such terms and conditions as determined by the Board.

(d) Method of Exercise. Subject to the terms of the applicable Award Agreement,
the exercisability provisions of Section 5(c) and the termination provisions of
Section 7, Options may be exercised in whole or in part from time to time during
their term by the delivery of written notice to the Company specifying the
number of Shares to be purchased. Such notice will be accompanied by payment in
full of the purchase price, either by certified or bank check, or such other
means as the Board may accept. As determined by the Board, in its sole
discretion, payment of the exercise price of an Option may be made in the form
of previously acquired Shares based on the Fair Market Value of the Shares on
the date the Option is exercised; provided, however, that, in the case of an
Incentive Stock Option, the right to make a payment in the form of previously
acquired Shares may be authorized only at the time the Option is granted.

No Shares will be issued upon exercise of an Option until full payment therefor
has been made. A Participant will not have the right to distributions or
dividends or any other rights of a stockholder with respect to Shares subject to
the Option until the Participant has given written notice of exercise, has paid
in full for such Shares, if requested, has given the representation described in
Section 11(a) hereof and fulfills such other conditions as may be set forth in
the applicable Award Agreement.

(e) Incentive Stock Option Limitations. In the case of an Incentive Stock
Option, the aggregate Fair Market Value (determined as of the time of grant) of
the Shares with respect to which Incentive Stock Options are exercisable for the
first time by the Participant during any calendar year under the Plan and/or any
other plan of the Company, its Parent or any Subsidiary will not exceed
$100,000. For purposes of applying the foregoing limitation, Incentive Stock
Options will be taken into account in the order granted. To the extent any
Option does not meet such limitation, that Option will be treated for all
purposes as a Non-Qualified Stock Option.

(f) Termination of Service. Unless otherwise specified in the applicable Award
Agreement, Options will be subject to the terms of Section 7 with respect to
exercise upon or following termination of employment or other service.

(g) Transferability of Options. Except as may otherwise be specifically
determined by the Board with respect to a particular Option: (i) no Option will
be transferable by the Participant other than by will or by the laws of descent
and distribution, and (ii) during the Participant’s lifetime, an Option will be
exercisable only by the Participant (or, in the event of the Participant’s
Disability, by his personal representative).

SECTION 6. Stock Appreciation Rights.

(a) Nature of Award. Upon the exercise of a SAR, its holder will be entitled to
receive an amount equal to the excess (if any) of: (i) the Fair Market Value of
the Shares covered by such SAR as of the date such SAR is exercised, over
(ii) the Fair Market Value of the Shares covered by such SAR as of the date such
SAR was granted. Such amount may be paid in either cash and/or Shares, as
determined by the Board in its sole and absolute discretion.

 

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(b) Terms and Conditions. The Award Agreement evidencing any SAR will
incorporate the following terms and conditions and will contain such additional
terms and conditions, not inconsistent with the terms of the Plan, as the Board
deems appropriate in its sole and absolute discretion:

(i) Term of SAR. Unless otherwise specified in the Award Agreement, the term of
a SAR will be ten years.

(ii) Exercisability. SARs will vest and become exercisable at such time or times
and subject to such terms and conditions as will be determined by the Board at
the time of grant.

(iii) Method of Exercise. Subject to terms of the applicable Award Agreement,
the exercisability provisions of Section 6(b)(ii) and the termination provisions
of Section 7, SARs may be exercised in whole or in part from time to time during
their term by delivery of written notice to the Company specifying the portion
of the SAR to be exercised.

(iv) Termination of Service. Unless otherwise specified in the Award Agreement,
SARs will be subject to the terms of Section 7 with respect to exercise upon
termination of employment or other service.

(v) Non-Transferability. Except as may otherwise be specifically determined by
the Board with respect to a particular SAR: (A) SARs may not be sold, pledged,
assigned, hypothecated, gifted, transferred or disposed of in any manner either
voluntarily or involuntarily by operation of law, other than by will or by the
laws of descent or distribution, and (B) during the Participant’s lifetime, SARs
will be exercisable only by the Participant (or, in the event of the
Participant’s Disability, by his personal representative).

SECTION 7. Termination of Service. Unless otherwise specified with respect to a
particular Option or SAR in the applicable Award Agreement, Options or SARs
granted hereunder will be exercisable after termination of service only to the
extent specified in this Section 7.

(a) Termination by Reason of Death. If a Participant’s service with the Company
or any Affiliate terminates by reason of death, any Option or SAR held by such
Participant may thereafter be exercised, to the extent then exercisable or on
such accelerated basis as the Board may determine at or after grant, by the
legal representative of the estate or by the legatee of the Participant under
the will of the Participant, for a period expiring (i) at such time as may be
specified by the Board at or after grant, or (ii) if not specified by the Board,
then 12 months from the date of death, or (iii) if sooner than the applicable
period specified under (i) or (ii) above, upon the expiration of the stated term
of such Option or SAR.

