EXHIBIT 10.2

EXECUTION COPY

SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is made
on this 2nd day of March, 2007 by and between DAN W. MATTHIAS, a resident of
Pennsylvania (“Employee”), and MOTHERS WORK, INC., a corporation organized and
existing under the laws of the State of Delaware (the “Company”).

W I T N E S S E T H

WHEREAS, the Company and Employee are parties to an Amended and Restated
Employment Agreement, dated April 28, 2005 and as further amended, pursuant to
which Employee serves as the Chief Executive Officer of the Company (the
“Existing Employment Agreement”); and

WHEREAS, the Company has determined it is essential to the business of the
Company to provide for the continued employment of Employee and Rebecca C.
Matthias and certain prohibitions against competition following their
termination of that employment under certain circumstances; and

WHEREAS, Section 17 of the Existing Employment Agreement provides that the
Company and Employee may amend the Existing Employment Agreement by mutual
agreement in writing; and

WHEREAS, the Company and Employee desire to amend and restate the Existing
Employment Agreement in its entirety.

NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained herein, and intending to be legally bound, the parties, subject to the
terms and conditions set forth herein, agree as follows:

1.             EMPLOYMENT AND TERM.  THE COMPANY WILL CONTINUE TO EMPLOY
EMPLOYEE AND EMPLOYEE HEREBY ACCEPTS CONTINUED EMPLOYMENT WITH THE COMPANY, AS
CHIEF EXECUTIVE OFFICER (HIS “POSITION”) ON THE TERMS HEREIN DESCRIBED FOR THE
PERIOD BEGINNING ON THE DATE HEREOF AND CONTINUING UNTIL THE EARLIER OF
SEPTEMBER 30, 2012 OR THE DATE TERMINATED BY EITHER PARTY (SUCH PERIOD OF
EMPLOYEE’S EMPLOYMENT IS HEREIN REFERRED TO AS THE “TERM”).  FOR AVOIDANCE OF
DOUBT, WHILE THE PARTIES MAY AGREE TO EXTEND THE TERM BY MUTUAL AGREEMENT, IN
THE ABSENCE OF SUCH AGREEMENT, NO EXTENSION WILL BE PRESUMED AND THE FAILURE TO
EXTEND THE AGREEMENT WILL NOT TRIGGER ANY RIGHT TO SEVERANCE OR ANY OTHER
ENTITLEMENT.

2.             DUTIES.

2.1.          DURING HIS EMPLOYMENT BY THE COMPANY, EXCEPT FOR VACATIONS IN
ACCORDANCE WITH SCHEDULE A HERETO, ABSENCES DUE TO TEMPORARY ILLNESS OR AS
OTHERWISE PROVIDED BELOW IN SECTION 3, EMPLOYEE SHALL USE HIS BEST EFFORTS TO
SERVE THE COMPANY FAITHFULLY AND SHALL DEVOTE HIS FULL TIME, ATTENTION, SKILL
AND EFFORTS TO THE PERFORMANCE OF THE DUTIES REQUIRED BY OR APPROPRIATE FOR HIS
POSITION.  EMPLOYEE AGREES TO ASSUME SUCH DUTIES AND RESPONSIBILITIES AS MAY

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BE CUSTOMARILY INCIDENT TO THE POSITION, AND AS MAY BE REASONABLY ASSIGNED TO
EMPLOYEE FROM TIME TO TIME BY THE BOARD OF DIRECTORS OF THE COMPANY (CONSISTENT
WITH THE COMPANY’S BYLAWS AND WITH THE LEVEL OF RESPONSIBILITY APPROPRIATE TO
THE POSITION).

2.2.          EFFECTIVE ON OR AFTER OCTOBER 1, 2009, EMPLOYEE MAY ELECT (WITH AT
LEAST 180 DAYS’ ADVANCE WRITTEN NOTICE TO THE COMPANY’S BOARD OF DIRECTORS) TO
REDUCE HIS TIME COMMITMENT TO 50% PART-TIME.  IN THAT CASE, (A) EMPLOYEE’S BASE
SALARY, CASH BONUS AND THE RANGE AND TARGET NUMBER OF SHARES SUBJECT TO EQUITY
INCENTIVE AWARDS DESCRIBED IN SECTION 5.3 WILL BE PROPORTIONATELY REDUCED, (B)
THE REDUCTION IN EMPLOYEE’S HOURS WILL NOT AFFECT HIS ELIGIBILITY TO CONTINUE TO
PARTICIPATE IN THE COMPANY’S GROUP HEALTH PLAN, AS IN EFFECT FROM TIME TO TIME
(OR, AT THE COMPANY’S ELECTION, IN A MUTUALLY AGREED UPON AND REASONABLY
COMPARABLE INDIVIDUAL ARRANGEMENT) OR TO RECEIVE ANY OTHER BENEFITS LISTED ON
SCHEDULE A HERETO (OTHER THAN THE BENEFITS DESCRIBED IN ITEM 9 THEREOF, TO THE
EXTENT ELIGIBILITY FOR THOSE BENEFITS REQUIRES MORE THAN 50% PART-TIME SERVICE),
AND (C) EMPLOYEE’S TITLE, AUTHORITY AND DUTIES WILL BE AS AGREED BETWEEN
EMPLOYEE AND THE COMPANY.

3.             OTHER BUSINESS ACTIVITIES.  DURING HIS EMPLOYMENT BY THE COMPANY,
EMPLOYEE WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY OTHER BUSINESS
ACTIVITIES OR PURSUITS WHATSOEVER, EXCEPT: (I) ACTIVITIES IN CONNECTION WITH ANY
CHARITABLE OR CIVIC ACTIVITIES, (II) PERSONAL INVESTMENTS, (III) SERVICE AS AN
EXECUTOR, TRUSTEE OR IN OTHER SIMILAR FIDUCIARY CAPACITY, (IV) SERVICE AS A
DIRECTOR FOR UP TO THREE OTHER COMPANIES (PROVIDED THAT ADVANCE NOTICE OF SUCH
OTHER BOARD SERVICE IS PROVIDED TO THE COMPENSATION COMMITTEE OF THE COMPANY’S
BOARD OF DIRECTORS AND PROVIDED FURTHER THAT NOT MORE THAN TWO OF SUCH OTHER
COMPANIES ARE PUBLICLY TRADED), OR (V) OTHER ACTIVITIES SPECIFICALLY AUTHORIZED
BY THE COMPENSATION COMMITTEE OF THE COMPANY’S BOARD OF DIRECTORS; PROVIDED,
HOWEVER, THAT ANY OF THE FOREGOING EXCEPTIONS DO NOT: (X) INTERFERE WITH
EMPLOYEE’S PERFORMANCE OF RESPONSIBILITIES AND OBLIGATIONS PURSUANT TO THIS
AGREEMENT, OR (Y) CREATE A CONFLICT OF INTEREST WITH EMPLOYEE’S RESPONSIBILITIES
TO THE COMPANY.  FOR AVOIDANCE OF DOUBT, INCIDENTAL USE OF COMPANY FACILITIES
(SUCH AS TELEPHONE OR EMAIL SYSTEMS) IN FURTHERANCE OF ACTIVITIES AUTHORIZED
UNDER THIS PARAGRAPH WILL NOT CONSTITUTE AN INTERFERENCE WITH EMPLOYEE’S
OBLIGATIONS TO THE COMPANY.

4.             DIRECTOR.  DURING THE TERM OF HIS EMPLOYMENT, THE COMPANY SHALL
NOMINATE EMPLOYEE FOR ELECTION TO THE COMPANY’S BOARD OF DIRECTORS AND SHALL USE
ITS BEST EFFORTS TO ELECT EMPLOYEE TO SUCH POSITION.

5.             COMPENSATION.  THE COMPANY SHALL PAY EMPLOYEE, AND EMPLOYEE
HEREBY AGREES TO ACCEPT, AS COMPENSATION FOR ALL SERVICES RENDERED HEREUNDER AND
FOR EMPLOYEE’S COVENANT NOT TO COMPETE AS PROVIDED FOR IN SECTION 8 HEREOF:

5.1.          BASE SALARY.  THE COMPANY SHALL PAY EMPLOYEE AN INITIAL BASE
SALARY AT THE ANNUAL RATE OF $531,803 (AS THE SAME MAY HEREAFTER BE INCREASED
PURSUANT TO THE TERMS OF THIS SECTION, THE “BASE SALARY”).  THE BASE SALARY
SHALL BE INCLUSIVE OF ALL APPLICABLE INCOME, SOCIAL SECURITY AND OTHER TAXES AND
CHARGES WHICH ARE REQUIRED BY LAW TO BE WITHHELD BY THE COMPANY OR WHICH ARE
REQUESTED TO BE WITHHELD BY EMPLOYEE, AND WHICH SHALL BE WITHHELD AND PAID IN
ACCORDANCE WITH THE COMPANY’S NORMAL PAYROLL PRACTICE FOR ITS SIMILARLY SITUATED
EMPLOYEES FROM TIME TO TIME IN EFFECT.  THE BASE SALARY SHALL BE INCREASED AT
THE START OF EACH FISCAL YEAR OF THE COMPANY, AS DETERMINED BY THE COMPENSATION
COMMITTEE OF THE COMPANY’S

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BOARD OF DIRECTORS, BUT IN NO EVENT SHALL SUCH INCREASE BE LESS THAN THE
CORRESPONDING INCREASE IN THE REVISED CONSUMER PRICE INDEX FOR ALL ITEMS FOR THE
1994 BASE YEAR (THE “INDEX”), AS PUBLISHED BY THE U.S.  DEPARTMENT OF LABOR,
BUREAU OF LABOR STATISTICS.  IF THE INDEX IS CHANGED SO THAT A BASE PERIOD OTHER
THAN 1994 IS USED, THE INDEX USED HEREIN SHALL BE CONVERTED IN ACCORDANCE WITH
THE CONVERSION FACTOR PUBLISHED BY THE BUREAU OF LABOR STATISTICS.  IF THE INDEX
IS NOT PUBLISHED, IS DISCONTINUED OR IS OTHERWISE REVISED DURING THE TERM, SUCH
OTHER INDEX OR CALCULATION WITH WHICH IT IS REPLACED SHALL BE USED IN ORDER TO
OBTAIN SUBSTANTIALLY THE SAME RESULT AS WOULD BE OBTAINED IF THE INDEX HAD
CONTINUED TO BE PUBLISHED IN THE SAME FORM AND MANNER AS IT WAS PRIOR TO IT
BEING REPLACED.

5.2.          CASH BONUS.

(A)           EMPLOYEE’S BONUS FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2007
WILL BE BETWEEN 0% AND 100% OF EMPLOYEE’S BASE SALARY, WITH A TARGET OF 50%.

(B)           EMPLOYEE’S BONUS FOR ANY FISCAL YEAR OF THE TERM BEGINNING AFTER
SEPTEMBER 30, 2007 WILL BE BETWEEN 0% AND 200% OF EMPLOYEE’S BASE SALARY, WITH A
TARGET OF 100%.

