MOTHERS VVORK, INC. AND SUBSIDIARIES
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
`
`1 6. EMPLOYMENT AGREEMENTS
`
`The Company has employment agreements with its Chairman of the Board and Chief Executive Officer ("CEO”) and its President and Chief
`Operating Officer (“CDO”). These agreements, as amended, provided for base compensation of approximately $506,000, $492,000 and $477,000 for
`fiscal 2006, 2005 and 2004, respectively, increasing annually thereafter i11 a11 an1o1111t to be dete1n1i11ed by tl1e Compensation Committee of the Board
`of Directors, and salary continuation and severance payments should employment of the executives be terminated under specified conditions, as
`defined therein. The agreements continue in effect until terminated by either the Company or the executive in accordance with the termination
`provisions of the agreements. Additionally, the CEO and COO are eligible for an annual cash bonus and stock options based on performance, as
`specified by the Compensation Committee. 011 November 14, 2006, as a result of the Compensation Committee’s reconsideration of its approach to
`equity-based compensation for executive officers and other key employees, the Company and both its CEO and COO entered into amendments to
`the Employment Agreements to change the form of equity incentive awards that the CEO and COO will be entitled to receive with respect to the
`Company’s fiscal year ended September 30, 2006, from a grant of stock options to a grant of shares of restricted stock.
`
`The Company also has an employment agreement, as amended, with its Executive Vice President—Chief Financial Officer. This agreement
`provided for base compensation of approximately $425,000, $382,000 and $360,000 for fiscal 2006, 2005 and 2004, respectively, which is subject to
`potential increase in the future by the Company. The agreement also provides for salary continuation and severance payments should employment
`of the executive be terminated under specified conditions, as defined therein. The agreement continues in effect until terminated by either the
`Company or the executive in accordance with the termination provisions ofthe agreement.
`
`17. EMPLOYEE BENEFIT PLANS
`
`The Company has a 401(k) savings plan for all employees who have at least six months of service and are at least 18 years of age. Employees
`can contribute up to 20% of their annual salary. Employees who meet certain criteria are eligible for a matching contribution from the Company
`based or1 a sliding scale. Company matches are made i11 the first quarter of the succeeding calendar year. Company matches vest over a period of
`approximately six years from each en1ployee’s commencement of employment with the Company. Company matching contributions totaling
`$130,000, $116,000 and $82,000 were made in fiscal 2006, 2005 and 2004, respectively. In addition, the Company may make discretionary
`contributions to the plan, which vest over a period of approximately six years from each employee’s commencement of employment with the
`Company. The Company has not made any discretionary contributions.
`
`F-34
`
`Source: DESTINATION MATERNITY CORP., 10-K, 12/14/2006 I Powered by Intelligize
`
`DMC Exhibit 2038_O85
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`MOTHERS VVORK, INC. AND SUBSIDIARIES
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
`
`18. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
`Quarterly financial results for the years ended September 30, 2006 and 2005 were as follows (in thousands, except per share amounts):
`
`§0S0c6al
`
`Fiscal
`2005
`
`Net sales
`Gross profit
`Netincome (loss)
`Net income (loss) per share—BasiC
`Net income (loss) per share—Diluted
`
`Net Sales
`Gross profit
`Net income (loss)
`Net income (loss) per share—Basic
`Net income (loss) per share Diluted
`
`Quarter Ended
`
`9/30/06
`55 142,825
`72,596
`(602 )
`(0.11 )
`(0.11 )
`
`6/30/06
`$ 163,883
`89,860
`8,774
`1.64
`1.54
`
`3/31/06
`$ 144,643
`76,023
`502
`0.09
`0.09
`
`12/31/05
`$ 151,393
`76,183
`428
`0.08
`0.08
`
`9/30/05
`$ 135,237
`63,839
`(5,340 )
`(1.01 )
`(1.01 )
`
`Ouarter Ended
`6/30/05
`3/31/05
`$ 152,740
`$ 140,031
`81,367
`69,353
`5,509
`(97 )
`1.05
`(0.02 )
`1.03
`(0.02 )
`
`12/31/04
`$ 133,619
`69,615
`(247)
`(0.05)
`(0.05)
`
`The Company’s business, like that of other retailers, is seasonal. The Company’s quarterly net sales have historically been highest in its third
`fiscal quarter, corresponding to the Spring selling season, followed by its first fiscal quarter, corresponding to the Fall/holiday selling season.
`Given the typically higher gross margin experienced i11 the tl1ird fiscal quarter compared to other quarters, the relatively fixed nature of most of the
`Company’s operating expenses and interest expense, and the historically higher sales level in the third quarter, the Company l1as typically
`generated a very significant percentage of its full year operating income and net income during the third quarter.