(b) Termination by Reason of Disability. If a Participant’s service with the
Company or any Affiliate terminates by reason of Disability, any Option or SAR
held by such Participant may thereafter be exercised by the Participant or his
personal representative, to the extent it was exercisable at the time of
termination, or on such accelerated basis as the Board may determine at or after
grant, for a period expiring (i) at such time as may be specified by the Board
at or after grant, or (ii) if not specified by the Board, then 12 months from
the date of termination of service, or (iii) if sooner than the applicable
period specified under (i) or (ii) above, upon the expiration of the stated term
of such Option or SAR.

 

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(c) Cause. If a Participant’s service with the Company or any Affiliate is
terminated for Cause: (i) any Option or SAR not already exercised will be
immediately and automatically forfeited as of the date of such termination, and
(ii) any Shares for which the Company has not yet delivered share certificates
will be immediately and automatically forfeited and the Company will refund to
the Participant the Option exercise price paid for such Shares, if any.

(d) Other Termination. If a Participant’s service with the Company or any
Affiliate terminates for any reason other than death, Disability or Cause, any
Option or SAR held by such Participant may thereafter be exercised by the
Participant, to the extent it was exercisable at the time of such termination,
or on such accelerated basis as the Board may determine at or after grant, for a
period expiring (i) at such time as may be specified by the Board at or after
grant, or (ii) if not specified by the Board, then 90 days from the date of
termination of service, or (iii) if sooner than the applicable period specified
under (i) or (ii) above, upon the expiration of the stated term of such Option
or SAR.

SECTION 8. Restricted Stock.

(a) Issuance. Restricted Stock may be issued either alone or in conjunction with
other Awards. The Board will determine the time or times within which Restricted
Stock may be subject to forfeiture, and all other conditions of such Awards. The
purchase price for Restricted Stock may, but need not, be zero. The prospective
recipient of an Award of Restricted Stock will not have any rights with respect
to such Award, unless and until such recipient has delivered to the Company an
executed Award Agreement and has otherwise complied with the applicable terms
and conditions of such Award.

(b) Certificates. A share certificate will be issued in connection with each
Award of Restricted Stock. Such certificate will be registered in the name of
the Participant receiving the Award, and will bear the following legend and/or
any other legend required by this Plan, the Award Agreement or by applicable
law:

THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY ARE
SUBJECT TO THE TERMS AND CONDITIONS OF THE DESTINATION MATERNITY CORPORATION
2005 EQUITY INCENTIVE PLAN AND AN AWARD AGREEMENT ENTERED INTO BETWEEN [THE
PARTICIPANT] AND DESTINATION MATERNITY CORPORATION COPIES OF THAT PLAN AND
AGREEMENT ARE ON FILE IN THE PRINCIPAL OFFICES OF DESTINATION MATERNITY
CORPORATION AND WILL BE MADE AVAILABLE TO THE HOLDER OF THIS CERTIFICATE WITHOUT
CHARGE UPON REQUEST TO THE SECRETARY OF THE COMPANY.

Share certificates evidencing Restricted Stock will be held in custody by the
Company or in escrow by an escrow agent until the restrictions thereon have
lapsed. As a condition to any Award of Restricted Stock, the Participant may be
required to deliver to the Company a share power, endorsed in blank, relating to
the Shares covered by such Award.

 

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(c) Restrictions and Conditions. The Award Agreement evidencing the grant of any
Restricted Stock will incorporate the following terms and conditions and such
additional terms and conditions, not inconsistent with the terms of the Plan, as
the Board deems appropriate in its sole and absolute discretion:

(i) During a period commencing with the date of an Award of Restricted Stock and
ending at such time or times as specified by the Board (the “Restriction
Period”), the Participant will not be permitted to sell, transfer, pledge,
assign or otherwise encumber Restricted Stock awarded under the Plan. The Board
may condition the lapse of restrictions on Restricted Stock upon the continued
employment or service of the recipient, the attainment of specified individual
or corporate performance goals, or such other factors as the Board may
determine, in its sole and absolute discretion.

(ii) Except as provided in this paragraph (ii) or the applicable Award
Agreement, once the Participant has been issued a certificate or certificates
for Restricted Stock, the Participant will have, with respect to the Restricted
Stock, all of the rights of a stockholder of the Company, including the right to
vote the Shares, and the right to receive any cash distributions or dividends.
The Board, in its sole discretion, may require cash distributions or dividends
to be subjected to the same Restriction Period as is applicable to the
Restricted Stock with respect to which such amounts are paid, or, if the Board
so determines, reinvested in additional Restricted Stock to the extent Shares
are available under Section 3(a) of the Plan. Any distributions or dividends
paid in the form of securities with respect to Restricted Stock will be subject
to the same terms and conditions as the Restricted Stock with respect to which
they were paid, including, without limitation, the same Restriction Period.

