3.                                        Other Business Activities .  During her employment by the Company, Employee will not, directly or indirectly, engage in any other business activities or pursuits whatsoever, except : (i) activities in connection with any charitable or civic activities, (ii) personal investments, (iii) service as an executor, trustee or in other similar fiduciary capacity, or (iv) other activities specifically authorized by the Compensation Committee of the Company’s Board of Directors; provided , however , that any of the foregoing exceptions do not: (x) interfere with Employee’s performance of responsibilities and obligations pursuant to this Agreement, or (y) create a conflict of interest with Employee’s responsibilities to the Company.  For avoidance of doubt, incidental use of Company facilities (such as telephone or email systems) in furtherance of activities authorized under this paragraph will not constitute an interference with Employee’s obligations to the Company.

4.                                        Director .  During the term off her employment, the Company shall nominate the Employee for election to the Company’s Board of Directors and shall use its best efforts to elect Employee to such position.

5.                                        Compensation .  The Company shall pay Employee, and Employee hereby agrees to accept, as compensation for all services rendered hereunder and for Employee’s covenant not to compete as provided for in Section 8 hereof:

5.1.                               Base Salary .  The Company shall pay Employee an initial base salary at the annual rate of $491,727 (as the same may hereafter be increased pursuant to the terms of this section, the “Base Salary”).  The Base Salary shall be inclusive of all applicable income, social security and other taxes and charges which are required by law to be withheld by the Company or which are requested to be withheld by Employee, and which shall be withheld and paid in accordance with the Company’s normal payroll practice for its similarly situated employees from time to time in effect.  The Base Salary shall be increased at the start of each fiscal year of the Company, as determined by the Compensation Committee of the Company’s Board of Directors, but in no event shall such increase be less than the corresponding increase in the Revised Consumer Price Index for All Items for the 1994 Base Year (the “Index”), as published by the U.S.  Department of Labor, Bureau of Labor Statistics.  If the Index is changed so that a base period other than 1994 is used, the Index used herein shall be converted in accordance with the conversion factor published by the Bureau of Labor Statistics.  If the Index is not published, is discontinued or is otherwise revised during the Term, such other index or calculation with which it is replaced shall be used in order to obtain substantially the same result as would be obtained if the Index had continued to be published in the same form and manner as it was prior to it being replaced.

5.2.                               Cash Bonus .  On such date as bonuses are paid to other senior executives of the Company, the Company shall pay Employee a bonus for each year throughout the Term (the “Cash Bonus”) equal to an amount of between 0% and 100% of Employee’s Base Salary, with a target of 50%.  The actual bonus amount paid, if any, is based upon the Company’s achievement in the applicable fiscal year of corporate and/or individual performance goals approved by the Company’s Board of Directors or its Compensation Committee.

5.3.                               Options .  Each year throughout the Term, the Company shall issue to Employee, as additional compensation (the “Option Compensation”), within thirty (30) days

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following the date on which the Company releases final earnings for the preceding fiscal year (such date hereinafter referred to as the “Earnings Release Date”), an option to purchase that number of shares of Common Stock of the Company, $.01 par value per share (the “Common Stock”) equal to an amount of between zero and 60,000 with a target of 45,000 (the actual number of shares subject to the option granted, if any, will be based on the Company’s achievement in the applicable fiscal year of corporate and/or individual performance goals approved by the Company’s Board of Directors or its Compensation Committee) (the “Options”), which amount shall be subject to equitable adjustment whenever there shall occur a stock split, combination, reclassification or other similar event involving the Common Stock.  Such Options shall be exercisable at the closing price of the Common Stock as reported by NASDAQ on the date of grant and shall vest immediately.

6.                                        Benefits and Expenses .  In addition to those benefits provided to similarly situated employees of the Company, Employee shall be entitled to those employee benefits as set forth on Schedule A hereto, such benefits to include, but not limited to: an automobile; vacation; health, major medical and hospitalization insurance; disability insurance; life insurance; expense reimbursement and participation in the Company’s 401(k) plan (“Benefits”).

7.                                        Confidentiality .  Employee recognizes and acknowledges that the Proprietary Information (as hereinafter defined) is a valuable, special and unique asset of the Business of the Company.  As a result, both during the Term and thereafter, Employee shall not, without prior written consent of the Company, for any reason either directly or indirectly divulge to any third-party or use for her own benefit, or for any purpose other than the exclusive benefit of the Company, any confidential, proprietary, business and technical information or trade secrets of the Company or of any subsidiary or affiliate of the Company (“Proprietary Information”) revealed, obtained or developed in the course of her employment with the Company.  Failure by the Company to mark any of the Proprietary Information as confidential or proprietary shall not affect its status as Proprietary Information under the terms of this Agreement.