`
`19. SEGMENT AND ENTERPRISE VVIDE DISCLOSURES
`
`Operating Segment. Ifnder SFAS No. l3l, “Disclosures about Segments of an Enterprise and Related Inform ation,” a company maybe
`required to report segmented information about separately identifiable parts of its business, which both (i) meet the definition of a11 “operating
`segment” under SFAS No. 131, and (ii) exceed certain quantitative thresholds established in SFAS No. 131. The Company has determined that its
`business is compriscd of onc opcrating scgmcnt: thc dcsign, manufacture and salc ofmatcrnity apparcl and related acccssories. Whilc thc
`Company offers a wide range of products for sale, the substantial portion of its products are initially distributed through the same distribution
`facilities, many of the Company's products are manufactured at common contract manufacturer production facilities, the Compa11y’s products are
`marketed through a common marketing department, and these products are sold to a similar customer base, consisting of expectant mothers.
`
`Source: DESTINATION M/%T'ERNITY CORR,
`
`‘lO~K, 1.?/'14/2006 | Powered by Intelligize
`
`DMC Exhibit 2038_O86
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`MOTHERS VVORK, INC. AND SUBSIDIARIES
`NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
`
`19. SEGMENT AND ENTERPRISE VVIDE DISCLOSURES (Continued)
`Geographic Information. Information concerning the Company’s operations by geographic area are as follows (in thousands):
`Year Ended September 30,
`2006
`2005
`2004
`
`Net Sales to Unafliliated Customers
`United States
`Canada
`
`Long-Lived Assets
`United States
`Canada
`Costa Rica
`
`$ 585,272
`17,472
`
`$ 547,924
`13,703
`
`$ 510,751
`7,300
`
`September
`30,
`2006
`
`September
`30,
`2005
`
`S 69,621
`2,535
`700
`
`$ 74,393
`2,658
`925
`
`Jllrljnr Customers, For the periods presented, the Company did not have any one customer who represented n1ore than 10% of its net sales.
`
`20. INTEREST EXPENSE, NET
`
`I11terest expense, net for the years ended September 30 is comprised of the following (in thousands):
`2006
`$ 15,419
`(885 )
`39 14,534
`
`Interest expense
`Interest income
`Interest expense, net
`
`2005
`$ 15,360
`(67 )
`$ 15,293
`
`2004
`$ 14,955
`(190)
`$ 14,765
`
`21.RELATED PARTY TRANSACTIONS
`
`Other than the husband and wife relationship between the CEO and COO, there are no other family relationships among any other executive
`officers of the Company.
`A dircctor of the Company currcntly provides consulting scrviccs to Pcppcr Hamilton LLP, which provides legal scrviccs to thc Company.
`The Company paid legal fees to this law firm of $278,000, $315,000 and $147,000 in fiscal 2006, 2005 and 2004, respectively. As of September 30,
`2006, the Company had amounts outstanding to this law Iirm of $527,000, which are included in accrued expenses and other current liabilities in the
`accompanying Consolidated Balance Sheets.
`During fiscal 2004, the Company 1‘epu1‘ohased a11 aggregate of 14,954 shares of common stock from botl1 the Company’s CEO a11d COO as pait
`of the share repurchase program.
`
`22. SUBSEQUENT EVENT
`
`In November 2006, the Company’s Board of Directors authorized the repurchase of $25.0 million principal amount of the Company’s Senior
`Notes (see Note 9). On December 8, 2006, the Company Completed the 1'epu1'Cl1ase of the authorized a111ou11t at 105.625"/o of the $25.0 million
`principal amount, plus accrued and unpaid interest. In connection witl1 the repurchase, the Company recorded a pre-tax charge totalling $2,093,000,
`representing the premium paid plus the write—otf of unamottized debt issuance discount and deferred financing costs.
`
`Source: DESTINATION MAT'ERNITY CORR,
`
`‘lO~K, 1.?/'14/2006 | Powered by Intelligize
`
`DMC Exhibit 2038_O87
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`MOTHERS WORK, INC. AND SUBSIDIARIES
`SCHEDULE II—VALUATION AND QUALIFVIVG ACCOUNTS
`(in thousands)
`
`Balance
`at
`beginning
`of period
`
`Additions
`charged
`to
`costs and
`expenses
`
`Balance
`at
`end of
`period
`
`Deductions
`
`SE 361
`
`$ 14
`
`$ —
`
`$ 375
`
`438
`
`400
`
`—
`
`38
`
`(77 )
`
`—
`
`361
`
`438
`
`Year Ended September 30. 2006
`Product rcturn rcscrvc
`
`Year Ended September 30, 2005
`Product return reserve
`Year Ended September 30, 2004
`Product return reserve
`
`F-37
`
`Source: DESTINATION MATERNITY CORR, 10-K, 12/14/2006 I Powered by Intelligize
`
`DMC Exhibit 2038_O88
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`MOTHERS WORK, INC.
