Exhibit 10.1


 


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.


 

















 


(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.


 


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


 


2

















 


(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);


 


3

















 


(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 700,000.  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 200,000 Shares in
any calendar year.  In addition, not more
than 350,000 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)


 


4

















 


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 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.


 


5

















 


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 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.


 


6

















 


(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.


 


(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).


 


7

















 


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.


 


8

















 


(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.


 


9

















 


(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.


 


10
















 


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
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.


 


11

















 


(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”
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, 


 


12

















 


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.


 


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 


 


13

















 


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.


 


14