Document:

Exhibit 10.2

November 6, 2009

Crescendo Partners II, L.P., Series K

Crescendo Investments II, LLC

Crescendo Partners III, L.P.

Crescendo Investments III, LLC

825 Third Avenue, 40th Floor

New York, NY 10022

Dear Sir or Madam:

You have previously entered into that certain Confidentiality Agreement with Destination Maternity Corporation, previously known as Mothers Work, Inc., (the "Company"), dated March 10, 2008 (the "Confidentiality Agreement") pursuant to which you and your directors, partners, officers, employees, agents, affiliates and advisors (including, without limitation, attorneys, accountants, consultants, bankers and financial advisors) (collectively "Representatives") agreed to take or abstain from taking certain actions as set forth in such agreement.  You and your Representatives further agree to the undertakings and other terms and provisions set forth in this letter agreement.  All capitalized terms used in this letter agreement and not otherwise defined shall have the respective meanings assigned to such terms in the Confidentiality Agreement. 

You hereby agree that the terms of the Confidentiality Agreement remain in full force and effect in accordance with its terms, except to the extent specifically otherwise provided in this letter agreement.

You hereby agree to vote only for the nominees selected by the Company's Board of Directors (the "Board") for election to the Board at the 2010 Annual Meeting of Stockholders, provided such nominees include Arnaud Ajdler or any of your other Representatives.

You hereby agree that neither you nor any of your affiliates (as defined in rule 12b-2 under the Securities Exchange Act of 1934, as amended), will (and you and they will not assist or encourage others to), directly or indirectly, take any action prior to the election of directors at the 2011 Annual Meeting of Stockholders to seek the removal of any current member of the Board or any director elected to the Board at the 2010 Annual Meeting of Stockholders; provided, however, that nothing in this letter agreement shall limit your right to nominate a slate of director candidates for election at the 2011 Annual Meeting of Shareholders, subject to compliance with applicable provisions of the Company's By-Laws and the Confidentiality Agreement.

The Company hereby agrees to use commercially reasonable efforts to recruit two new directors for election to the Board at the 2010 Annual Meeting of Stockholders (collectively, the "10th and 11th Directors"), one of whom shall be a director whom the Board determines qualifies as an "audit committee financial expert," as that term is defined in Item 407(d)(5) of Regulation S-K, to chair the Board's Audit Committee; and the other of whom shall be a person experienced in matters relating to the Company's business.  To the extent either or both of the 10th and 11th Directors are not identified in time for inclusion in the Company's proxy statement for the 2010 Annual Meeting of Stockholders, the Company agrees to use commercially reasonable efforts to identify and appoint such 10th or 11th Director(s) (as applicable) to the Board as soon thereafter as is reasonably practicable.  The nomination of the 10th and 11th Director will require the unanimous approval of the Nominating and Corporate Governance Committee.   In addition, prior to the 2011 Annual Meeting of Stockholders, any increase in the size of the Board and the filling of any vacancy on the Board shall require the unanimous approval of the Nominating and Corporate Governance Committee. 

Upon Mr. Ajdler's re-election to the Board at the 2010 Annual Meeting of Stockholders, the Company agrees to use commercially reasonable efforts to cause Mr. Ajdler to be appointed as Chairman of the Compensation Committee at the first Board meeting following the 2010 Annual Meeting of Stockholders.  The Company agrees that the Board shall take no action to remove Mr. Ajdler, at any time prior to the 2011 Annual Meeting of Stockholders, as (i) Chairman of the Compensation Committee, (ii) a member of the Nominating and Corporate Governance Committee or (iii) a member of the Compensation Committee. 

For so long as Mr. Ajdler serves as a member of the Board, in the event that the date on which the Company notifies you of the slate of director candidates nominated for election at any meeting of stockholders occurring in 2011 or thereafter (the "Notification Date") occurs fewer than 10 days before the deadline for stockholders to nominate candidates for election as a director at such meeting of stockholders in accordance with the Company's By-Laws, Crescendo shall be entitled to an extension of time, until the close of business on the 10th day following the Notification Date, for the submission of any such director candidates along with all other information required by the By-Laws in connection therewith, and any such submission by Crescendo by the 10th day following the Notification Date shall be considered timely for purposes of the By-Laws.