(C)           THE ACTUAL AMOUNT OF ANY BONUS PAYABLE UNDER THIS SECTION 5.2
(EACH, A “CASH BONUS”) WILL BE PAID IN ACCORDANCE WITH THE MOTHERS WORK, INC.
MANAGEMENT INCENTIVE PLAN, BASED ON THE COMPANY’S ACHIEVEMENT IN THE APPLICABLE
FISCAL YEAR OF CORPORATE AND/OR INDIVIDUAL PERFORMANCE GOALS APPROVED BY THE
COMPANY’S BOARD OF DIRECTORS OR ITS COMPENSATION COMMITTEE.

5.3.          EQUITY INCENTIVES.

(A)           FOR EACH FISCAL YEAR OF THE COMPANY ENDING DURING THE TERM, THE
COMPANY SHALL ISSUE TO EMPLOYEE, AS ADDITIONAL COMPENSATION, RESTRICTED STOCK OR
RESTRICTED STOCK UNITS WITH RESPECT TO A NUMBER OF SHARES OF COMMON STOCK OF THE
COMPANY, $.01 PAR VALUE PER SHARE (THE “COMMON STOCK”) BETWEEN ZERO AND 20,000
WITH A TARGET OF 15,000, WHICH AMOUNT SHALL BE SUBJECT TO EQUITABLE ADJUSTMENT
WHENEVER THERE SHALL OCCUR A STOCK SPLIT, COMBINATION, RECLASSIFICATION OR OTHER
SIMILAR EVENT INVOLVING THE COMMON STOCK (THE “PERFORMANCE SHARES”).  THE ACTUAL
NUMBER OF PERFORMANCE SHARES SUBJECT TO A GIVEN YEAR’S AWARD WILL BE DETERMINED
OR ADJUSTED, AS APPLICABLE, BASED ON THE COMPANY’S ACHIEVEMENT IN THE APPLICABLE
YEAR OF CORPORATE AND/OR INDIVIDUAL PERFORMANCE GOALS APPROVED BY THE COMPANY’S
BOARD OF DIRECTORS OR ITS COMPENSATION COMMITTEE.  SUCH DETERMINATION WILL OCCUR
WITHIN 30 DAYS FOLLOWING THE DATE ON WHICH THE COMPANY RELEASES FINAL EARNINGS
FOR THE RELEVANT FISCAL YEAR.  ANY AWARD ISSUED OR TO BE ISSUED UNDER THIS
PARAGRAPH WILL ALSO BE SUBJECT TO TIME VESTING IN TWO EQUAL ANNUAL INSTALLMENTS,
ON THE FIRST AND SECOND ANNIVERSARIES OF THE LAST DAY OF THE FISCAL YEAR WITH
RESPECT TO WHICH THEY WERE GRANTED, BASED ON EMPLOYEE’S CONTINUED EMPLOYMENT
WITH THE COMPANY (AND SUBJECT TO ACCELERATED FULL VESTING IN THE EVENT OF A
CHANGE IN CONTROL, EMPLOYEE’S DEATH, DISABILITY, TERMINATION WITHOUT CAUSE OR
RESIGNATION WITH GOOD REASON DURING THE TWO YEAR TIME VESTING PERIOD).

(B)           IF EMPLOYEE’S EMPLOYMENT IS TERMINATED PURSUANT TO SECTIONS 9.3,
9.4 OR 9.6, EMPLOYEE WILL BE ENTITLED TO A PRO-RATA PORTION (DETERMINED BASED ON
THE

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NUMBER OF FULL AND PARTIAL MONTHS OF THE FISCAL YEAR THAT HAVE TRANSPIRED PRIOR
TO THE DATE OF TERMINATION) OF THE PERFORMANCE SHARES THAT OTHERWISE WOULD HAVE
BEEN EARNED UNDER THIS SECTION 5.3 FOR THE FISCAL YEAR OF TERMINATION (BASED ON
ACTUAL CORPORATE AND/OR INDIVIDUAL PERFORMANCE IN THAT YEAR, DETERMINED AT THE
SAME TIME AND IN THE SAME MANNER AS WOULD HAVE OTHERWISE BEEN APPLICABLE IN THE
ABSENCE OF THE TERMINATION).  SUCH SHARES WILL BE ISSUED OR RELEASED FROM ESCROW
(AS APPLICABLE, DEPENDING ON WHETHER AWARDED IN THE FORM OF RESTRICTED STOCK
UNITS OR RESTRICTED STOCK) AT THE SAME TIME AS WOULD HAVE OTHERWISE BEEN
APPLICABLE IN THE ABSENCE OF THE TERMINATION, PROVIDED THAT THE TIME-BASED
VESTING REQUIREMENT OTHERWISE APPLICABLE TO SUCH PRO-RATA PERFORMANCE SHARE
AWARD WILL BE WAIVED.

(C)           THE COMPANY’S OBLIGATIONS UNDER THIS SECTION 5.3 WILL BE SUBJECT
TO STOCKHOLDER APPROVAL, IN A MANNER CONSISTENT WITH THE REQUIREMENTS OF SECTION
162(M) OF THE CODE, AT THE COMPANY’S 2008 ANNUAL MEETING.

6.             BENEFITS AND EXPENSES.  IN ADDITION TO THOSE BENEFITS PROVIDED TO
SIMILARLY SITUATED EMPLOYEES OF THE COMPANY, EMPLOYEE SHALL BE ENTITLED TO THOSE
EMPLOYEE BENEFITS AS SET FORTH ON SCHEDULE A HERETO (“BENEFITS”).

7.             CONFIDENTIALITY.  EMPLOYEE RECOGNIZES AND ACKNOWLEDGES THAT THE
PROPRIETARY INFORMATION (AS HEREINAFTER DEFINED) IS A VALUABLE, SPECIAL AND
UNIQUE ASSET OF THE BUSINESS OF THE COMPANY.  AS A RESULT, BOTH DURING THE TERM
AND THEREAFTER, EMPLOYEE SHALL NOT, WITHOUT PRIOR WRITTEN CONSENT OF THE
COMPANY, FOR ANY REASON EITHER DIRECTLY OR INDIRECTLY DIVULGE TO ANY THIRD-PARTY
OR USE FOR HIS OWN BENEFIT, OR FOR ANY PURPOSE OTHER THAN THE EXCLUSIVE BENEFIT
OF THE COMPANY, ANY CONFIDENTIAL, PROPRIETARY, BUSINESS AND TECHNICAL
INFORMATION OR TRADE SECRETS OF THE COMPANY OR OF ANY SUBSIDIARY OR AFFILIATE OF
THE COMPANY (“PROPRIETARY INFORMATION”) REVEALED, OBTAINED OR DEVELOPED IN THE
COURSE OF HIS EMPLOYMENT WITH THE COMPANY.  FAILURE BY THE COMPANY TO MARK ANY
OF THE PROPRIETARY INFORMATION AS CONFIDENTIAL OR PROPRIETARY SHALL NOT AFFECT
ITS STATUS AS PROPRIETARY INFORMATION UNDER THE TERMS OF THIS AGREEMENT.

8.             COVENANT NOT TO COMPETE.  EMPLOYEE SHALL NOT, DURING THE TERM AND
THE TWO (2) YEAR PERIOD FOLLOWING ANY CESSATION OF EMPLOYEE’S EMPLOYMENT WITH
THE COMPANY (THE “RESTRICTED PERIOD”), DO ANY OF THE FOLLOWING, DIRECTLY OR
INDIRECTLY, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY:

8.1.          ENGAGE OR PARTICIPATE IN A PROHIBITED BUSINESS (AS DEFINED BELOW)
AS DETERMINED AT THE TERMINATION OF EMPLOYEE’S EMPLOYMENT HEREUNDER;

8.2.          BECOME INTERESTED IN (AS OWNER, STOCKHOLDER, LENDER, PARTNER,
CO-VENTURER, DIRECTOR, OFFICER, EMPLOYEE, AGENT, CONSULTANT OR OTHERWISE) ANY
PERSON, FIRM, CORPORATION, ASSOCIATION OR OTHER ENTITY ENGAGED IN ANY PROHIBITED
BUSINESS AS DETERMINED AT THE TERMINATION OF EMPLOYEE’S EMPLOYMENT HEREUNDER. 
NOTWITHSTANDING THE FOREGOING, EMPLOYEE MAY HOLD NOT MORE THAN ONE PERCENT (1%)
OF THE OUTSTANDING SECURITIES OF ANY CLASS OF ANY PUBLICLY-TRADED SECURITIES OF
A COMPANY THAT IS ENGAGED IN ACTIVITIES REFERENCED IN SECTION 8.1 HEREOF;

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8.3.          SOLICIT OR CALL ON, EITHER DIRECTLY OR INDIRECTLY, ANY SUPPLIER
WITH WHOM THE COMPANY SHALL HAVE DEALT AT ANY TIME DURING THE ONE (1) YEAR
PERIOD IMMEDIATELY PRECEDING THE TERMINATION OF EMPLOYEE’S EMPLOYMENT HEREUNDER;

8.4.          INFLUENCE OR ATTEMPT TO INFLUENCE ANY SUPPLIER OR POTENTIAL
SUPPLIER OF THE COMPANY TO TERMINATE OR MODIFY ANY WRITTEN OR ORAL AGREEMENT OR
COURSE OF DEALING WITH THE COMPANY; OR

8.5.          INFLUENCE OR ATTEMPT TO INFLUENCE ANY PERSON TO EITHER (I)
TERMINATE OR MODIFY HIS OR HER EMPLOYMENT, CONSULTING, AGENCY, DISTRIBUTORSHIP
OR OTHER ARRANGEMENT WITH THE COMPANY, OR (II) EMPLOY OR RETAIN, OR ARRANGE TO
HAVE ANY OTHER PERSON OR ENTITY EMPLOY OR RETAIN, ANY PERSON WHO HAS BEEN
EMPLOYED OR RETAINED BY THE COMPANY AS AN EMPLOYEE, CONSULTANT, AGENT OR
DISTRIBUTOR OF THE COMPANY AT ANY TIME DURING THE ONE (1) YEAR PERIOD
IMMEDIATELY PRECEDING THE TERMINATION OF EMPLOYEE’S EMPLOYMENT HEREUNDER.

The term “Prohibited Business” shall mean both (i) the manufacture, marketing
and/or sale of maternity clothing, and (ii) any other specialty apparel retail
niche market in which the Company is conducting or then currently implementing
plans to conduct its vertically integrated operating strategy (it being agreed
that the scope of any such niche market will be made by reference to the
relevant characteristics upon which such specific market is defined (e.g.
identifiable target customer base, price point, fashion point-of-view, styling
and retail distribution locations)).

9.             TERMINATION.  EMPLOYEE’S EMPLOYMENT HEREUNDER MAY BE TERMINATED
DURING THE TERM UPON THE OCCURRENCE OF ANY ONE OF THE EVENTS DESCRIBED IN THIS
SECTION 9.  UPON TERMINATION, EMPLOYEE SHALL BE ENTITLED ONLY TO SUCH
COMPENSATION AND BENEFITS AS DESCRIBED IN THE APPLICABLE SUBSECTION OF THIS
SECTION 9.