`
`2005 EQUITY INCENTIVE PLAN
`
`(As amended through October 9, 2006)
`
`Exhibit 10.27
`
`SECTION 1. Purpose; Definitions. Tl1e purposes of tlie Mothers V\7o1'k, Ir1c. 2005 Equity I11ce11tive Plan (the “Plan”) are to: (a)
`enable Mothers Work, Inc. (the “Co1r1gany”) 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.
`
`different meaning:
`
`For purposes of the Plan, the following terms will have the meanings defined below, unless the context clearly requires a
`
`(a) ’ means, witl1 respect to a Person, 21 Person that directly or indirectly controls, is controlled by, or is under common
`co11trol with such Person.
`
`(h) “Award” means an award of Options, SARs, Restricted Stock or Restricted Stock Units 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 l3(d) and l4(d) of the Exchange Act) becoming a “beneficial owner” (as defined in Rule l3d—3
`
`Source: DESTINATION MATERNITY CORP., EX-10.27, 12/14/2006 I Powered by Intelligize
`
`DMC Exhibit 2038_O89
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`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, reorgani7ation or merger ofthe Company resulting in the stockholders ofthe
`Company immediately prior to such event not owning at least a majority of the voting power ofthe 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) ‘ilk’, 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 l’la11.
`
`(i) ’ means a member of the Board.
`
`(i) ’ 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.
`
`(1) “ ” means the Securities Exchange Act of 1934, as amended.
`
`(m) “Fair Market Value” means, as of any date: (i) if the Shares are 11ot 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 tl1e Shares are not listed or admitted to trading on
`any national securities exchange, but are traded in the over—the—eounter 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, I11c. (“.\Iasdag”) or any comparable
`system or, ifthe Common Stock is not listed on Nasdaq or a comparable system, the closing sale price ofa Share or, if no sale is publicly reported,
`the average of the closing bid and asked prices, as furnished by two members of the .\Iational Association of Securities Dealers, Inc. who make a
`market in the Common Stock selected from time to time by the Company for that purpose.
`
`the Code.
`
`(n) “ ncentive Stock 0 tion” means any Option intended to be an “Incentive Stock Option” within the meaning of Section 422 of
`
`(o) “Non—En1ployee Director” will have the meaning set forth in Rule l6b—3(b)(3)(i) promulgated by tl1e 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 l62(m) of tlie Code or regulations thereunder, require
`that each “Non-Employee Director” also be an “outside director” as that term is defined in regulations under Section l62(m) of the Code.
`
`I\)
`
`Source: DESTINATION MATERNITY CORP., EX-10.27, 12/14/2006 I Powered by Intelligize
`
`DMC Exhibit 2038_090
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`(p) “ on- ualificd Stock O tion” mcans any Option that is not an lnccntivc Stock Option.
`
`Section 5 hereof.
`
`(q) “Option” means any option to purchase Shares (including Restricted Stock, if the Board so determines) granted pursuant to
`
`(r) T" means, in respect ofthe Company, a “parent corporation” as defined in Sections 424(e) of the Code
`
`(s) “l’atticipant” mcans an cmployec, consultant, Director, or othcr scrvicc provider of or to thc Company or any of its rcspcctivc
`Affiliates to whom an Award is granted.
`
`(t) “Person” means an individual, partnership, corporation, limited liability company, trust, joint venture, unincorporated
`association, or other entity or association.
`
`(u) “Restricted Stock” means Shares that are subject to restrictions pursuant to Section 8 hereof.
`
`(v) “Restricted Stock Unit” means a right granted under and subject to restrictions pursuant to Section 8 hereof.
`
`(W) “SAR” means a stock appreciation right granted under the Plan and described in Section 6 hereof.
`
`(X) “Shares" means shares of the Company’s common stock, par value S.0l, subject to substitution or adjustment as provided in
`Section 3§c1 hereof.
`
`(y) “ ” means, in respect of the Co1I1pa11y, a subsidiary company as defined i11 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 providedfurther, that the authority of any
`Con1n1ittee appointed pursuant to this Section 2 will be subject to such terms and co11ditio11s as the Board may prescribe a11d 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 11ot 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—En1ployee
`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
`thereafier directly administer the Plan.