It is further understood and agreed that money damages would not be a sufficient remedy for any breach of this letter agreement by you or any of your Representatives and that the Company shall be entitled to seek equitable relief, including injunction and specific performance, as a remedy for any such breach. Such remedies shall not be deemed to be the exclusive remedies for a breach by you of this letter agreement but shall be in addition to all other remedies available at law or equity to the Company.

The Company has agreed to reimburse you for your reasonable out-of-pocket fees and expenses incurred in connection with the negotiation and execution of this letter agreement, including any filings with the SEC that may be required in connection with this letter agreement, provided that such reimbursement will not exceed $20,000 in the aggregate.

The Company agrees that as a condition of issuing any press release announcing this letter agreement, any of the terms contained in this letter agreement, or matters related to the resolutions of the Board approving this letter agreement and the declassification of the Board, such press release shall be reasonably acceptable to the Crescendo Parties. The Crescendo Parties agree that as a condition of issuing any press release announcing this letter agreement, any of the terms contained in this letter agreement, or matters related to the resolutions of the Board approving this letter agreement and the declassification of the Board, such press release shall be reasonably acceptable to the Company. 

This letter agreement is for the benefit of the Company, and its directors, officers, stockholders, owners, affiliates, and agents, and shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to its principles or rules regarding conflicts of laws.  All disputes arising from or relating to this letter agreement shall be heard exclusively in a court of competent jurisdiction within the State of Delaware, and the parties hereto consent to personal jurisdiction in such courts for such purposes, and further waive all objections on grounds of improper venue or forum non conveniens.

Please confirm your agreement with the foregoing by signing and returning one copy of this letter to the undersigned, whereupon this letter agreement shall become a binding agreement among you and the Company.
Very truly yours,

DESTINATION MATERNITY CORPORATION

By:/s/ Edward M. Krell

Name:  Edward M. Krell

Title:Chief Executive Officer

  

Accepted and agreed as of the date

first written above:

CRESCENDO PARTNERS II, L.P., SERIES K

By:Crescendo Investments II, LLC

General Partner

By:/s/ Eric Rosenfeld

Name: Eric Rosenfeld

Title: Managing Member

CRESCENDO INVESTMENTS II, LLC

By:/s/ Eric Rosenfeld

Name: Eric Rosenfeld

Title: Managing Member

CRESCENDO PARTNERS III, L.P.

By:Crescendo Investments III, LLC

General Partner

By:/s/ Eric Rosenfeld

Name: Eric Rosenfeld

Title: Managing Member

CRESCENDO INVESTMENTS III, LLC

By:/s/ Eric Rosenfeld

Name: Eric Rosenfeld

Title: Managing MemberExhibit 10.3

November 6, 2009

 

Via Hand Delivery

Ms. Rebecca C. Matthias

Re:Transition

Dear Rebecca:

Reference is hereby made to that certain Second Amended and Restated Employment Agreement made by and between you and Destination Maternity Corporation (f/k/a/ Mothers Work, Inc.) (the "Company") dated March 2, 2007, as amended (the "Employment Agreement") and your Supplemental Retirement Agreement with the Company dated March 2, 2007, as amended (the "SERP").  In anticipation of your planned retirement from employment, we have reached certain agreements regarding the transition of your responsibilities and your continued service to, and compensation by, the Company during that period of transition.  This letter agreement (the "Agreement"), effective as of the date first indicated above (the "Effective Date"), memorializes our agreements in this regard and modifies your Employment Agreement and SERP to the extent necessary to accomplish the following:

1.Service:

(a)Your status as a full-time employee of the Company shall continue from the Effective Date until June 15, 2010 (the "Transition Date") and, on such date, you shall cease to be a Section 16 officer.  Following the Transition Date, you will serve the Company as a part-time employee until September 30, 2010 (the "Termination Date").  During the period between the Transition Date and the Termination Date (the "Part Time Period"), your level of service to the Company, including your service as a director, will not exceed 20% of the average level of bona fide services you performed over the 36 month period immediately preceding the Transition Date.  The parties intend that the reduction of your service commitment at the Transition Date will result in your "separation from service" within the meaning of Treas. Reg. Sec. 1.409A-1(h) for purposes of the distribution of your benefits under the SERP and, therefore, the parties agree that the SERP benefit will be paid in full on December 16, 2010.   Your employment with the Company shall terminate as of the Termination Date.  Your title and authority may be altered upon the appointment of one or more persons to assume your current duties (or a portion thereof) to the extent necessary to effect an orderly transition of responsibility, as determined by the Company's Board of Directors (the "Board") with the advice of the Company's Chief Executive Officer.