9.1.          TERMINATION BY DEATH.  IN THE EVENT THAT EMPLOYEE DIES DURING THE
TERM, EMPLOYEE’S EMPLOYMENT HEREUNDER SHALL BE TERMINATED THEREBY AND THE
COMPANY SHALL PAY TO EMPLOYEE’S EXECUTORS, LEGAL REPRESENTATIVES OR
ADMINISTRATORS AN AMOUNT EQUAL TO THE ACCRUED AND UNPAID PORTION OF HIS BASE
SALARY, BENEFITS AND CASH BONUS THROUGH THE END OF THE MONTH IN WHICH HE DIES,
IN ADDITION TO THAT PORTION OF THE SEVERANCE PAY DESCRIBED IN SECTION
9.3(C)(I).  ALL OUTSTANDING OPTIONS SHALL BECOME IMMEDIATELY VESTED AND
EXERCISABLE.  FOR PURPOSES OF THIS AGREEMENT, ACCRUED BUT UNPAID CASH BONUSES
MEANS ANY CASH BONUS PAYABLE WITH RESPECT TO A YEAR ENDING PRIOR TO THE DATE OF
TERMINATION, AS WELL AS A PRO-RATA PORTION OF ANY CASH BONUS THAT WOULD HAVE
BEEN PAID FOR THE YEAR OF TERMINATION, BUT FOR THAT TERMINATION.  EXCEPT AS
OTHERWISE PROVIDED HEREIN, THE AMOUNT OF SUCH CASH BONUSES WILL BE DETERMINED
AND PAID IN THE SAME MANNER AND AS OF THE SAME DATE THAT CASH BONUSES WOULD
OTHERWISE HAVE BEEN DETERMINED AND PAID FOR THE APPLICABLE YEAR, BUT FOR THE
TERMINATION (THE “CUSTOMARY PAYMENT DATE”) AND WILL BE PRO-RATED, AS APPLICABLE,
BASED ON THE NUMBER OF FULL AND PARTIAL MONTHS OF THE YEAR TRANSPIRED PRIOR TO
THE DATE OF TERMINATION.  EXCEPT AS SPECIFICALLY SET FORTH IN THIS SECTION 9.1,
THE COMPANY SHALL HAVE NO LIABILITY OR OBLIGATION HEREUNDER TO EMPLOYEE’S
EXECUTORS, LEGAL REPRESENTATIVES, ADMINISTRATORS, HEIRS OR ASSIGNS OR ANY OTHER
PERSON CLAIMING UNDER OR THROUGH HIM BY REASON OF EMPLOYEE’S DEATH, EXCEPT THAT
EMPLOYEE’S EXECUTORS, LEGAL REPRESENTATIVES OR ADMINISTRATORS WILL BE ENTITLED
TO RECEIVE THE PAYMENT PRESCRIBED UNDER ANY DEATH OR DISABILITY

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BENEFITS PLAN IN WHICH HE IS A PARTICIPANT AS AN EMPLOYEE OF THE COMPANY, AND TO
EXERCISE ANY RIGHTS AFFORDED UNDER ANY COMPENSATION OR BENEFIT PLAN THEN IN
EFFECT.

9.2.          TERMINATION FOR CAUSE.

(A)           THE COMPANY MAY TERMINATE EMPLOYEE’S EMPLOYMENT HEREUNDER AT ANY
TIME FOR “CAUSE” UPON FORTY-FIVE (45) DAYS PRIOR WRITTEN NOTICE TO EMPLOYEE (OR
CONTINUATION OF BASE SALARY FOR 45 DAYS IN LIEU OF SUCH NOTICE).  FOR PURPOSES
OF THIS AGREEMENT, “CAUSE” SHALL MEAN: (I) ANY MATERIAL BREACH BY EMPLOYEE OF
ANY OF HIS MATERIAL OBLIGATIONS UNDER SECTIONS 7 OR 8 OF THIS AGREEMENT, OR (II)
OTHER CONDUCT OF EMPLOYEE INVOLVING ANY TYPE OF MATERIAL DISLOYALTY TO THE
COMPANY OR WILLFUL MISCONDUCT WITH RESPECT TO THE COMPANY, INCLUDING WITHOUT
LIMITATION FRAUD, EMBEZZLEMENT, THEFT OR PROVEN DISHONESTY IN THE COURSE OF HIS
EMPLOYMENT OR CONVICTION OF A FELONY.

(B)           IN THE EVENT OF A TERMINATION OF EMPLOYEE’S EMPLOYMENT HEREUNDER
PURSUANT TO SECTION 9.2(A), EMPLOYEE SHALL BE ENTITLED TO RECEIVE ALL ACCRUED
BUT UNPAID (AS OF THE EFFECTIVE DATE OF SUCH TERMINATION) BASE SALARY AND
BENEFITS.  ALL COMPENSATION SHALL CEASE AT THE TIME OF SUCH TERMINATION, SUBJECT
TO THE TERMS OF ANY BENEFIT OR COMPENSATION PLAN THEN IN FORCE AND APPLICABLE TO
EMPLOYEE.  ALL OUTSTANDING OPTIONS WHICH REMAIN UNVESTED SHALL BE AUTOMATICALLY
CANCELED AND DECLARED NULL AND VOID.  EXCEPT AS SPECIFICALLY SET FORTH IN THIS
SECTION 9.2, THE COMPANY SHALL HAVE NO LIABILITY OR OBLIGATION HEREUNDER BY
REASON OF SUCH TERMINATION.

(C)           AT LEAST THIRTY (30) DAYS PRIOR TO THE TERMINATION OF EMPLOYEE’S
EMPLOYMENT HEREUNDER PURSUANT TO ANY CLAUSE OF SECTION 9.2(A), THE BOARD OF
DIRECTORS OF THE COMPANY SHALL HOLD A MEETING AT WHICH EMPLOYEE SHALL BE GIVEN
THE OPPORTUNITY TO BE HEARD WITH RESPECT TO SUCH TERMINATION AND, TO THE EXTENT
REMEDIABLE, A REASONABLE OPPORTUNITY TO REMEDY THE OBJECTIONABLE BEHAVIOR.

9.3.          TERMINATION WITHOUT CAUSE.

(A)           THE COMPANY MAY TERMINATE EMPLOYEE’S EMPLOYMENT HEREUNDER AT ANY
TIME, FOR ANY REASON, WITHOUT CAUSE, EFFECTIVE UPON THE DATE DESIGNATED BY THE
COMPANY UPON NINETY (90) DAYS WRITTEN NOTICE TO EMPLOYEE.

(B)           IN THE EVENT OF A TERMINATION OF EMPLOYEE’S EMPLOYMENT HEREUNDER
PURSUANT TO SECTION 9.3(A), EMPLOYEE SHALL BE ENTITLED TO RECEIVE ALL ACCRUED
BUT UNPAID (AS OF THE EFFECTIVE DATE OF SUCH TERMINATION) BASE SALARY, BENEFITS
AND CASH BONUSES PLUS THE SEVERANCE PAY (AS DEFINED HEREIN).  EXCEPT AS
SPECIFICALLY SET FORTH HEREIN, ALL COMPENSATION SHALL CEASE AT THE TIME OF SUCH
TERMINATION, SUBJECT TO THE TERMS OF ANY BENEFIT OR COMPENSATION PLAN THEN IN
FORCE AND APPLICABLE TO EMPLOYEE.  ALL OUTSTANDING OPTIONS SHALL BECOME
IMMEDIATELY VESTED AND EXERCISABLE.

(C)           FOR THE PURPOSES OF THIS AGREEMENT, THE TERM “SEVERANCE PAY” SHALL
MEAN:

(I)            A LUMP SUM IN CASH TO BE PAID BY THE COMPANY TO EMPLOYEE WITHIN
FIFTEEN (15) DAYS AFTER THE EFFECTIVE DATE OF THE EVENT GIVING RISE TO SUCH

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PAYMENT (THE “SEVERANCE EVENT”) IN AN AMOUNT EQUAL TO (A) THREE TIMES (1)
EMPLOYEE’S BASE SALARY AS IN EFFECT ON THE DATE OF THE SEVERANCE EVENT (TAKING
INTO ACCOUNT ANY REDUCTION OCCASIONED BY EMPLOYEE’S CHANGE TO PART-TIME STATUS,
AS DESCRIBED ABOVE IN SECTION 2.2), PLUS (2) THE TARGET AMOUNT OF EMPLOYEE’S
CASH BONUS FOR THE YEAR OF THE SEVERANCE EVENT (AGAIN, TAKING INTO ACCOUNT ANY
REDUCTION OCCASIONED BY EMPLOYEE’S CHANGE TO PART-TIME STATUS, AS DESCRIBED
ABOVE IN SECTION 2.2), AND (B) ANY ACCRUED VACATION PAY, TO THE EXTENT NOT
THERETOFORE PAID;

(II)           CONTINUATION, FOR A PERIOD OF 36 MONTHS, OF THE BENEFITS LISTED
AS ITEMS 1, 3, 7 AND 8 ON THE ATTACHED SCHEDULE A;

(III)          IN LIEU OF CONTINUATION COVERAGE UNDER COBRA, EMPLOYEE WILL BE
ENTITLED TO (A) CONTINUED COVERAGE UNDER THE COMPANY’S GROUP HEALTH PLAN, AS IN
EFFECT FROM TIME TO TIME (OR, AT THE ELECTION OF THE COMPANY, UNDER A MUTUALLY
AGREED UPON AND REASONABLY COMPARABLE INDIVIDUAL ARRANGEMENT), UNTIL THE EARLIER
OF (1) MEDICARE ELIGIBILITY, OR (2) ELIGIBILITY FOR COVERAGE UNDER ANOTHER
EMPLOYER’S GROUP HEALTH PLAN, AND (B) FOLLOWING MEDICARE ELIGIBILITY AND UNTIL
DEATH, PAYMENT OR REIMBURSEMENT OF EMPLOYEE’S MEDICARE PART B AND PART D
PREMIUMS AND THE COSTS OF A MEDICARE SUPPLEMENT POLICY REASONABLY SELECTED BY
EMPLOYEE (OR, IF A MEDICARE SUPPLEMENT POLICY CANNOT REASONABLY BE OBTAINED,
CONTINUED ACCESS TO COVERAGE UNDER THE COMPANY’S GROUP HEALTH PLAN, AS IN EFFECT
FROM TIME TO TIME).

(D)           NOTWITHSTANDING THE FOREGOING:

(I)            FOR PURPOSES OF ANY SEVERANCE PAY THAT BECOMES PAYABLE PRIOR TO
OCTOBER 1, 2007, THE WORD “TARGET” IN SECTION 9.3(C)(I)(A)(2) WILL BE DELETED
AND REPLACED WITH THE PHRASE “MAXIMUM POTENTIAL.”