`
`Source: DESTINATION MATERNITY CORP., EX-10.27, 12/14/2006 I Powered by Intelligize
`
`DMC Exhibit 2038_O91
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`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);
`
`(b) determine the type ofAward to be granted;
`
`(c) detenninc the number of Shares, if any, to be covered by each Award;
`
`(d) establish the vesting or forfeiture terms of each Award;
`
`and
`
`(e) determine wheth er and under what circumstances an Option may be exercised with out a payment ofcash under Section 5 df
`
`(f) 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 tl1e Plan will he 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 500,000. 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 Options or SARS with respect to more than
`200,000 Shares in any calendar year. In addition, not more than 250,000 Shares will be issued hereunder in respect of Restricted Stock or Restricted
`Stock Units
`
`(h) Effect oftl1e Expiration or Teimillation of Awards. If and to the extent that an Option or SAR expires, teirninates 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 or Restricted Stock Unit is canceled, forfeited or repurehased for
`any reason, the Shares subject to that Award
`
`Source: DESTINATION MATERNITY CORP., EX-10.27, 12/14/2006 I Powered by Intelligize
`
`DMC Exhibit 2038_092
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`will again become available for grant under the l’lan. In addition, if any Share is withheld pursuant to Section ll(el 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 rellects equitably the effects of such
`event or transaction.
`
`(d) Change in Control. Notwithstanding anything to the contrary set forth in the Pla11, 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, i11 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. §l .424-l (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 i11 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 011 the date of the Change in Control and the exercise price of that Option or SAR;
`provided, that ifthe 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 subj eeted to vesting
`terms substantially identical to those that applied to the cancelled Award immediately prior to the Change in Control.
`
`SECTION 4. Eliflbility. 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 31a). any or all of the Shares reserved for issuance u11dcr Section 3(a)_ may be issued in respect of Incentive Stock Options.
`
`Source: DESTINATION MATERNITY CORP., EX-10.27, 12/14/2006 I Powered by Intelligize
`
`DMC Exhibit 2038_093
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`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 ofthe 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 ofthe grant. However, any Incentive Stock Option granted to any Participant who, at the
`time the Option is granted, owns more than l0% ofthe voting power ofall classes of shares ofthe 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
`n1ore than 10% of the voting power ofall classes of shares ofthe Company, its Parent or a Subsidiary may not have a term ofmore than live years.
`No Option may be exercised by any person after expiration of the term of the Option.
`
`(c) Exercisabilifl. 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 excrcisability provisions of Section 5(c)_ and
`the termination provisions ofSecti on 7. Options may be exercised in whole or in part from time to time during their tenn 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 filll 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 llga hereof and fulfills
`such other conditions as may be set forth in the applicable Award Agreement.
`
`(e) Incentive Stock Option Limitations. In the ease of an Incentive Stock Option. the aggregate Fair Market Value (determined as
`of the time of grant) ofthe 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—Qualif1ed Stock Option.
`
`Source: DESTINATION MATERNITY CORP., EX-10.27, 12/14/2006 I Powered by Intelligize
`
`DMC Exhibit 2038_O94
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`(I) Tcrmination of Service. Lnlcss otherwise specified in the applicable Award Agrcemcnt, Options will bc subject to the terms of
`Section 7 with respect to exercise upon or following termination of employment or other service.
`
`(g) Transferabilitv of Options. Except as may otherwise be specifically determined by the Board with respect to a particular
`Option: (i) no Option will bc transfcrablc by the Participant other than by will or by the laws of descent and distribution, and (ii) during the
`Participanfs lifetime, an Option will be exercisable only by the Participant (or, in the event ofthe 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 ofthe 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 tcrms and conditions, not inconsistent with the terms ofthc Plan, as the Board dccms 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
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`written notice to the Company specifying the portion of the SAR to be exercised.
`
`(iv) Termination of Service. Unless otherwise specified ir1 the Award Agreemeilt, SARs will be subject to the terms of
`Section 7 with respect to exercise upon termination of employment or other service.
`
`(V) l\'on-Transferabilitv. Except as may otherwise be specifically determined by the Board with respect to a particular
`SAR: (A) SARs may not he sold, pledged, assigned, hypothecated, gifted, transferred or disposed ofir1 any manner either voluntarily or
`involuntarily by operation of law, other than by will or by the laws of descent or distribution, a11d (B) during the Participant’s lifetime, SARs will be
`exercisable only by the Participant (or, in the event of the Participant’s Disability, by his personal representative).
`
`SECTION 7. Terminatio11 of Service. Unless otherwise specified with respect to a particular Option or SAR in the applicable
`Award Agreement, Options or SARs granted
`
`Source: DESTINATION MATERNITY CORP., EX-10.27, 12/14/2006 I Powered by Intelligize
`
`DMC Exhibit 2038_O95
`
`Target v. DMC
`|PR2013-00530, 531, 532, 533
`
`

`
`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 thereafier 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 legatce ofthc Participant under the will ofthc Participant, for a
`period expiring (i) at such time as may he specified by the Board at or after grant, or (ii) if not specified by the Board, then l2 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 Disabilifl. lfa l’articipant’s service with the Company or any Afliliate terminates by reason of
`Disability, any Option or SAR held by such Participant may thereafter be exercised by the Participant or his personal repres