(iii) Subject to the provisions of the applicable Award Agreement, if a
Participant’s service with the Company and it Affiliates terminates prior to the
expiration of the applicable Restriction Period, the Participant’s Restricted
Stock that then remains subject to forfeiture will then be forfeited
automatically.

(iv) If and when the Restriction Period expires without a prior forfeiture of
the Restricted Stock subject to such Restriction Period (or if and when the
restrictions applicable to Restricted Stock are removed pursuant to Section 3(d)
or otherwise), the certificates for such Shares will be replaced with new
certificates, without the restrictive legends described in Section 8(b)
applicable to such lapsed restrictions, and such new certificates will be
delivered to the Participant, the Participant’s representative (if the
Participant has suffered a Disability), or the Participant’s estate or heir (if
the Participant has died).

SECTION 9. Restricted Stock Units. Subject to the other terms of the Plan, the
Board may grant Restricted Stock Units to eligible individuals and may impose
conditions on such units as it may deem appropriate. Each Restricted Stock Unit
shall be evidenced by an Award Agreement in the form that is approved by the
Board and that is not inconsistent with the terms and conditions of the Plan.
Each Restricted Stock Unit will represent a right to receive from the Company,
upon fulfillment of any applicable conditions, an amount equal to the Fair
Market Value (at the time of the distribution) of one Share. Distributions may
be made in cash and/or Shares. All other terms governing Restricted Stock Units,
such as vesting, time and form of payment and termination of units shall be set
forth in the applicable Award Agreement.

SECTION 10. Performance Awards.

(a) Performance Awards Generally. The Board may grant Performance Awards in
accordance with this Section 10. Performance Awards may be denominated as a
number of Shares, or specified number of other Awards (or a combination thereof)
which may be earned upon achievement or satisfaction of performance

 

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conditions specified by the Board. In addition, the Board may specify that any
other Award shall constitute a Performance Award by conditioning the vesting or
settlement of the Award upon the achievement or satisfaction of such performance
conditions as may be specified by the Board. Subject to Section 10(b), the Board
may use such business criteria or other measures of performance as it may deem
appropriate in establishing the relevant performance conditions and may, in its
discretion, adjust such criteria from time to time.

(b) Qualified Performance-Based Compensation Under Section 162(m). Performance
Awards intended to constitute “qualified performance-based compensation” under
Section 162(m) of the Code will be granted by the Committee and will be subject
to the terms of this Section 10(b).

(i) Specified Business Criteria. The grant, vesting and/or settlement of a
Performance Award subject to this Section 10(b) will be contingent upon
achievement of one or more of the following business criteria (subject to
adjustment in accordance with Section 10(b)(ii), below):

(A) the attainment of certain target levels of, or a specified percentage
increase in: revenues, income before taxes and extraordinary items, net income,
operating income, earnings before income tax, earnings before interest, taxes,
depreciation and amortization, earning per share, after-tax or pre-tax profits,
operational cash flow, return on capital employed or returned on invested
capital, after-tax or pre-tax return on stockholders’ equity, the price of the
Company’s common stock or a combination of the foregoing;

(B) the achievement of a certain level of, reduction of, or other specified
objectives with regard to limiting the level of increase in, the Company’s bank
debt or other public or private debt or financial obligations;

(C) 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

(D) 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.

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 goals for a
particular performance period need not be the same for all Participants.

(ii) Adjustments to Performance Goals. The Committee may provide, at the time
performance goals are established in accordance with Section 10(b)(i), that
adjustments will be made to those performance goals to take into account, in any
objective manner specified by the Committee, the impact of one or more of the
following: (A) gain or loss from all or certain claims and/or litigation and
insurance recoveries, (B) the impairment of tangible or intangible assets,
(C) stock-based compensation expense, (D) extraordinary, unusual or infrequently
occurring events reported in the Company’s public filings, (E) restructuring
activities reported in the Company’s public filings, (F) investments,
dispositions or acquisitions, (G) loss from the disposal of certain assets,
(H) gain or loss from the early extinguishment, redemption, or repurchase of
debt, (I) cash or non-cash charges related to store closing expenses,
(J) changes in accounting principles, or (K) any other item, event or
circumstance that would not cause an Award to fail to constitute “qualified
performance-based compensation”

 

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under Section 162(m) of the Code. An adjustment described in this
Section 10(b)(ii) 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 objectives are established. In
addition, 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,
spin-off, merger, reorganization or other similar event or transaction affecting
the Company’s stock.