(II)           FOR PURPOSES OF ANY SEVERANCE PAY THAT BECOMES PAYABLE ON OR
AFTER OCTOBER 1, 2009: (X) THE PHRASE “THREE TIMES” IN SECTION 9.3(C)(I)(A) WILL
BE DELETED AND REPLACED WITH THE PHRASE “TWO TIMES,” AND (Y) THE PHRASE “36
MONTHS” IN SECTION 9.3(C)(II) WILL BE DELETED AND REPLACED WITH THE PHRASE “24
MONTHS.”

9.4.          TERMINATION FOR GOOD REASON.

(A)           EMPLOYEE MAY TERMINATE EMPLOYEE’S EMPLOYMENT HEREUNDER FOR “GOOD
REASON” EFFECTIVE UPON THE DATE DESIGNATED BY EMPLOYEE IN A WRITTEN NOTICE OF
THE TERMINATION OF HIS EMPLOYMENT HEREUNDER PURSUANT TO THIS SECTION 9.4(A). 
“GOOD REASON” MEANS ANY OF THE FOLLOWING, WITHOUT EMPLOYEE’S PRIOR CONSENT: (I)
A MATERIAL, ADVERSE CHANGE IN TITLE, AUTHORITY OR DUTIES (INCLUDING THE
ASSIGNMENT OF DUTIES MATERIALLY INCONSISTENT WITH EMPLOYEE’S POSITION, BUT
EXCLUDING (A) ANY CHANGE IN TITLE, AUTHORITY OR DUTIES ASSOCIATED WITH
EMPLOYEE’S CHANGE TO PART-TIME STATUS, AS CONTEMPLATED BY SECTION 2.2, PROVIDED
EMPLOYEE THEN CONTINUES IN AN EXECUTIVE LEVEL ROLE, OR (B) THE APPOINTMENT OF
ANOTHER EXECUTIVE TO A POSITION HELD BY EMPLOYEE (AND ANY RESULTING TRANSFER OF
AUTHORITY OR DUTIES ASSOCIATED WITH THAT POSITION), IF SUCH APPOINTMENT WAS
SUPPORTED BY EMPLOYEE)); (II) A REDUCTION IN BASE SALARY OR CASH BONUS
OPPORTUNITY (DESCRIBED IN SECTION 5), OTHER THAN A PROPORTIONATE REDUCTION
ASSOCIATED WITH A CHANGE TO PART-TIME STATUS, AS CONTEMPLATED BY SECTION 2.2; OR
(III) A REQUIREMENT THAT EMPLOYEE RELOCATE HIS CURRENT PLACE OF RESIDENCE. 
HOWEVER, NONE OF THE FOREGOING EVENTS OR CONDITIONS WILL

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CONSTITUTE GOOD REASON UNLESS EMPLOYEE PROVIDES THE COMPANY WITH WRITTEN
OBJECTION TO THE EVENT OR CONDITION WITHIN 90 DAYS FOLLOWING THE OCCURRENCE
THEREOF, THE COMPANY DOES NOT REVERSE OR OTHERWISE CURE THE EVENT OR CONDITION
WITHIN 15 DAYS OF RECEIVING THAT WRITTEN OBJECTION, AND EMPLOYEE RESIGNS HIS
EMPLOYMENT WITHIN 30 DAYS FOLLOWING THE EXPIRATION OF THAT CURE PERIOD.

(B)           IN THE EVENT OF A TERMINATION OF EMPLOYEE’S EMPLOYMENT HEREUNDER
PURSUANT TO SECTION 9.4(A) HEREOF, EMPLOYEE SHALL BE ENTITLED TO RECEIVE ALL
ACCRUED BUT UNPAID (AS OF THE EFFECTIVE DATE OF SUCH TERMINATION) BASE SALARY,
BENEFITS AND CASH BONUSES.  IN ADDITION, EMPLOYEE SHALL BE ENTITLED TO THE
SEVERANCE PAY DEFINED IN SECTION 9.3(C) HEREIN.  EXCEPT AS SPECIFICALLY SET
FORTH IN THIS SECTION 9.4(B), ALL COMPENSATION SHALL CEASE AT THE TIME OF SUCH
TERMINATION, SUBJECT TO THE TERMS OF ANY BENEFIT OR COMPENSATION PLAN THEN IN
FORCE AND APPLICABLE TO EMPLOYEE.  ALL OUTSTANDING OPTIONS SHALL BECOME
IMMEDIATELY VESTED AND EXERCISABLE.

9.5.          TERMINATION WITHOUT GOOD REASON.

(A)           EMPLOYEE MAY TERMINATE EMPLOYEE’S EMPLOYMENT HEREUNDER AT ANY
TIME, FOR ANY REASON, WITH OR WITHOUT GOOD REASON, EFFECTIVE UPON THE DATE
DESIGNATED BY EMPLOYEE UPON NINETY (90) DAYS WRITTEN NOTICE OF THE TERMINATION
OF HIS EMPLOYMENT HEREUNDER.

(B)           IN THE EVENT OF A TERMINATION OF EMPLOYEE’S EMPLOYMENT HEREUNDER
PURSUANT TO SECTION 9.5(A) HEREOF, EMPLOYEE WILL BE ENTITLED TO RECEIVE ALL
ACCRUED BUT UNPAID (AS OF THE EFFECTIVE DATE OF SUCH TERMINATION) BASE SALARY,
BENEFITS AND CASH BONUSES.  IN ADDITION AND IN LIEU OF CONTINUATION COVERAGE
UNDER COBRA, EMPLOYEE WILL BE ENTITLED TO (A) CONTINUED COVERAGE UNDER THE
COMPANY’S GROUP HEALTH PLAN, AS IN EFFECT FROM TIME TO TIME (OR, AT THE ELECTION
OF THE COMPANY, UNDER A MUTUALLY AGREED UPON AND REASONABLY COMPARABLE
INDIVIDUAL ARRANGEMENT), UNTIL THE EARLIER OF (1) MEDICARE ELIGIBILITY, OR (2)
ELIGIBILITY FOR COVERAGE UNDER ANOTHER EMPLOYER’S GROUP HEALTH PLAN, AND (B)
FOLLOWING MEDICARE ELIGIBILITY AND UNTIL DEATH, PAYMENT OR REIMBURSEMENT OF
EMPLOYEE’S MEDICARE PART B AND PART D PREMIUMS AND THE COSTS OF A MEDICARE
SUPPLEMENT POLICY REASONABLY SELECTED BY EMPLOYEE (OR, IF A MEDICARE SUPPLEMENT
POLICY CANNOT REASONABLY BE OBTAINED, CONTINUED ACCESS TO COVERAGE UNDER THE
COMPANY’S GROUP HEALTH PLAN, AS IN EFFECT FROM TIME TO TIME).

(C)           IF EMPLOYEE’S TERMINATION PURSUANT TO SECTION 9.5(A) OCCURS ON OR
AFTER OCTOBER 1, 2009, THE HEALTHCARE BENEFITS DESCRIBED IN THE PRECEDING
PARAGRAPH WILL BE PROVIDED TO EMPLOYEE WITHOUT CHARGE.  IF EMPLOYEE’S
TERMINATION PURSUANT TO SECTION 9.5(A) OCCURS PRIOR TO OCTOBER 1, 2009, EMPLOYEE
WILL BE REQUIRED TO PAY A MONTHLY PREMIUM FOR SUCH BENEFITS EQUAL TO THE
“APPLICABLE PREMIUM” (AS DEFINED IN 29 U.S.C. § 1164) PAYABLE FROM TIME TO TIME
FOR COBRA CONTINUATION COVERAGE UNDER THE COMPANY’S GROUP HEALTH PLAN.  FAILURE
TO PAY SUCH MONTHLY PREMIUM WITHIN 30 DAYS FOLLOWING WRITTEN NOTICE OF SUCH
FAILURE WILL BE DEEMED A WAIVER OF ANY FURTHER HEALTHCARE BENEFITS UNDER THIS
SECTION, EFFECTIVE AS OF THE START OF THE PERIOD TO WHICH SUCH UNPAID MONTHLY
PREMIUM APPLIES.

(D)           EXCEPT AS SPECIFICALLY SET FORTH IN THIS SECTION 9.5, ALL
COMPENSATION SHALL CEASE AT THE TIME OF A TERMINATION DESCRIBED IN SECTION
9.5(A), SUBJECT TO THE

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TERMS OF ANY BENEFIT OR COMPENSATION PLAN THEN IN FORCE AND APPLICABLE TO
EMPLOYEE.  ALL OUTSTANDING OPTIONS WHICH REMAIN UNVESTED SHALL BE AUTOMATICALLY
CANCELED AND DECLARED NULL AND VOID.  EXCEPT AS SPECIFICALLY SET FORTH IN THIS
SECTION 9.5, NEITHER THE COMPANY NOR EMPLOYEE SHALL HAVE ANY LIABILITY OR
OBLIGATION HEREUNDER BY REASON OF SUCH TERMINATION.

9.6.          CHANGE IN CONTROL.

(A)           IF THERE IS A CHANGE IN CONTROL DURING THE TERM, EMPLOYEE MAY
ELECT AT ANY TIME MORE THAN SIX MONTHS AFTER SUCH CHANGE IN CONTROL TO TERMINATE
EMPLOYEE’S EMPLOYMENT HEREUNDER UPON FIFTEEN (15) DAYS PRIOR WRITTEN NOTICE.

(B)           FOR PURPOSES OF THIS AGREEMENT, A “CHANGE IN CONTROL” SHALL HAVE
OCCURRED IF ANY OF THE FOLLOWING EVENTS SHALL OCCUR:

(I)            THE SALE, TRANSFER, ASSIGNMENT OR OTHER DISPOSITION (INCLUDING BY
MERGER OR CONSOLIDATION) BY STOCKHOLDERS OF THE COMPANY, IN ONE TRANSACTION OR A
SERIES OF RELATED TRANSACTIONS, OF MORE THAN THIRTY-FIVE PERCENT (35%) OF THE
VOTING POWER REPRESENTED BY THE THEN OUTSTANDING STOCK OF THE COMPANY TO ONE OR
MORE PERSONS, OTHER THAN ANY SUCH SALES, TRANSFERS, ASSIGNMENTS OR OTHER
DISPOSITIONS BY SUCH STOCKHOLDERS TO THEIR RESPECTIVE AFFILIATES.  FOR THE
PURPOSES OF THIS AGREEMENT, (1) “AFFILIATE” MEANS, WITH RESPECT TO ANY
STOCKHOLDER OF THE COMPANY, (X) ANY PERSON DIRECTLY OR INDIRECTLY CONTROLLING,
CONTROLLED BY OR UNDER COMMON CONTROL WITH SUCH STOCKHOLDER OR (Y) ANY OFFICER,
DIRECTOR OR GENERAL PARTNER OF SUCH STOCKHOLDER; AND (2) “PERSON” MEANS AN
INDIVIDUAL, PARTNERSHIP, CORPORATION, JOINT VENTURE, ASSOCIATION, TRUST,
UNINCORPORATED ASSOCIATION, OTHER ENTITY, ASSOCIATION OR GROUP OF ASSOCIATED
PERSONS ACTING IN CONCERT (EXCEPT THAT SUCH TERM SHALL NOT INCLUDE EMPLOYEES OF
THE COMPANY, DAN W. MATTHIAS AND/OR REBECCA C. MATTHIAS);

(II)           THE COMPANY SELLS ALL OR SUBSTANTIALLY ALL OF ITS ASSETS TO ANY
OTHER PERSON IN ANY SALE OR SERIES OF RELATED SALES (OTHER THAN A TRANSACTION TO
WHICH ONLY THE COMPANY AND ONE OR MORE OF ITS SUBSIDIARIES ARE PARTIES); OR

(III)          ANY PERSON BECOMES A DIRECT OR INDIRECT BENEFICIAL OWNER OF
SHARES OF STOCK OF THE COMPANY REPRESENTING AN AGGREGATE OF 35% OR MORE OF THE
VOTES THEN ENTITLED TO BE CAST AT AN ELECTION OF DIRECTORS OF THE COMPANY
(UNLESS A VOTING AGREEMENT REMAINS IN EFFECT IN RESPECT OF A GREATER THAN 51% OF
SUCH SHARES).