(b)Following the Termination Date and through September 30, 2012 (the "Consultancy Period"), you will remain available to the Company, when and as reasonably requested by the Company's Chief Executive Officer, to assist in the transition of your duties to your successor, and will make yourself available to the executive management of the Company with respect to strategic, merchandising, public relations, publicity and other matters as reasonably requested by the Company's Chief Executive Officer and consistent with your present and past duties for the Company.  The Company will exercise reasonable efforts to schedule the time and place for the performance of such consultancy services pursuant to this Section so as to not unduly interfere with your personal and other professional and employment obligations.

 

By way of example, you may be asked to do the following during the Consultancy Period:

 
(1)Participate in the periodic meetings with fashion editors; 

 
(2)Participate in publicity opportunities for the benefit of the Company, such as interviews; 

 
(3)Participate in public relations events; 

 
(4)Participate in product line review meetings; and 

 
(5)General merchandising consulting. 

The parties agree that the consultancy services provided by you for each year of the Consultancy Period will be not more than 5% of the Company's office business hours for a given year.  Except as otherwise specifically herein provided, you agree that you will not be entitled to any additional compensation in respect of your assistance during the Consultancy Period but all of your reasonable expenses incurred, and documented in accordance with the Company's reimbursement policy for executives generally, will be reimbursed within 5 business days of submission.

(c)Until the Termination Date, you hereby agree (except as otherwise provided in section 3 of the Employment Agreement) to continue to devote your best efforts to the performance of services for the Company and its affiliates and, in particular, to exercise your best efforts to facilitate an orderly transition of authority and responsibility to your successor(s).  

(d)Your service as a director will continue to the extent you desire to continue to serve and are re-elected by stockholders.  For all periods you serve as a director following the first annual stockholders meeting occurring after the Termination Date, you will be compensated for service as a director in accordance with the Company's non-employee director compensation policy, as then in effect.

2.Additional Agreements and Acknowledgements:

(a)You agree and acknowledge that the matters described in this Agreement do not constitute "Good Reason" for purposes of the Employment Agreement, the SERP or any other arrangement between you and the Company.  You further agree and acknowledge that, following the Effective Date, no resignation of employment by you will constitute a resignation with "Good Reason" unless (i) this Agreement is materially breached, (ii) you provide written notice of the breach within 90 days, (iii) the Company does not cure the breach within 15 days of receipt of such notice and (iv) you resign within 30 days of the expiration of that cure period.

(b)You agree and acknowledge that the termination of your employment in accordance with Section 1(a) of this Agreement will constitute a resignation without "Good Reason" under Section 9.5 of the Employment Agreement and you will then be entitled only to the rights and benefits provided for in: (i) this Agreement; (ii) the SERP and (iii) Sections 9.5(b) and (c) of the Employment Agreement.  The Company hereby acknowledges and agrees that you have the right to 5 weeks vacation to be taken between January 1, 2010 and the Transition Date.

(c)You agree and acknowledge that, both before or after the Termination Date and subject to reimbursement of your reasonable expenses, you will cooperate fully with the Company and its counsel with respect to any matter (including litigation, investigations, or governmental proceedings) in which you were in any way involved during your employment with the Company.  You 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 your cooperation so as not to unduly interfere with your other personal and professional commitments.  

(d)You further agree and acknowledge that the restrictive covenants contained in Section 7, 8 and 21 of the Employment Agreement will survive the termination of your (i) employment, (ii) service as a consultant to the Company and (iii) service on the Board.  You affirm that those restrictive covenants are reasonable and necessary to protect the legitimate interests of the Company, that you received adequate consideration in exchange for agreeing to those restrictions and that you will abide by those restrictions.  You and the Company acknowledge and agree that the term "Restricted Period," as used in the Employment Agreement, will hereafter be construed to mean the period of your service to the Company in any capacity (including your service as a consultant and/or as a Board member as provided for above) and will end two years after the end of the Consultancy Period.