(c) Other Terms of Performance Awards. The Board may specify other terms
pertinent to a Performance Award in the applicable Award Agreement, including
terms relating to the treatment of that Award in the event of a Change in
Control prior to the end of the applicable performance period.

SECTION 11. Amendments and Termination. The Board may amend, alter or
discontinue the Plan at any time. However, except as otherwise provided in
Section 3, no amendment, alteration or discontinuation will be made which would
impair the rights of a Participant with respect to an Award without that
Participant’s consent or which, without the approval of such amendment within
365 days of its adoption by the Board by the Company’s stockholders in a manner
consistent with Treas. Reg. § 1.422-3, would: (i) increase the total number of
Shares reserved for issuance hereunder, or (ii) change the persons or class of
persons eligible to receive Awards.

SECTION 12. General Provisions.

(a) The Board may require each Participant to represent to and agree with the
Company in writing that the Participant is acquiring securities of the Company
for investment purposes and without a view to distribution thereof and as to
such other matters as the Board believes are appropriate.

(b) All certificates for Shares or other securities delivered under the Plan
will be subject to such share-transfer orders and other restrictions as the
Board may deem advisable under the rules, regulations and other requirements of
the Securities Act of 1933, as amended, the Exchange Act, any stock exchange
upon which the Shares are then listed, and any other applicable federal or state
securities law, and the Board may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.

(c) Nothing contained in the Plan will prevent the Board from adopting other or
additional compensation arrangements, subject to stockholder approval if such
approval is required.

(d) Neither the adoption of the Plan nor the execution of any document in
connection with the Plan will: (i) confer upon any employee of the Company or an
Affiliate any right to continued employment or engagement 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.

(e) No later than the date as of which an amount first becomes includible in the
gross income of the Participant for federal income tax purposes with respect to
any Award under the Plan, the Participant will pay to the Company, or make
arrangements satisfactory to the Company regarding the payment of, any federal,
state or local taxes of any kind required by law to be withheld with respect to
such amount. Unless otherwise determined by the Board, the minimum required
withholding obligations may be settled with Shares, including Shares that are
part of the Award that gives rise to the withholding requirement. The
obligations of the Company under the Plan will be conditioned on such payment or
arrangements and the Company will have the right to deduct any such taxes from
any payment of any kind otherwise due to the Participant.

 

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SECTION 13. Effective Date of Plan. Subject to the approval of the Plan by the
Company’s stockholders within 12 months of the Plan’s adoption by the Board, the
Plan will become effective on the date that it is adopted by the Board.

SECTION 14. Term of Plan. The Plan will continue in effect until terminated in
accordance with Section 11; provided, however, that no Incentive Stock Option
will be granted hereunder on or after the 10th anniversary of the date of
stockholder approval of the Plan (or, if the stockholders approve an amendment
that increases the number of shares subject to the Plan, the 10th anniversary of
the date of such approval); but provided further, that Incentive Stock Options
granted prior to such 10th anniversary may extend beyond that date.

SECTION 15. Invalid Provisions. In the event that any provision of this Plan is
found to be invalid or otherwise unenforceable under any applicable law, such
invalidity or unenforceability will not be construed as rendering any other
provisions contained herein as invalid or unenforceable, and all such other
provisions will be given full force and effect to the same extent as though the
invalid or unenforceable provision was not contained herein.

SECTION 16. Governing Law. The Plan 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.

SECTION 17. Board Action. Notwithstanding anything to the contrary set forth in
the Plan, any and all actions of the Board or Committee, as the case may be,
taken under or in connection with the Plan and any agreements, instruments,
documents, certificates or other writings entered into, executed, granted,
issued and/or delivered pursuant to the terms hereof, will be subject to and
limited by any and all votes, consents, approvals, waivers or other actions of
all or certain stockholders of the Company or other persons required by:

(a) the Company’s Certificate of Incorporation (as the same may be amended
and/or restated from time to time);

(b) the Company’s Bylaws (as the same may be amended and/or restated from time
to time); and

(c) any other agreement, instrument, document or writing now or hereafter
existing, between or among the Company and its stockholders or other persons (as
the same may be amended from time to time).

SECTION 18. Notices. Any notice to be given to the Company pursuant to the
provisions of this Plan must be given in writing and addressed, if to the
Company, to its principal executive office to the attention of its Chief
Financial Officer (or such other person as the Company may designate in writing
from time to time), and, if to a Participant, to the address contained in the
Company’s personnel files, or at such other address as that Participant may
hereafter designate in writing to the Company. Any such notice will be deemed
duly given: if delivered personally or via recognized overnight delivery
service, on the date and at the time so delivered; if sent via telecopier or
email, on the date and at the time telecopied or emailed with confirmation of
delivery; or, if mailed, five (5) days after the date of mailing by registered
or certified mail.

 

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