(C)           IN THE EVENT OF A TERMINATION OF EMPLOYEE’S EMPLOYMENT HEREUNDER
PURSUANT TO SECTION 9.6, EMPLOYEE SHALL BE ENTITLED TO RECEIVE ALL ACCRUED BUT
UNPAID (AS OF THE EFFECTIVE DATE OF SUCH TERMINATION) BASE SALARY, BENEFITS AND
CASH BONUSES, AND THE SEVERANCE PAY; PROVIDED, HOWEVER, THAT IF THIS AGREEMENT
IS ASSUMED BY ANY SUCCESSOR TO ALL OR SUBSTANTIALLY ALL OF THE COMPANY’S ASSETS
AND BUSINESS, SUCH PAYMENTS SHALL BE THE JOINT AND SEVERAL OBLIGATION OF THE
COMPANY AND SUCH PURCHASER.  ALSO, IN THE EVENT OF TERMINATION PURSUANT TO THIS
SECTION 9.6, ALL OUTSTANDING OPTIONS SHALL BECOME IMMEDIATELY VESTED AND
EXERCISABLE.  EXCEPT AS SPECIFICALLY SET FORTH IN THIS SECTION 9.6, ALL
COMPENSATION SHALL CEASE AT THE TIME OF SUCH TERMINATION, SUBJECT TO THE TERMS
OF ANY BENEFIT OR COMPENSATION PLANS THEN IN FORCE AND APPLICABLE TO EMPLOYEE.

(D)           [RESERVED]

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(E)           PARACHUTE TAX GROSS-UP.

(I)            SUBJECT TO SECTION 9.6(E)(II) BELOW, IF THE TOTAL PAYMENTS WOULD
RESULT IN THE IMPOSITION OF A PARACHUTE EXCISE TAX ON EMPLOYEE, THE COMPANY WILL
MAKE AN ADDITIONAL PAYMENT TO EMPLOYEE IN AN AMOUNT SUCH THAT, AFTER THE PAYMENT
OF ALL FEDERAL AND STATE INCOME, EMPLOYMENT AND EXCISE TAXES ON BOTH THE TOTAL
PAYMENTS AND THE ADDITIONAL PAYMENT MADE PURSUANT TO THIS SECTION 9.6(E)(I),
EMPLOYEE WILL BE IN THE SAME AFTER-TAX POSITION AS IF NO PARACHUTE EXCISE TAX
HAD BEEN IMPOSED.

(II)           NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, NO
ADDITIONAL PAYMENT WILL BE MADE TO EMPLOYEE PURSUANT TO SECTION 9.6(E)(I) AND
THE TOTAL PAYMENTS WILL INSTEAD BE REDUCED OR LIMITED TO THE CAPPED AMOUNT, IF:

(A)          EMPLOYEE RESIGNS HIS EMPLOYMENT DURING THE SIX MONTH PERIOD
FOLLOWING A CHANGE IN CONTROL AND THERE IS NOT OTHERWISE GOOD REASON FOR THAT
RESIGNATION; OR

(B)          THE ADDITIONAL PAYMENT DESCRIBED ABOVE IN SECTION 9.6(E)(I) WOULD
NOT CAUSE THE TOTAL AFTER-TAX PAYMENTS TO EXCEED THE CAPPED AMOUNT (AFTER
REDUCTION FOR ALL APPLICABLE TAXES) BY MORE THAN 20%.

(III)          THE DETERMINATION OF WHETHER AND TO WHAT EXTENT REDUCTIONS OR
PAYMENTS UNDER THIS SECTION 9.6(E) ARE REQUIRED WILL BE MADE IN GOOD FAITH BY
THE COMPANY’S BOARD OF DIRECTORS, AFTER CONSULTATION WITH AN INDEPENDENT EXPERT
SELECTED BY THE COMPANY.  IN THE EVENT OF ANY UNDERPAYMENT OR OVERPAYMENT TO
EMPLOYEE (DETERMINED AFTER THE APPLICATION OF THIS SECTION 9.6(E)), THE AMOUNT
OF SUCH UNDERPAYMENT OR OVERPAYMENT WILL BE IMMEDIATELY PAID BY THE COMPANY TO
EMPLOYEE OR REFUNDED BY EMPLOYEE TO THE COMPANY, AS THE CASE MAY BE, WITH
INTEREST AT THE APPLICABLE FEDERAL RATE SPECIFIED IN SECTION 7872(F)(2) OF THE
CODE.

(IV)          FOR PURPOSES OF THIS AGREEMENT:

(A)          “CAPPED AMOUNT” MEANS THE LARGEST AMOUNT PAYABLE TO EMPLOYEE
WITHOUT CAUSING THE APPLICATION OF A PARACHUTE EXCISE TAX.

(B)          “CODE” MEANS THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, AND ALL
RULES AND REGULATIONS PROMULGATED THEREUNDER.

(C)          “PARACHUTE EXCISE TAX” MEANS THE FEDERAL EXCISE TAX LEVIED ON
CERTAIN “EXCESS PARACHUTE PAYMENTS” UNDER SECTION 4999 OF THE CODE OR ANY
SUCCESSOR PROVISION.

(D)          “TOTAL AFTER-TAX PAYMENTS” MEANS THE TOTAL VALUE OF ALL “PARACHUTE
PAYMENTS” (AS THAT TERM IS DEFINED IN SECTION 280G(B)(2) OF THE CODE) MADE TO OR
FOR THE BENEFIT OF EMPLOYEE (WHETHER MADE UNDER THIS AGREEMENT OR OTHERWISE),
AFTER REDUCTION FOR ALL APPLICABLE TAXES (INCLUDING, WITHOUT LIMITATION, THE
PARACHUTE EXCISE TAX).

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(E)           “TOTAL PAYMENTS” MEANS THE TOTAL OF ALL “PARACHUTE PAYMENTS” (AS
THAT TERM IS DEFINED IN SECTION 280G(B)(2) OF THE CODE, BUT DETERMINED WITHOUT
REGARD TO SECTION 280G(B)(2)(A)(II)) MADE TO OR FOR THE BENEFIT OF EMPLOYEE,
WHETHER MADE UNDER THIS AGREEMENT OR OTHERWISE.

9.7.          TERMINATION FOR DISABILITY.

(A)           IF EMPLOYEE IS UNABLE, AFTER ANY REASONABLE ACCOMMODATION REQUIRED
BY LAW, TO PERFORM EMPLOYEE’S DUTIES AND RESPONSIBILITIES HEREUNDER BY REASON OF
ILLNESS INJURY OR INCAPACITY FOR MORE THAN SIX (6) CONSECUTIVE MONTHS, DURING
WHICH TIME THE COMPANY SHALL CONTINUE TO COMPENSATE EMPLOYEE HEREUNDER (WITH
SUCH COMPENSATION TO BE REDUCED BY THE AMOUNT OF ANY DISABILITY PAYMENT OR
SIMILAR PAYMENT RECEIVED BY EMPLOYEE FOR THIS TIME PERIOD UNDER ANY PLAN
SPONSORED BY THE COMPANY OR THROUGH WORKERS’ COMPENSATION), EMPLOYEE’S
EMPLOYMENT HEREUNDER MAY BE TERMINATED BY COMPANY.

(B)           IN THE EVENT OF A TERMINATION OF EMPLOYEE’S EMPLOYMENT HEREUNDER
PURSUANT TO SECTION 9.7(A), EMPLOYEE WILL BE ENTITLED TO RECEIVE ALL ACCRUED BUT
UNPAID (AS OF THE DATE OF SUCH TERMINATION) BASE SALARY, BENEFITS AND CASH
BONUSES.  IN ADDITION, ALL OUTSTANDING OPTIONS SHALL BECOME IMMEDIATELY VESTED
AND EXERCISABLE.  FINALLY, FOR A PERIOD OF THIRTY (30) MONTHS FOLLOWING THE DATE
OF SUCH TERMINATION:

(I)            THE COMPANY WILL MAKE MONTHLY SUPPLEMENTAL DISABILITY PAYMENTS TO
EMPLOYEE, EACH EQUAL TO ONE-SIXTH (1/6) OF EMPLOYEE’S BASE SALARY AS OF THE DATE
OF TERMINATION;

(II)           THE COMPANY WILL: (A) WAIVE THE APPLICABLE HEALTHCARE PREMIUM
OTHERWISE PAYABLE FOR COBRA CONTINUATION COVERAGE FOR EMPLOYEE (AND, TO THE
EXTENT COVERED IMMEDIATELY PRIOR TO THE DATE OF EMPLOYEE’S TERMINATION, HIS
SPOUSE AND DEPENDENTS), PLUS (B) ONCE COBRA CONTINUATION COVERAGE EXPIRES
(UNLESS SUCH EXPIRATION IS DUE TO ELIGIBILITY FOR OTHER GROUP HEALTH INSURANCE
OR MEDICARE), REIMBURSE EMPLOYEE, ON AN AFTER-TAX BASIS, FOR PREMIUMS PAID FOR
HEALTH INSURANCE COVERAGE PROVIDING BENEFITS SUBSTANTIALLY SIMILAR TO THOSE THEN
PROVIDED TO ACTIVE EMPLOYEES OF THE COMPANY; AND

(III)          THE COMPANY WILL CONTINUE TO PROVIDE THE BENEFITS DESCRIBED IN
ITEMS 1, 3, 7, AND 8 OF SCHEDULE A, ATTACHED HERETO.

(C)           AMOUNTS PAYABLE UNDER SECTION 9.7(A) OR (B) WILL BE REDUCED BY ANY
DISABILITY OR LIFE INSURANCE BENEFITS PAYABLE WITH RESPECT TO THE SAME PERIOD
UNDER ANY COMPANY FUNDED DISABILITY OR DEATH BENEFIT PLAN, POLICY OR ARRANGEMENT
OR UNDER THE SOCIAL SECURITY ACT.  TO THE EXTENT ANY INSURANCE BENEFIT DESCRIBED
IN THE PRECEDING SENTENCE IS EXEMPT FROM FEDERAL INCOME TAX, THEN FOR PURPOSES
OF THIS REDUCTION, THE AMOUNT OF THAT INSURANCE BENEFIT WILL BE DEEMED TO BE
150% OF THE AMOUNT ACTUALLY RECEIVED BY EMPLOYEE.  AMOUNTS PAYABLE UNDER SECTION
9.7(B) WILL BE REDUCED BY ALL AMOUNTS EARNED BY EMPLOYEE FOR THE PERFORMANCE OF
PERSONAL SERVICES DURING THE THIRTY (30) MONTH PERIOD THEREIN DESCRIBED.