8.                                        Covenant not to Compete .  Unless Employee’s employment with the Company is terminated by Employee for Good Reason (pursuant to Section 9.4) or upon a Change in Control (pursuant to Section 9.6), the Employee shall not, during the Term and for a period ending two (2) years after both Employee and Dan W. Matthias shall have terminated their employment with the Company (the “Restricted Period”), do any of the following directly or indirectly without the prior written consent of the Company:

8.1.                               engage or participate in the Prohibited Business (as defined below) as determined at the termination of Employee’s employment hereunder;

8.2.                               become interested in (as owner, stockholder, lender, partner, co-venturer, director, officer, employee, agent, consultant or otherwise) any person, firm, corporation, association or other entity engaged in any Prohibited Business as determined at the termination of Employee’s employment hereunder.  Notwithstanding the foregoing, Employee may hold not more than one percent (1%) of the outstanding securities of any class of any publicly-traded securities of a company that is engaged in activities referenced in Section 8.1 hereof;

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8.3.                               solicit or call on, either directly or indirectly, any supplier with whom the Company shall have dealt at any time during the one (1) year period immediately preceding the termination of Employee’s employment hereunder;

8.4.                               influence or attempt to influence any supplier or potential supplier of the Company to terminate or modify any written or oral agreement or course of dealing with the Company; or

8.5.                               influence or attempt to influence any person to either (i) terminate or modify her employment, consulting, agency, distributorship or other arrangement with the Company, or (ii) employ or retain, or arrange to have any other person or entity employ or retain, any person who has been employed or retained by the Company as an employee, consultant, agent or distributor of the Company at any time during the one (1) year period immediately preceding the termination of Employee’s employment hereunder.

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

9.                                        Termination .  Employee’s employment hereunder may be terminated during the Term upon the occurrence of any one of the events described in this Section 9.  Upon termination, Employee shall be entitled only to such compensation and benefits as described in the applicable subsection of this Section 9.

9.1.                               Termination by Death .  In the event that Employee dies during the Term, Employee’s employment hereunder shall be terminated thereby and the Company shall pay to Employee’s executors, legal representatives or administrators an amount equal to the accrued and unpaid portion of her Base Salary, Benefits, Cash Bonus and Option Compensation (“Cash Bonus” and “Option Compensation” collectively, the “Bonuses”) through the end of the month in which she dies, in addition to the Severance Pay (as defined herein).  All outstanding options shall become immediately vested and exercisable.  For purposes of this Agreement, accrued but unpaid Cash Bonuses and Option Compensation means any Bonuses payable with respect to a year ending prior to the date of termination, as well as a pro-rata portion of any Bonuses that would have been paid for the year of termination, but for that termination.  Except as otherwise provided herein, the amount of such Bonuses will be determined and paid in the same manner and as of the same date that Bonuses would otherwise have been determined and paid for the applicable year, but for the termination (the “Customary Payment Date”) and will be pro-rated, as applicable, based on the number of full and partial months of the year transpired prior to the date of termination.  However, notwithstanding the foregoing and except as otherwise provided herein, accrued but unpaid Option Compensation payable by virtue of a termination of employment will be paid in the form of a cash lump sum (in lieu of an actual stock option grant): (i) in the case of Option Compensation payable in respect of a completed fiscal year, on the Customary Payment Date in an amount equal to the product of (A) the number

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of shares that would have been subject to the stock option that otherwise would have been granted in respect of that Option Compensation, but for the termination, multiplied by (B) the excess, if any, of (I) the Fair Market Value (as defined in the Company’ Amended and Restated Stock Option Plan) as of the date of termination over (II) the Fair Market Value on the first trading day following the Earnings Release Date at the beginning of the fiscal year for which the Option Compensation is being paid; and (ii) in the case of Option Compensation payable in respect of the year of termination, within fifteen (15) days following the date of termination in an amount equal to the product of (A) forty-five thousand (45,000), pro-rated, based on the number of full and partial months of the fiscal year transpired prior to the date of termination, multiplied by (B) the excess, if any, of (I) the Fair Market Value as of the date of termination over (II) the Fair Market Value on the first trading day following the Earnings Release Date at the beginning of the fiscal year for which the Option Compensation is being paid (or the first trading day following the Earnings Release Date at the beginning of the prior fiscal year if no Earnings Release Date has yet occurred in the fiscal year of termination).  Except as specifically set forth in this Section 9.1, the Company shall have no liability or obligation hereunder to Employee’s executors, legal representatives, administrators, heirs or assigns or any other person claiming under or through her by reason of Employee’s death, except that Employee’s executors, legal representatives or administrators will be entitled to receive the payment prescribed under any death or disability benefits plan in which she is a participant as an employee of the Company, and to exercise any rights afforded under any compensation or benefit plan then in effect.