(e)You agree and acknowledge that you will not be entitled to any further equity grants from the Company (except for any restricted shares that may be issued to you by the Company with respect to 2009 fiscal year performance, subject to Section 2(f) below, or as a director of the Company under the Company's non-employee director compensation policy as in effect from time to time).

(f)You hereby forego receipt of 50% of any restricted shares otherwise issuable to you by the Company in respect of 2009 fiscal year performance.

(g)Your right under Section 11.2 of the Employment Agreement to elect a cashout of your vested stock options upon termination of employment is hereby cancelled.

(h)Your remaining rights under the Employment Agreement, as modified by this Agreement, are affirmed through the Termination Date.

(i)You agree, upon request of the Company, to execute and deliver to the Company a general release of claims substantially in the form attached as Exhibit I to your Employment Agreement within 30 days of the Termination Date (the "Release" ) and that any amount or right under Section 3 hereof which has not by that time been paid or effectuated may be conditioned on the delivery and effectiveness of such Release

(j)You agree that, if no "Change in Control" (as that term is defined in the Employment Agreement) occurs on or prior to March 31, 2010, Section 9.6 of the Employment Agreement and Section 2(c) of the SERP will then cease to apply.  You agree further that if a Change in Control does occur on or prior to March 31, 2010: 

(1) any pro-rata bonus that may become payable under Section 9.6 of the Employment Agreement for the year of termination will be determined in accordance with Section 3(c), below (i.e., with reference to your actual base salary earned for that portion of fiscal 2010 preceding your termination); and

(2) for purposes of calculating any "Severance Pay" that may become payable under Section 9.6 of the Employment Agreement, the amount described in Section 9.3(c)(i)(A)(2) (i.e., the target amount of your bonus for the year of termination) will be equal to your annualized rate of base salary immediately prior to your termination, as determined in accordance with Section 3(a), below.

(k)The Company agrees to promptly pay your reasonable legal fees and expenses incurred prior to the date hereof in connection with matters relating to this Agreement.

3.Compensation.

Subject to your compliance with: (i) this Agreement, and (ii) the continuing obligations under your Employment Agreement, you will be entitled to the following compensation (the "Compensation"):

(a)During the period from the Effective Date through the Transition Date, you will be paid a base salary at an annualized rate of $571,731.  During the Part Time Period, you will be paid a base salary at an annualized rate of $114,346.

(b)Your vested percentage under the SERP will increase to 93 1/3% on the Transition Date, notwithstanding the fact that you will not be employed on a full-time basis for the entire 2010 fiscal year.

(c)You will be eligible for a pro-rata cash bonus under the Company's Management Incentive Program (the "MIP") for the 2010 fiscal year.  The bonus will be calculated under the terms of the MIP as currently in effect based on the Company's full year performance, and your target bonus will be equal to 100% of your actual base salary earned during the 2010 fiscal year (for example only, assuming you work full time until the Transition Date and 20% part-time until the Termination Date, you would have a target bonus of $438,327).

(d)The fringe benefits listed on Schedule A of your Employment Agreement will continue through the Termination Date (except for the benefits listed in Section 9(i) of Schedule A, to the extent your part-time service impairs eligibility).

(e)The final tranche of the stock option granted to you by the Company on November 28, 2005 and any restricted shares issued to you by the Company in respect of 2009 fiscal year performance (determined after application of Section 2(f), above) will vest on the Termination Date.

(f)Your continued service as a director will be counted as service or employment for purposes of the survival of all stock options granted to you by the Company.

(g)The Company will permit satisfaction of the exercise price of any vested stock option, as well as the minimum required tax withholding associated with any such option exercise, by means of a net cashless exercise.

 

<signature page follows>

 

To acknowledge your consent to and agreement with the foregoing, please execute and date this letter in the spaces provided below and return the executed copies to me.  This letter may be signed in multiple counterparts, each of which will be deemed an original, and all of which together will constitute a single instrument.

Sincerely,

DESTINATION MATERNITY CORPORATION

By:/s/ Edward M. Krell 
Edward M. Krell

Chief Executive Officer

 

Acknowledged and agreed on this

6th day of November, 2009:

/s/ Rebecca C. Matthias

Rebecca C. Matthias

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