(D)           FOR PURPOSES OF THIS SECTION 9.7, EXCEPT AS HEREINAFTER PROVIDED,
THE DETERMINATION AS TO WHETHER EMPLOYEE IS DISABLED SHALL BE MADE BY A LICENSED
PHYSICIAN SELECTED BY EMPLOYEE AND SHALL BE BASED UPON A FULL PHYSICAL
EXAMINATION AND GOOD

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FAITH OPINION BY SUCH PHYSICIAN.  IN THE EVENT THAT THE BOARD OF DIRECTORS
DISAGREES WITH SUCH PHYSICIAN’S CONCLUSION, THE BOARD OF DIRECTORS MAY REQUIRE
THAT EMPLOYEE SUBMIT TO A FULL PHYSICAL EXAMINATION BY ANOTHER LICENSED
PHYSICIAN SELECTED BY EMPLOYEE AND APPROVED BY THE COMPANY.  IF THE TWO OPINIONS
SHALL BE INCONSISTENT, A THIRD OPINION SHALL BE OBTAINED AFTER FULL PHYSICAL
EXAMINATION BY A THIRD LICENSED PHYSICIAN SELECTED BY EMPLOYEE AND APPROVED BY
THE COMPANY.  THE MAJORITY OF THE THREE OPINIONS SHALL BE CONCLUSIVE.

(E)           EXCEPT AS SPECIFICALLY SET FORTH IN THIS SECTION 9.7, THE COMPANY
SHALL HAVE NO LIABILITY OR OBLIGATION TO EMPLOYEE FOR COMPENSATION OR BENEFITS
BY REASON OF TERMINATION PURSUANT TO THIS SECTION 9.7.

9.8.          RELEASE.  NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT,
THE PAYMENTS AND BENEFITS CONTEMPLATED BY SECTIONS 9.1, 9.3, 9.4, 9.5, 9.6 AND
9.7 ARE CONDITIONED ON, AND MADE IN CONSIDERATION FOR, THE EXECUTION AND
DELIVERY BY EMPLOYEE (OR, IN THE CASE OF SECTION 9.1, BY THE EXECUTOR, LEGAL
REPRESENTATIVE OR ADMINISTRATOR OF EMPLOYEE’S ESTATE) OF A GENERAL AND MUTUAL
RELEASE OF CLAIMS IN SUBSTANTIALLY THE FORM ATTACHED HERETO AS EXHIBIT I AND IN
A MANNER CONSISTENT WITH THE REQUIREMENTS OF THE OLDER WORKERS BENEFIT
PROTECTION ACT AND ANY OTHER APPLICABLE LAW (THE “RELEASE”).  ACCORDINGLY,
NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT, ALL PAYMENTS AND BENEFITS
CONTEMPLATED BY SECTIONS 9.1, 9.3, 9.4, 9.5, 9.6 AND 9.7 WILL BE PAID OR
PROVIDED (OR WILL COMMENCE TO BE PAID OR PROVIDED) NO EARLIER THAN THE DATE THAT
SUCH RELEASE BECOMES IRREVOCABLE.

10.           OUTPLACEMENT SERVICE.  IN THE EVENT EMPLOYEE’S EMPLOYMENT
HEREUNDER IS TERMINATED PURSUANT TO SECTIONS 9.3, 9.4 OR 9.6, THE COMPANY SHALL,
(A) PAY FOR FULL OUTPLACEMENT SERVICES FOR EMPLOYEE, SUCH PAYMENT TO BE MADE TO
AN AGENCY SELECTED BY EMPLOYEE, BASED UPON THE CUSTOMARY FEES CHARGED BY
NATIONALLY RATED FIRMS ENGAGED IN SUCH SERVICES, AND (B) PROVIDE TO EMPLOYEE,
FOR A REASONABLE PERIOD OF TIME FOLLOWING TERMINATION OF EMPLOYMENT, OFFICE
SPACE AND SECRETARIAL SUPPORT TO ASSIST EMPLOYEE IN SEARCHING FOR AND OBTAINING
A NEW POSITION, THE LOCATION OF SUCH OFFICE SPACE TO BE REASONABLY DETERMINED BY
EMPLOYEE.

11.           OTHER AGREEMENTS.

11.1.        COMPANY AGREES THAT THE COMPANY MAY NOT RELOCATE ITS PRINCIPAL
EXECUTIVE OFFICES TO A LOCATION OUTSIDE OF 15 MILES OF THE CURRENT CORPORATE
HEADQUARTERS IN PHILADELPHIA, PENNSYLVANIA WITHOUT THE CONSENT OF EMPLOYEE.

11.2.        IN THE EVENT OF TERMINATION OF EMPLOYEE’S EMPLOYMENT HEREUNDER
PURSUANT TO SECTIONS 9.3, 9.4 OR 9.6, AT EMPLOYEE’S ELECTION GIVEN BY WRITTEN
NOTICE TO THE COMPANY WITHIN 30 DAYS OF SUCH TERMINATION (PROVIDED THAT, IF
NECESSARY, SUCH PERIOD WILL BE EXTENDED TO TERMINATE ONE DAY AFTER EMPLOYEE
COULD EFFECT THE TRANSACTION WITHOUT INCURRING LIABILITY UNDER SECTION 16(B) OF
THE SECURITIES EXCHANGE ACT OF 1934 OR OTHERWISE VIOLATING APPLICABLE SECURITIES
LAWS OR INSIDER TRADING POLICIES), THE COMPANY SHALL BE OBLIGATED TO REPURCHASE
ALL VESTED STOCK OPTIONS ISSUED BY THE COMPANY AND THEN HELD BY EMPLOYEE AT A
PRICE EQUAL TO THE CLOSING PRICE OF THE COMMON STOCK ON THE DATE OF SUCH REQUEST
LESS THE EXERCISE PRICE OF SUCH OPTIONS (THE “AGGREGATE REPURCHASE PRICE”). 
UPON SUCH ELECTION, THE COMPANY WILL PAY IN IMMEDIATELY AVAILABLE FUNDS, THE
AGGREGATE REPURCHASE PRICE TO EMPLOYEE AND EMPLOYEE WILL RELINQUISH ALL SUCH
OPTIONS TO THE COMPANY.

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11.3.        WITH RESPECT TO STOCK OPTIONS GRANTED TO EMPLOYEE UNDER THE
COMPANY’S 1987 STOCK OPTION PLAN (WHETHER AS ORIGINALLY IN EFFECT OR AS
SUBSEQUENTLY AMENDED AND RESTATED), EMPLOYEE AGREES THAT SECTION 15(C) OF THAT
PLAN WILL NOT APPLY AUTOMATICALLY AND WILL INSTEAD APPLY ONLY TO THE EXTENT
DETERMINED BY THE COMPANY’S BOARD OF DIRECTORS (OR BY THE COMMITTEE OF THE BOARD
OF DIRECTORS AUTHORIZED TO ADMINISTER THE PLAN ON BEHALF OF THE BOARD OF
DIRECTORS) IN ITS DISCRETION.

12.           SURVIVAL OF PROVISIONS.  THE PROVISIONS OF THIS AGREEMENT SET
FORTH IN SECTIONS 7, 8, 11.2, 11.3, 14, 21 AND 22 HEREOF SHALL SURVIVE THE
TERMINATION OF EMPLOYEE’S EMPLOYMENT HEREUNDER.

13.           SUCCESSORS AND ASSIGNS.  THIS AGREEMENT SHALL INURE TO THE BENEFIT
OF AND BE BINDING UPON THE COMPANY AND EMPLOYEE AND THEIR RESPECTIVE SUCCESSORS,
EXECUTORS, ADMINISTRATORS, HEIRS AND/OR PERMITTED ASSIGNS; PROVIDED, HOWEVER,
THAT NEITHER EMPLOYEE NOR THE COMPANY MAY MAKE ANY ASSIGNMENTS OF THIS AGREEMENT
OR ANY INTEREST HEREIN, BY OPERATION OF LAW OR OTHERWISE, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE OTHER PARTIES HERETO, EXCEPT THAT, WITHOUT SUCH CONSENT,
THE COMPANY MAY ASSIGN THIS AGREEMENT TO ANY SUCCESSOR TO ALL OR SUBSTANTIALLY
ALL OF ITS ASSETS AND BUSINESS BY MEANS OF LIQUIDATION, DISSOLUTION, MERGER,
CONSOLIDATION, TRANSFER OF ASSETS, OR OTHERWISE, PROVIDED THAT SUCH SUCCESSOR
ASSUMES IN WRITING ALL OF THE OBLIGATIONS OF THE COMPANY UNDER THIS AGREEMENT,
SUBJECT, HOWEVER, TO EMPLOYEE’S RIGHTS TO TERMINATION AS PROVIDED IN SECTION 9.6
HEREOF.

14.           CONTRACTUAL INDEMNIFICATION, ADVANCEMENT OF EXPENSES.  IN ADDITION
TO, AND WITHOUT DEROGATION OF, ANY RIGHT OF INDEMNIFICATION, DEFENSE OR BEING
HELD HARMLESS TO WHICH EMPLOYEE MAY BE ENTITLED PURSUANT TO LAW OR OTHERWISE,
INCLUDING, WITHOUT LIMITATION, SUCH RIGHTS AS HE IS, FROM TIME TO TIME, ENTITLED
TO AS A CURRENT OR FORMER DIRECTOR, OFFICER AND EMPLOYEE OF THE COMPANY PURSUANT
TO THE ARTICLES OF INCORPORATION OF THE COMPANY, THE COMPANY AGREES AS FOLLOWS:

The Company shall indemnify and defend Employee and hold Employee harmless to
the maximum extent permitted by law against claims, judgments, fines, amounts
paid in settlement and reasonable expenses, including attorneys’ fees, incurred
by Employee in connection with defense of, or as a result of any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (any of the foregoing, an “Action”) (or any
appeal from any Action) in which Employee is made or is threatened to be made a
party by reason of the fact that Employee is or was a director, officer or
employee of the Company, regardless of whether such Action is one brought by or
in the right of the Company, to procure a judgment in the Company’s favor, or
other than by or in the right of the Company.

Expenses (including attorneys’ fees) incurred by Employee in defending an Action
shall be paid by the Company in advance of the final disposition of such Action
to the maximum extent permitted by law promptly following receipt by the Company
of evidence of Employee’s incurring any such expenses.

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In the event that in any Action, Employee concludes that based on the opinion of
counsel selected by him there exists in such Action an actual or potential
conflict between the interests or position of the Company or any other party to
the Action which the Company has undertaken to defend, Employee shall be
entitled, at the Company’s expense, to engage separate counsel of his own
selection reasonably acceptable to the Company to represent him in such Action.