9.2.                               Termination for Cause .

(a)                                   The Company may terminate Employee’s employment hereunder at any time for “cause” upon forty-five (45) days prior written notice to Employee.  For purposes of this Agreement, “cause” shall mean: (i) any material breach by Employee of any of her material obligations under Sections 7 or 8 of this Agreement or (ii) other conduct of Employee involving any type of material disloyalty to the Company or willful misconduct with respect to the Company, including without limitation fraud, embezzlement, theft or proven dishonesty in the course of her employment or conviction of a felony.

(b)                                  In the event of a termination of Employee’s employment hereunder pursuant to Section 9.2(a), Employee shall be entitled to receive all accrued but unpaid (as of the effective date of such termination) Base Salary, Benefits and Bonuses.  All Base Salary, Benefits and Bonuses shall cease at the time of such termination, subject to the terms of any benefit or compensation plan then in force and applicable to Employee.  All outstanding options which remain unvested shall be automatically canceled and declared null and void.  Except as specifically set forth in this Section 9.2, the Company shall have no liability or obligation hereunder by reason of such termination.

(c)                                   At least thirty (30) days prior to the termination of Employee’s employment hereunder pursuant to any clause of Section 9.2(a), the Board of Directors of the Company shall hold a meeting at which Employee shall be given the opportunity to be heard with respect to such termination and, to the extent remediable, a reasonable opportunity to remedy the objectionable behavior.

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9.3.                               Termination Without Cause .

(a)                                   The Company may terminate Employee’s employment hereunder at any time, for any reason, without cause, effective upon the date designated by the Company upon ninety (90) days written notice to Employee.

(b)                                  In the event of a termination of Employee’s employment hereunder pursuant to Section 9.3(a), Employee shall be entitled to receive all accrued but unpaid (as of the effective date of such termination) Base Salary, Benefits and Bonuses plus the Severance Pay (as defined herein); provided , that the amount of any Option Compensation will be determined in accordance with this Section 9.3(b).  Subject to Section 9.6, any accrued but unpaid Option Compensation payable by virtue of a termination pursuant to this Section 9.3 or Section 9.4 will be paid in the form of a cash lump sum (in lieu of an actual stock option grant) in an amount equal to the estimated fair value (pro-rated, as applicable) of the stock option that otherwise would have been granted in respect of that Option Compensation, but for the termination.  Such estimated fair value will be determined by the Company’s independent auditor: (i) in the case of Option Compensation payable in respect of a completed fiscal year, as of the applicable Customary Payment Date using the Black-Scholes model and the following assumptions: (A) option exercise price equal to the Fair Market Value as of the Customary Payment Date, (B) remaining option duration equal to eight years, (C) risk-free rate of return equal to the yield to maturity as of the Customary Payment Date of non-callable ten year U.S. Treasury Notes with a remaining term of eight years, (D) volatility equal to the standard deviation of the daily change in the Fair Market Value for the eight year period immediately preceding the Customary Payment Date, and (E) a dividend yield equal to the sum of the dividends per share paid on Common Stock in the twelve month period immediately preceding the Customary Payment Date, divided by the Fair Market Value as of the Customary Payment Date; and (ii) in the case of Option Compensation payable in respect of the year of termination, as of the date of termination using the Black-Scholes model and the same assumptions as those set forth above except that: (A) the option exercise price is equal to the Fair Market Value as of the date of termination, and (B) the number of shares subject to the option is forty-five thousand (45,000) pro-rated, based on the number of full and partial months of the fiscal year transpired prior to the date of termination.  Except as specifically set forth herein, all Base Salary, Benefits and Bonuses shall cease at the time of such termination, subject to the terms of any benefit or compensation plan then in force and applicable to Employee.  All outstanding options shall become immediately vested and exercisable.

(c)                                   For the purposes of this Agreement, the term “Severance Pay” shall mean a lump sum in cash to be paid by the Corporation to the Employee within fifteen (15) days after the effective date of the event giving rise to such payment (the “Severance Event”) in an amount equal to (i) the Employee’s Base Sal