To the extent the Company shall maintain insurance on behalf of any person who
is or was a director, officer, employee or agent of the Company against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Company would have the
power to indemnify him against such liability, the Company shall include
Employee as a named insured under such insurance with respect to any period as
to which Employee was a director, officer or employee of the Company.

Employee agrees not to settle any Action against him without the consent of the
Company, which consent may not be unreasonably withheld.

The indemnification and advancement of expenses provided by this Section shall
continue to Employee after the termination of this Agreement and shall inure to
the benefit of Employee’s heirs, executors and administrators and shall be paid
unless and until Employee’s conduct which gave rise to the action shall have
been adjudicated by a court to have been willful and in bad faith.

15.           EMPLOYEE BENEFITS.  THIS AGREEMENT SHALL NOT BE CONSTRUED TO BE IN
LIEU OR TO THE EXCLUSION OF ANY OTHER RIGHTS, BENEFITS AND PRIVILEGES TO WHICH
EMPLOYEE MAY BE ENTITLED AS AN EMPLOYEE OF THE COMPANY UNDER ANY RETIREMENT,
PENSION, PROFIT-SHARING, INSURANCE, HOSPITAL OR OTHER PLANS OR BENEFITS WHICH
MAY NOW BE IN EFFECT OR WHICH MAY HEREAFTER BE ADOPTED.

16.           NOTICE.  ANY NOTICE OR COMMUNICATION REQUIRED OR PERMITTED UNDER
THIS AGREEMENT SHALL BE MADE IN WRITING AND SENT BY CERTIFIED OR REGISTERED
MAIL, RETURN RECEIPT REQUESTED, ADDRESSED AS FOLLOWS:

If to Employee:

Dan W. Matthias
6238 Ross Road
Honeybrook, PA 19344

If to Company:

Mothers Work, Inc.
456 North Fifth Street
Philadelphia, PA 19123
Attn: General Counsel

or to such other address as either party may from time to time duly specify by
notice given to the other party in the manner specified above.

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17.           ENTIRE AGREEMENT; AMENDMENTS.  THIS AGREEMENT CONTAINS THE ENTIRE
AGREEMENT AND UNDERSTANDING OF THE PARTIES HERETO RELATING TO THE SUBJECT MATTER
HEREOF (EXCEPT FOR SPECIFIC CROSS-REFERENCES TO PREVIOUSLY EXECUTED AGREEMENTS),
AND MERGES AND SUPERSEDES ALL PRIOR AND CONTEMPORANEOUS DISCUSSIONS, AGREEMENTS
AND UNDERSTANDINGS OF EVERY NATURE BETWEEN THE PARTIES HERETO RELATING TO THE
EMPLOYMENT OF EMPLOYEE WITH THE COMPANY (INCLUDING, WITHOUT LIMITATION, THE
EXISTING EMPLOYMENT AGREEMENT).  THIS AGREEMENT MAY NOT BE CHANGED OR MODIFIED,
EXCEPT BY AN AGREEMENT IN WRITING SIGNED BY EACH OF THE PARTIES HERETO.

18.           WAIVER.  THE WAIVER OF THE BREACH OF ANY TERM OR PROVISION OF THIS
AGREEMENT SHALL NOT OPERATE AS OR BE CONSTRUED TO BE A WAIVER OF ANY OTHER OR
SUBSEQUENT BREACH OF THIS AGREEMENT.

19.           GOVERNING LAW.  THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE
APPLICATION OF THE PRINCIPLES OF CONFLICTS OF LAWS.

20.           INVALIDITY.  IN CASE ANY ONE OR MORE OF THE PROVISIONS CONTAINED
IN THIS AGREEMENT SHALL, FOR ANY REASON, BE HELD TO BE INVALID, ILLEGAL OR
UNENFORCEABLE IN ANY RESPECT, SUCH INVALIDITY, ILLEGALITY OR UNENFORCEABILITY
SHALL NOT AFFECT THE VALIDITY OF ANY OTHER PROVISION OF THIS AGREEMENT, AND SUCH
PROVISION(S) SHALL BE DEEMED MODIFIED TO THE EXTENT NECESSARY TO MAKE IT
ENFORCEABLE.

21.           SPECIFIC ENFORCEMENT; EXTENSION OF PERIOD.

21.1.        EMPLOYEE ACKNOWLEDGES THAT THE RESTRICTIONS CONTAINED IN SECTIONS 7
AND 8 HEREOF ARE REASONABLE AND NECESSARY TO PROTECT THE LEGITIMATE INTERESTS OF
THE COMPANY AND ITS AFFILIATES AND THAT THE COMPANY WOULD NOT HAVE ENTERED INTO
THIS AGREEMENT IN THE ABSENCE OF SUCH RESTRICTIONS.  EMPLOYEE ALSO ACKNOWLEDGES
THAT ANY BREACH BY HIM OF SECTIONS 7 OR 8 HEREOF WILL CAUSE CONTINUING AND
IRREPARABLE INJURY TO THE COMPANY FOR WHICH MONETARY DAMAGES WOULD NOT BE AN
ADEQUATE REMEDY.  EMPLOYEE SHALL NOT, IN ANY ACTION OR PROCEEDING TO ENFORCE ANY
OF THE PROVISIONS OF THIS AGREEMENT, ASSERT THE CLAIM OR DEFENSE THAT AN
ADEQUATE REMEDY AT LAW EXISTS.  IN THE EVENT OF SUCH BREACH BY EMPLOYEE, THE
COMPANY SHALL HAVE THE RIGHT TO ENFORCE THE PROVISIONS OF SECTIONS 7 AND 8 OF
THIS AGREEMENT BY SEEKING INJUNCTIVE OR OTHER RELIEF IN ANY COURT, AND THIS
AGREEMENT SHALL NOT IN ANY WAY LIMIT REMEDIES OF LAW OR IN EQUITY OTHERWISE
AVAILABLE TO THE COMPANY.  IF AN ACTION AT LAW OR IN EQUITY IS NECESSARY TO
ENFORCE OR INTERPRET THE TERMS OF THIS AGREEMENT, THE PREVAILING PARTY SHALL BE
ENTITLED TO RECOVER, IN ADDITION TO ANY OTHER RELIEF, REASONABLE ATTORNEYS’
FEES, COSTS AND DISBURSEMENTS.  IN THE EVENT THAT THE PROVISIONS OF SECTIONS 7
OR 8 HEREOF SHOULD EVER BE ADJUDICATED TO EXCEED THE TIME, GEOGRAPHIC, OR OTHER
LIMITATIONS PERMITTED BY APPLICABLE LAW IN ANY APPLICABLE JURISDICTION, THEN
SUCH PROVISIONS SHALL BE DEEMED REFORMED IN SUCH JURISDICTION TO THE MAXIMUM
TIME, GEOGRAPHIC, OR OTHER LIMITATIONS PERMITTED BY APPLICABLE LAW.

21.2.        IN THE EVENT THAT EMPLOYEE SHALL BE IN BREACH OF ANY OF THE
RESTRICTIONS CONTAINED IN SECTION 8 HEREOF, THEN THE RESTRICTED PERIOD SHALL BE
EXTENDED FOR A PERIOD OF TIME EQUAL TO THE PERIOD OF TIME THAT EMPLOYEE IS IN
BREACH OF SUCH RESTRICTION.

15

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21.3.        THE PARTIES AGREE THAT THE VENUE FOR ANY ACTION BROUGHT UNDER THIS
SECTION 21 WILL BE IN THE FEDERAL OR STATE COURTS SITUATED IN THE EASTERN
DISTRICT OF PENNSYLVANIA AND THAT THEY WILL BE SUBJECT TO THE PERSONAL
JURISDICTION OF SUCH COURTS.

22.           MEDIATION.

22.1.        OTHER THAN A MATTER COVERED BY SECTION 21, ABOVE, THE PARTIES AGREE
THAT THEY WILL MAKE A GOOD FAITH ATTEMPT TO RESOLVE ANY DISPUTE ARISING
HEREUNDER BY SUBMITTING THE MATTER TO MEDIATION IN PHILADELPHIA, PENNSYLVANIA
BEFORE RESORTING TO ANY OTHER PROCEEDING OR FORUM.  THE PARTIES WILL SUBMIT THE
MATTER TO MEDIATION WITHIN 5 BUSINESS DAYS OF THE DETERMINATION THAT THERE IS A
DISPUTE AND WILL CHOOSE A MEDIATOR WITHIN 5 BUSINESS DAYS FOLLOWING SUCH
SUBMISSION, PROVIDED THAT IF THE PARTIES CANNOT AGREE ON A MEDIATOR, THE
MEDIATOR WILL BE SELECTED BY THE AMERICAN ARBITRATION ASSOCIATION.  WITHIN 30
DAYS AFTER THE SELECTION OF THE MEDIATOR, THE PARTIES AND THEIR RESPECTIVE
ATTORNEYS WILL MEET WITH THE MEDIATOR FOR TWO MEDIATION SESSIONS OF AT LEAST TWO
HOURS EACH.  IF THE CLAIM OR DISPUTE CANNOT BE SETTLED DURING SUCH MEDIATION
SESSIONS (OR A MUTUALLY AGREED CONTINUATION OF THOSE SESSIONS), EITHER OF THE
PARTIES MAY GIVE THE MEDIATOR AND THE OTHER PARTY WRITTEN NOTICE DECLARING THE
END OF THE MEDIATION PROCESS.  ALL DISCUSSIONS CONNECTED WITH THIS MEDIATION
PROVISION WILL BE CONFIDENTIAL AND TREATED AS COMPROMISE AND SETTLEMENT
DISCUSSIONS.  ACCORDINGLY, NOTHING DISCLOSED IN SUCH DISCUSSIONS MAY BE USED FOR
ANY PURPOSE IN ANY LATER PROCEEDING.

22.2.        IF MEDIATION IS UNSUCCESSFUL, THE VENUE FOR ANY ACTION ARISING
HEREUNDER WILL BE IN THE FEDERAL OR STATE COURTS SITUATED IN THE EASTERN
DISTRICT OF PENNSYLVANIA.  THE PARTIES AGREE THAT THEY WILL EACH BE SUBJECT TO
THE PERSONAL JURISDICTION OF SUCH COURTS.

23.           COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN ONE OR MORE
COUNTERPARTS, EACH OF WHICH SHALL BE DEEMED AN ORIGINAL, AND ALL OF WHICH
TOGETHER SHALL BE DEEMED TO BE ONE AND THE SAME INSTRUMENT.

24.           COMPLIANCE WITH SECTION 409A OF THE CODE.  IF PAYMENTS DUE TO
EMPLOYEE ARE SUBJECT TO THE REQUIREMENTS OF PROP. TREAS. REG. § 1.409A-3(G)(2)
(OR ANY SUCCESSOR PROVISION), THEN NOTWITHSTANDING ANY OTHER PROVISION OF THIS
AGREEMENT (OR ANY OTHERWISE APPLICABLE PLAN, POLICY, AGREEMENT OR ARRANGEMENT),
SUCH PAYMENTS THAT ARE OTHERWISE DUE WITHIN SIX MONTHS FOLLOWING EMPLOYEE’S
SEPARATION FROM SERVICE WILL BE DEFERRED (WITHOUT INTEREST) AND PAID TO EMPLOYEE
IN A LUMP SUM IMMEDIATELY FOLLOWING THAT SIX MONTH PERIOD.

[SIGNATURE PAGE FOLLOWS.]

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

ATTEST:

 

MOTHERS WORK, INC.

 

 

 

 

 

 

By:

/s/ Ronald J. Masciantonio

 

By:

 

/s/ Edward M. Krell

 

 

 

 

 

Edward M. Krell, Executive Vice President

 

 

 

 

- Chief Financial Officer

 

 

 

 

 

 

 

 

DAN W. MATTHIAS

 

 

 

 

 

 

 

 

 

 

/s/ Dan W. Matthias

 

 

17

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SCHEDULE A

EMPLOYEE BENEFITS OF DAN W. MATTHIAS

1.                                       Automobile and insurance coverage for
the use of that automobile, in each case commensurate with that presently
provided.

2.                                       Vacation:  5 Weeks

3.                                       Life Insurance:  One million dollar
($1,000,000) death benefit.

4.                                       Health:  Such other benefits as are
received by similarly situated executives in comparable companies, all as
approved by the Company’s Board of Directors, to include umbrella medical
insurance in excess of applicable lifetime maximums under the Company’s health
insurance program for Employee, and an annual physical, gym or wellness program
up to $5,000.

5.                                       Home Office Support:  To include
computer, fax, other equipment, plus telephone lines to support equipment, plus
two voice phone lines. (This does not include any rent, or other cash
compensation.)

6.                                       Sample Sewer:  For personal fitting of
clothes.

7.                                       Personal Tax Services:  The Company
will pay on Employee’s behalf, or reimburse Employee for, the reasonable costs
of tax accounting and tax return preparation services rendered by Employee’s
chosen provider following delivery of proper documentation of those costs.

8.                                       Business Publications and
Subscriptions:  Such as The Wall Street Journal and Womens Wear Daily.

9.                                       Other:  Such other benefits as: (i) are
provided to other executives of the Company (excluding, however, those specific
benefits covered herein), and, in addition to the foregoing, (ii) those
determined by the Company’s Board of Directors.

10.                                 Harvard Club Membership.

A-1

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Exhibit I

RELEASE AND NON-DISPARAGEMENT AGREEMENT

THIS RELEASE AND NON-DISPARAGEMENT AGREEMENT (this “Release”) is made by and
between DAN W. MATTHIAS (“Employee”) and MOTHERS WORK, INC. (the “Company”).

WHEREAS, Employee’s employment by the Company has terminated; and

WHEREAS, pursuant to Section [9.  ] of the Second Amended and Restated
Employment Agreement by and between the Company and Employee dated March 2, 2007
(the “Agreement”), the Company has agreed to pay Employee certain amounts and to
provide him with certain rights and benefits, subject to the execution of this
Release.

NOW THEREFORE, in consideration of these premises and the mutual promises
contained herein, and intending to be legally bound hereby, the parties agree as
follows:

1.             Resignation and Consideration.

1.1.          Effective immediately, Employee hereby resigns as an officer of
the Company and each of its subsidiaries and affiliates and, unless otherwise
agreed between Employee and the Company, as a director of the Company and each
of its subsidiaries and affiliates.

1.2.          Employee acknowledges that: (i) the payments, rights and benefits
set forth in Section [9.  ] of the Agreement constitute full settlement of all
his rights under the Agreement, (ii) he has no entitlement under any other
severance or similar arrangement maintained by the Company, and (iii) except as
otherwise provided specifically in this Release, the Company does not and will
not have any other liability or obligation to Employee.  Employee further
acknowledges that, in the absence of his execution of this Release, the benefits
and payments specified in Section [9.  ] of the Agreement would not otherwise be
due to him.

2.             Employee’s Release.

2.1.          Employee hereby fully and forever releases and discharges the
Company, its parent and subsidiary corporations and each of their predecessors,
successors, assigns, stockholders, affiliates, officers, directors, trustees,
employees, agents and attorneys, past and present (the Company and each such
person or entity is referred to as a “Released Person”) from any and all claims,
demands, liens, agreements, contracts, covenants, actions, suits, causes of
action, obligations, controversies, debts, costs, expenses, damages, judgments,
orders and liabilities, of whatever kind or nature, direct or indirect, in law,
equity or otherwise, whether known or unknown, arising through the date of this
Release out of Employee’s employment by the Company or the termination thereof,
including, but not limited to, any claims for relief or causes of action under
the Age Discrimination in Employment Act, 29 U.S.C. § 621 et seq., or any other
federal, state or local statute, ordinance or regulation regarding
discrimination in

I-1

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employment and any claims, demands or actions based upon alleged wrongful or
retaliatory discharge or breach of contract under any state or federal law.

2.2.          Employee expressly represents that he has not filed a lawsuit or
initiated any other administrative proceeding against a Released Person and that
he has not assigned any claim against a Released Person.  Employee further
promises not to initiate a lawsuit or to bring any other claim against the other
arising out of or in any way related to Employee’s employment by the Company or
the termination of that employment.  This Release will not prevent Employee from
filing a charge with the Equal Employment Opportunity Commission (or similar
state agency) or participating in any investigation conducted by the Equal
Employment Opportunity Commission (or similar state agency); provided, however,
that any claims by Employee for personal relief in connection with such a charge
or investigation (such as reinstatement or monetary damages) would be barred.

2.3.          The foregoing will not be deemed to release the Company from
(a) claims solely to enforce Sections [9.  ], [10], [11.2] and 14 of the
Agreement, (b) claims for benefits (not including severance benefits) under the
Company’s employee welfare benefit plans and employee pension benefit plans,
subject to the terms and conditions of those plans, or (c) claims for
indemnification under the Company’s By-Laws.

3.             Company Release.

3.1.          The Company hereby fully and forever releases and discharges the
Employee and his executors, administrators and heirs from any and all claims,
demands, liens, agreements, contracts, covenants, actions, suits, causes of
action, obligations, controversies, debts, costs, expenses, damages, judgments,
orders and liabilities, of whatever kind or nature, direct or indirect, in law,
equity or otherwise, whether known or unknown, arising through the date of this
Release out of Employee’s service to the Company or the termination thereof.

3.2.          The Company expressly represents that it has not filed a lawsuit
or initiated any other administrative proceeding against Employee and that it
has not assigned any claim against Employee.  The Company further promises not
to initiate a lawsuit or to bring any other claim against Employee arising out
of or in any way related to Employee’s service to the Company or the termination
thereof.

3.3.          The foregoing will not be deemed to release Employee from claims
(a) to enforce Sections 7 and 8 of the Agreement, (b) claims arising from acts
or omissions by Executive that would constitute a crime, or (c) claims that are
not known to any member of the Company’s Board of Directors (provided that a
claim will be deemed known if the basis for each material element of the claim
could have been ascertained by the Board of Directors prior to the date hereof
upon reasonable inquiry).

4.             Restrictive Covenants.  Employee acknowledges that restrictive
covenants contained in Section 7 and 8 of the Agreement will survive the
termination of his employment.  Employee affirms that those restrictive
covenants are reasonable and necessary to protect the legitimate interests of
the Company, that he received adequate consideration in exchange for agreeing to
those restrictions and that he will abide by those restrictions.

I-2

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5.             Non-Disparagement.  Employee will not disparage any Released
Person or otherwise take any action which could reasonably be expected to
adversely affect the personal or professional reputation of any Released
Person.  Similarly, the Company (meaning, solely for this purpose, the executive
officers and directors of the Company and other persons authorized to make
official communications on behalf of the Company) will not disparage Employee or
otherwise take any action which could reasonably be expected to adversely affect
the personal or professional reputation of Employee.  Notwithstanding the
foregoing, in no event will any legally required disclosure or action be deemed
to violate this paragraph, regardless of the content of such disclosure or the
nature of such action.

6.             Cooperation.  Employee further agrees that, subject to
reimbursement of his reasonable expenses, he will cooperate fully with the
Company and its counsel with respect to any matter (including litigation,
investigations, or governmental proceedings) in which Employee was in any way
involved during his employment with the Company.  Employee will render such
cooperation in a timely manner on reasonable notice from the Company, provided
that the Company will attempt to limit the need for Employee’s cooperation under
this paragraph so as not to unduly interfere with his other personal and
professional commitments.

7.             Rescission Right.  Employee expressly acknowledges and recites
that (a) he has read and understands the terms of this Release in its entirety,
(b) he has entered into this Release knowingly and voluntarily, without any
duress or coercion; (c) he has been advised orally and is hereby advised in
writing to consult with an attorney with respect to this Release before signing
it; (d) he was provided 21 calendar days after receipt of the Release to
consider its terms before signing it; and (e) he is provided 7 calendar days
from the date of signing to terminate and revoke this Release, in which case
this Release shall be unenforceable, null and void.  Employee may revoke this
Release during those 7 days by providing written notice of revocation to the
Company at the address specified in Section 16 of the Agreement.

8.             Challenge.  If Employee violates or challenges the enforceability
of this Release, no further payments, rights or benefits under Section 9 of the
Agreement will be due to Employee.

9.             Miscellaneous.

9.1.          No Admission of Liability.  This Release is not to be construed as
an admission of any violation of any federal, state or local statute, ordinance
or regulation or of any duty owed by the Company to Employee.  There have been
no such violations, and the Company specifically denies any such violations.

9.2.          Severability.  Whenever possible, each provision of this Release
will be interpreted in such manner as to be effective and valid under applicable
law.  However, if any provision of this Release is held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
will not affect any other provision, and this Release will be reformed,
construed and enforced as though the invalid, illegal or unenforceable provision
had never been herein contained.

I-3

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9.3.          Entire Agreement; Amendments.  Except as otherwise provided
herein, this Release contains the entire agreement and understanding of the
parties hereto relating to the subject matter hereof, and merges and supersedes
all prior and contemporaneous discussions, agreements and understandings of
every nature relating to the subject matter hereof.  This Release may not be
changed or modified, except by an agreement in writing signed by each of the
parties hereto.

9.4.          Governing Law.  This Release shall be governed by, and enforced in
accordance with, the laws of the State of Delaware, without regard to the
application of the principles of conflicts of laws.

9.5.          Counterparts and Facsimiles.  This Release may be executed,
including execution by facsimile signature, in multiple counterparts, each of
which shall be deemed an original, and all of which together shall be deemed to
be one and the same instrument.

[Signature page follows.]

I-4

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IN WITNESS WHEREOF, the Company has caused this Release to be executed by its
duly authorized officer, and Employee has executed this Release, in each case on
the date indicated below, respectively.

MOTHERS WORK, INC.

 

 

 

 

 

By:

 

 

 

 

 

Name & Title:

 

 

 

 

 

Date:

 

 

 

 

 

 

 

DAN W. MATTHIAS

 

 

 

 

 

 

 

 

 

 

Date:

 

 

 

I-5

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